Goodman Fielder shares down 19% on result

(Updated) Shares in Goodman Fielder have slumped by nearly 20% following a significant fall in first half profits and a reduced guidance for the full year.

The dual-listed Australasian food company boosted its revenues for the half year 2009 12.2% to $A1.48 billion, while profit fell 21.9% to $A73.9 million.

The company is projecting full year guidance of $A170-180 million, below last year’s $A197.7 million (which excludes the Fresh Dairy $A170 million write-down).

At close the shares were trading at $1.45, down 34c or 19% on yesterday's close.

Managing director Peter Margin attributes the poor performance on commodity price volatility, which he says added around $A120 million in costs compared to this time last year.

Restructuring costs cost the company a further $A6.6 million.

The company’s dairy division, home to brands such as Tararua, Meadow fresh and Puhoi Valley, has been undergoing an extensive period of renovation following a year that saw a decline in earnings, and a $A170 million dollar writedown.

Goodman Fielder’s fresh dairy and meat division was down 30% to $A18.2 million earnings before interest, tax, depreciation and amortisation (ebitda) for the half.

The company reformulated and repackaged its entire range to revitalise its market prospects, raising further suspicions of a looming sale attempt.

Goodman Fielder purchased Fresh Dairy in 2005 for A$A830 million, and it accounts for around 17% of the company’s total revenue.

It’s estimated that the division is now worth between $A350-500 million.

Mr Margin says that much of the problems came from milk, hurt by the weak New Zealand dollar and commodity price volatility, while its cheese and yoghurt products remained relatively strong.

“The outlook for dairy business far more positive than 12 months ago,” he says.

He projects dairy prices to stay low for another 3-4 months, while wheat and canola oil commodities are already recovering and will boost the company’s Home Ingredients and Baking divisions in the second half.

Home ingredients were up 6% to $A49.7 million ebitda, while Fresh Baking was down 23.9% to $A57.5 million ebitda.

The company’s 2009 will still continue to be dominated by “extreme” commodity volatility, reduced customer demand and margin pressures from heavy competitive discounting.

The company is trying to limit inventories and increase cash flow as much as possible, and has repaid $A770 million in debt in the last year.

Goodman Fielder’s debt-to-debt plus equity ratio is 31%, relatively healthy when compared to rivals, and Mr Margin maintains the company is well prepared for market conditions in the year ahead.

The company is also undertaking a strategy review over 2009, as Mr Margin believes that the commodity boom/bust of the last year has “fundamentally changed” the way the company does business.

The company’s dividend for the half will be 4.5 cents, and a projected full year dividend of 7.5c – above 2008’s 6c.

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