Goodman Fielder stock tumbles

Wednesday 25th February 2009

Shares of Goodman Fielder, the food ingredients manufacturer, tumbled after the company posted a 22% decline in first-half earnings and said full-year earnings may weaken by about the same amount.

The stock fell 14% to A$1.21 on the ASX. Profit in the six months ended Dec. 31 fell to A$73.9 million, from A$94.6 million a year earlier, the company said in a statement. Full-year profit will be between A$170 million and A$185 million, down as much as 23% from the previous year's A$220 million before one-time items.

The company, whose brands include Edmonds, Ernest Adams, Quality Bakers, Diamond and Meadow Lea, said the economic downturn has pushed some consumers to eschew its products in favour of cheaper alternatives such as supermarket house brands. Profit may pick up in the second half as the company benefits from lower commodity prices though customers will be running down inventories, it said.

In the first half, rising prices of raw materials added A$120 million to its costs and squeezed margins.

"The continuing severe economic conditions have caused an erosion of consumer confidence and this has resulted in a drift to cheaper alternatives such as house brand products," it said.

Sales in the first half rose 12% to A$1.48 billion. The company will pay a first-half dividend of 6 cents a share.

By Jonathan Underhill

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