Goodman Fielder issues profit downgrade
Goodman Fielder (NZX:GFF) has been hit hard by increasing commodity prices, adverse exchange rates and natural disasters, resulting in a lower full-year profit forecast.
At the time of the release of the company's Interim results, the company anticipated that net profit after tax for the year would be in line with the prior year's normalised earnings of A$183.5 million.
The company now expects net profit for the 2011 financial year to be in the range of A$140 to A$150 million following a soft third quarter offset by a more promising outlook for the last quarter.
“Market share reduction, increases in agricultural commodity costs and adverse currency translation costs have contributed to the decline, and the company has been unable to reduce its cost base quickly enough to compensate,” chairman Max Ould said today.
“Timely cost recovery in our Australian Baking and Home Ingredients businesses has proved to be very difficult to achieve in the current climate of fierce retailer competition.
“During the third quarter the company sought to recover its increased costs through price increases on its products and we took a firm position with our major Australian trading partners," Mr Ould said.
“This resulted in retailer resistance to price increases and some negative but largely temporary impacts on on-shelf ranging. As a result the third quarter saw a reduction in volumes, coupled with delays in cost recovery.
“At this point we believe that the fourth quarter will see an improvement on the third quarter as price increases are being achieved and ranging is returning to normal.
“However the poor performance of the third quarter will not be recovered prior to the end of the year, despite steady or improved performances from our New Zealand Dairy business, Integro Foods and our Asia Pacific operations.”
The company had underestimated the impact of the ongoing effects of a number of natural disasters in New Zealand, Queensland and Victoria which have resulted in the loss of some business and higher than expected operating costs.
Mr Ould said the company is close to announcing a replacement for outgoing chief executive Peter Martin, who retires tomorrow.