Goodman Fielder warns annual earnings to fall, seeks faster cost-cutting with lay-offs
Goodman Fielder [NZX: GFF], Australasia's biggest food company, says annual earnings will miss expectations by as much as 15 percent, prompting it to speed up its cost cutting plan and reduce staff.
The Sydney-based company expects normalised earnings before interest and tax will be 10 to 15 percent below analysts' consensus of A$180 million in the 12 months ending June 30, having previously said in February EBIT would be broadly in line with last year's A$185.6 million. As a result, the company has accelerated its cost-saving plan, which it says it will achieve primarily by laying off staff, to cut an extra A$25 million by the end of the 2015 financial year.
"Trading conditions in Australia and New Zealand have deteriorated and manufacturing and supply chain cost savings under Project Renaissance have been delayed," Goodman said in a statement. "This has required the company to revise its earnings expectations for the fourth quarter."
The maker of household brands including Vogel's bread, Meadowfresh milk and yoghurt, and Meadowlea butter and margarine has been cost cutting, restructuring and divesting over the past three years, to focus on its core brands and reduce debt.
It recently completed the sale of its New Zealand meats business to Hellers, which included the closure of a Hamilton plant employing 120 workers.
Goodman's baking division increased volumes in the third quarter, though the net sale price was lower than expected, and the unit wasn't able to achieve between A$10 million to A$15 million in cost-savings in the period.
The grocery division's earnings were weaker than expected due to heightened competition squeezing price and volumes, a trend Goodman says will likely continue in the fourth quarter.
The New Zealand dairy unit will have earnings put under pressure by an increase in the farmgate milk price, with a time lag between the increase in raw milk prices and cost recovery.
Goodman's Asia Pacific business was largely unchanged, it said.
The company said the lower forecast earnings will mean net debt won't fall by as much as anticipated, though it continues to remain within its banking covenants.
The dual-listed shares were unchanged at 65 cents on the NZX at the market open, and have dropped 9.7 percent this year.