Goodman Fielder reaps payoff from restructure

By DITA DE BONI

Food concern Goodman Fielder hopes to rebuild market confidence in the company with results that it believes show a reversal of fortunes.

Yesterday, the company released annual results showing a profit before abnormals of $A130.9 million ($173 million), up 24.2 per cent from the previous year.

Goodman Fielder cut costs by $60 million in the year to June 30, with a further $40 million to $50 million pledged to come off in the next financial year. That saving may be offset by costs incurred as it continues to restructure and synergise transtasman operations.

In New Zealand, parts of the old Ernest Adams plants were closed and flour mills rationalised after a wide-ranging review, named Project Jupiter.

Flour mills were shut in Auckland and Palmerston North, with the loss of more than 100 jobs.

Chief executive David Hearn and group managing director Doug McKay could give no assurances that flour milling would not eventually cease in New Zealand, but Mr Hearn said a capital investment of $10 million at one of the remaining mills in Mt Maunganui meant there was "no chance" that the operation would disappear from the landscape in the "foreseeable future."

Overall, the company experienced record earnings in four out of five divisions, with its ingredients division proving once more to be the "troubled child," Mr Hearn said. The operation had been pummelled by weak gelatin prices in North America.

Goodman Fielder said prices would settle over the next year.

New Zealand continued to supply a disproportionate percentage of pre-tax earnings - about 26 per cent - compared with its overall sales, which comprise only 17 per cent of company totals.

Management once again praised the local Bluebird operation as "the model of how to run an efficient business" as it had boosted production while cutting costs, as well as surviving a "full-frontal" from market competitor ETA, Mr Hearn said.

Mr McKay said the integration of baked goods company Ernest Adams was complete and highly successful.

The division was in the process of negotiating access to Australian supermarket chains.

Christmas products from the Ernest Adams range were already due to be sold through wide-ranging Australian channels, he said, but would not specify those networks.

Mr Hearn said the overall profit was broadly in line with analysts' forecasts and confirmed the success of restructuring the company over the past few years.

"Our job is to continue to demonstrate we have good growth prospects.

"Last year's results were a cause for concern but we must show that to be an aberration," he said.

"Our job is to deliver confidence over time, and then let the market do its job in reflecting that."

While revenue dropped in the year by 7.6 per cent to $A3.1 billion as a result of the sale of non-core assets, net profits gained by almost a quarter, earnings per share jumped to A10.3c from 8.3c, and net debt dropped from $A835 million to $778 million.

Abnormals of $A48 million resulting from the rationalisation of flour mills, edible oils and other facilities creamed the top off results.

The final net profit of $83 million is still 27 per cent up on comparable results last year.

The company has decided that despite an improved profit, a final dividend of 4c will be paid, bringing the full-year dividend to 7.5c two years in a row.

Mr Hearn said the decision to stick with 7.5c this year was "more a result of last year's payout being artificially high."

The company had paid out an "unsustainable" 90.4 per cent of its net profit in 1999, compared with 73.1 per cent this year.