Food firm's hopes rise

By DITA DE BONI

Cakes, slices and Christmas goods for export to Australia will help Goodman Fielder's restructured Ernest Adams division contribute more to the company's full-year result.

Chief executive David Hearn has been visiting Goodman's New Zealand staff this week to drive home the message that the company has finally turned a corner and the share price will improve.

"We have a better-quality business now, with more stability in the portfolio, with the integration of the Ernest Adams and Bunge Defiance providing stable and predictable performances," he said.

"We believe the sharemarket will finally redress itself and value our shares - which we would probably consider undervalued - more highly in the fullness of time."

Goodman Fielder stock has been on a steady decline for several years. Yesterday it closed at 142c, up 2c.

Mr Hearn was confident that the stock would rise in value when the market recognised the company's intrinsic value.

Inked into his New Zealand travel itinerary is a session to drive home that message to the company's institutional investors here.

Goodman Fielder experienced a bleak first half in the 1998-99 year with a 23 per cent drop in earnings, due in part to aggressive competition for its Bluebird snack-foods division.

Full-year results for that year improved with the divestment of the poultry division, Steggles, and the company's acquisition of Australian baker Bunge Defiance and New Zealand's Ernest Adams, leading to a recently announced first-half profit jump of 47.3 per cent to $A67.9 million ($84.1 million) in the 1999/2000 year.

Mr Hearn said the result confirmed a full recovery for the company.

Its more solid position was proved by the fact that one division's less-than-optimal result - ingredients was the only division reporting a significant pre-tax drop in earnings - did not take too much glint off the group-wide result, he said.

"We weren't knocked sideways by the loss. It couldn't upset what was really an outstandingly good result."

In order to cope with volatile conditions in the gelatin business, where an industry-wide oversupply has caused huge price discounting, Goodman hopes to expand the business by way of joint ventures in Europe and the United States to provide more stability.

About 30 per cent of Goodman Fielder's business comes from New Zealand, with milling and baking the largest earners across the group.

Restructuring is aimed to ensure Ernest Adams can contribute further in that area.

A total of 110 jobs will go in the division and further plant closures are planned in order to fully incorporate it into the Goodman Fielder empire.

Mr Hearn said Goodman encountered a temporary glitch with Ernest Adams last month when fat ignited in a ventilation duct in the company's Print Place factory in Christchurch and razed it.

But the consolidation process was going well otherwise.

"Traditionally, Ernest Adams had just eight people marketing the brand into Australia , which was only a little scratch on the [major supermarkets] there.

"With our distribution channels and stronger marketing emphasis, the division will enjoy good growth."

Analyst Rowan Johnston, from sharebroking firm Frater Williams & Co, agreed that Goodman Fielder turned in a good result in the half year but said it would need "more runs on the board" before its share price could hope to rise.

"Because they've been non-performing for so long, the market probably takes the view that they'll believe it when they see it."