KEY POINTS:
Australasian food group Goodman Fielder expects earnings to remain flat this year due to uncertainty over commodity costs and economic conditions.
The company, whose brands include Edmonds, MeadowLea and Ernest Adams, was slugged by high wheat, dairy and food oil prices, which added A$204 million ($249.8 million) to its costs for the year ending June 30.
Net profit after tax before one-offs was A$220.7 million, up 0.9 per cent on last year's A$218.7 million.
But earnings were just A$27.7 million - down 88.4 per cent - once the A$170 million goodwill writedown of its New Zealand fresh dairy division and non-recurring restructuring costs associated with plant closures are included.
The company announced a fortnight ago that it was slashing the value of the division because of deteriorating economic conditions in New Zealand and high dairy commodity prices, which encouraged consumers to buy cheaper products. The fresh dairy division, with brands such as Tararua and Meadow Fresh, had accounted for about 17 per cent of group revenue last year.
Goodman Fielder said the results announced yesterday were "solid" in what was a very difficult trading environment.
Revenue had risen 10.2 per cent to A$2.675 billion, but soaring international crude oil prices added a further A$30 million in logistical costs. A rapid deterioration in the New Zealand economy towards the end of the financial year, and the weakening kiwi, also affected earnings, it said.
And it expects the difficult economic climate to continue.
"The group sees little improvement in the underlying earnings in the 2009 financial year due to uncertainty around commodity costs and future economic conditions in Australia and New Zealand."
But it was more optimistic for 2010, when it expects to reap the benefits of capital expenditure on improving efficiency, and an expected softening of commodity prices.
The company has signed a long-term contract with a Chinese company to make its commercial fats and oils at a Shanghai plant. This would allow it to increase its Chinese customer base, reduce conversion costs and avoid the need to supply finished goods from Australia. It plans a dividend of 7.5c.
