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Goodman Fielder 1H profit more than doubles on asset sales; revenue falls

Wednesday 13th February 2013

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Goodman Fielder, the biggest food company in Australia and New Zealand, said first-half earnings more than doubled on gains from asset sales while revenue fell with the rise of supermarket inhouse baking and grocery brands.

Profit rose to A$51 million, or 2.6 cents a share, in the six months ended Dec. 31, from $21.5 million, or 1.4 cents, a year earlier, the Sydney-based company said in a statement. Sales fell 9 percent to A$1.17 billion

The shares fell 4.9 percent to 68.5 Australian cents on the ASX as the food maker flagged continued challenging conditions in Australia and New Zealand. Goodman is part-way through its project Renaissance, which aims to achieve annual saving of A$100 million by 2015, and has sold assets including its Integro fats and oils division and its New Zealand milling business.

The company is embarking on a trim of its vast range of products, with 447 stock-keeping units in Australia and 269 SKUs in New Zealand. It has a target to reduce SKUs by about 30 percent. Its range includes Vogel's and Molenberg bread, Meadowlea margarine and White Wings and Edmonds baking products.

Goodman expects an earnings improvement in the second half of the year, as it benefits from price increases in the first half and cost control, it said, without giving a specific target.

In its New Zealand dairy business, which competes with Fonterra in both fresh milk and branded consumer products, normalised earnings before interest, tax, depreciation and amortisation rose 8 percent in the first half and its gross margin rose 3 percent.

"An increased performance in the dairy division from improved product mix and disciplined cost

management," it said in a presentation to analysts.

The volume of milk sold fell slightly while yoghurt volume rose 10 percent following a Meadow Fresh marketing campaign, it said.

The company plans to resume dividend payments in the second half, subject to trading conditions, at a rate of 50 percent to 80 percent of net profit. Net debt was A$498 million at Dec. 31, down 35 percent from a year earlier.

Normalised EBITDA in its baking division fell 11 percent to A$38.4 million in the first half, as sales fell 2 percent to A$480.6 million. The EBITDA margin shrank to 8 percent from 8.8 percent.

The baking sector "remains challenging from the continued impact of private label pricing and in-store baking on proprietary brands, in addition to the pressure of rising input costs," the company said.

Grocery earnings fell 18 percent to A$36.8 million, with "increased competition from proprietary brands and private label putting pressure on volumes and price," it said. Grocery EBITDA margin fell to 14.1 percent from 15.8 percent.

Asia Pacific EBITDA rose 3 percent to A$34.5 million and its margin improved to 20.2 percent from 19.5 percent.

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