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Goodman Fielder facing up to $A10M hit from rising milk prices

Goodman Fielder [NZX: GFF/GFZ010], the food ingredients maker, expects its New Zealand dairy business to trim as much as A$10 million from its annual earnings due to rapidly rising milk prices and anticipates its 2014 profits will largely come through in the second half of the year.

The Sydney-based company expects to lose between A$8 million and A$10 million of normalised earnings before interest and tax in its NZ dairy unit after farmgate milk prices jumped since the start of the financial year, and doubts it will be able to claw it back later, it said in a statement.

"The published farmgate milk price, which is a key determinant to Goodman Fielder's product cost, has increased by over 40 percent since the fourth quarter of FY13," the company said.

"Due to aggressive competitor wholesale pricing, Goodman Fielder has not been able to fully recover this significantly higher input cost through wholesale pricing to its customers, which has continued to impact margins in the first half," it said.

Goodman Fielder returned to profit last year after it completed a two-year restructure, selling assets and repaying debt.

The company expects to increase spending on direct marketing in the first half of the next financial year as it contends with stiff competition in the Australian market.

That increase, and the squeeze on dairy margins, means the bulk of earnings will be achieved in the second half, the company said.

The dual-listed shares fell 1.2 percent to 81 cents on the NZX today.