Profits sure to rise, says Goodman Fielder

Vogel's is one of Goodman Fielder's brands likely to feel the effects of predicted wheat price rises next year. Photo / Christine Cornege

Food company Goodman Fielder expects profits to rise after a solid start to the financial year and despite volatile commodity costs.

Goodman Fielder, which employs nearly 8000 people in Australia, New Zealand, Pacific and Asia, yesterday held its first annual meeting in New Zealand since listing on the ASX and NZX in 2005.

Chairman Max Ould said the strategic focus of the company was to reduce exposure to commodity cost volatility, increase focus on and strengthen through innovation the retail branded products portfolio, cut operating costs and pursue best-practice operational efficiency.

"Looking forward for the remainder of this financial year, our operating environment continues to be challenging with the company experiencing significant pricing pressure," Ould said.

The company confirmed full-year guidance for mid to high single-digit percentage profit growth over the previous year's normalised result.

The company had delivered a solid result in the 2010 financial year, despite difficult trading conditions, Ould said.

Managing director Peter Margin said revenue for the past financial year was down about 6.6 per cent to A$2.7 billion ($3.4 billion), hit by currency conversion and commodity volatility. "We saw commodity pricing come off quite a substantial amount and in many of the businesses that we trade in we passed those reductions in commodity costs through to our customers."

Normalised profit before one-off costs increased 11.2 per cent to A$183.5 million.

The first quarter of the current financial year was very solid, with the commercial business in particular performing well, Margin said. But it continued to be a challenging environment with risks around currency translation, ranging strategies of retailers, input cost recovery and mixed consumer sentiment.

"There's no doubt you're seeing a very volatile period in commodity costs moving up and down globally today," Margin said.

The main commodities for the company were wheat, dairy and vegetable oils.

Commodity costs would rise during the next year, Margin said.

"Dairy's already up there now, so I think you've seen a step change in dairy, oil and wheat certainly year on year it's going to be higher than it was," he said.

"It'll force global food pricing up in response to that because companies go out of business unless they're able to recover those sort of cost increases."

Goodman Fielder had been able to reduced its cost base. "Companies that don't have strong brands I think in this sort of environment are really going to struggle."

Australia accounted for about half of the company's business, with about a third from New Zealand and 15 per cent from Asia Pacific.

There were some fundamental issues to be addressed in consumer sentiment in Australia, Margin said.

"You've got mixed signals coming out in terms of the retail segment ... I think you're probably seeing a bit of it here [in New Zealand] but certainly in Australia there is a degree of caution."

Famous names
* Goodman Fielder is an ASX and NZX listed food company.
* Employs nearly 8000 people.
* Brands include Meadow Fresh, Tararua, Chesdale, Quality Bakers, Vogel's and Edmonds.