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Food giant issues profit warning

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Goodman Fielder, Australasia’s biggest food company, says annual earnings will miss expectations by as much as 15 per cent, prompting it to speed up its cost cutting plan and staff cuts.

The Sydney-based company expects normalised earnings before interest and tax will be 10 to 15 per cent below analysts’ consensus of $180 million in the 12 months ending June 30.

In February, it said they would be broadly in line with last year’s $185.6m.

The company has accelerated its cost-saving plan as a result, which it says it will achieve primarily by laying off staff, to cut an extra $25m 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 today.

“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 cutting costs, restructuring and divesting over the past three years, to focus on its core brands and to reduce debt.

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 $10m-$15m 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.

“Given the deterioration in market conditions since February, which has impacted third quarter performance, and a revision to fourth quarter forecasts, Goodman Fielder has revised its earnings guidance for 2013-14,” the statement said.

“Goodman Fielder now expects normalised EBIT for FY14 to be approximately 10-15 per cent below the current analysts’ consensus of approximately A$180 million.

“Goodman Fielder will conduct a detailed analysis of the carrying value of its businesses according to accounting standards.

“While that analysis is yet to be completed, the company currently expects to record non-cash impairments, reflecting the deterioration in the trading outlook across its portfolio.”

Cash restructuring costs related to redundancies are expected to be recorded as significant items in the FY14 accounts.

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