Only the New Zealand economy, its operations in that country and high commodity prices, stand in the way of food giant, Goodman Fielder, achieving its full year prospectus forecast of a pro-forma net profit of $223.9 million.
The company, which makes bread, spreads, biscuits and ingredients for the food industry revealed yesterday that its first half net profit hit $128.2 million.
An interim dividend of six cents per share to be paid from earnings per share of 9.7c.
The company said it expected to reach the pro-forma profit figure after tax and listed the volatility of the New Zealand dollar, commodity cost recovery (wheat, fuel, corn, oil seeds etc) and the performance of its NZ operations, as the ‘key risks’ to the meeting of the prospectus forecasts.
But Goodman Fielder said it had made good progress in the half, with three recent acquisitions all integrated and performing at or above expectations.
It also announced that it had entered into an agreement to acquire the majority share in the Arnott’s biscuits business in Papua New Guinea, the first time in 13 years or so that part of the Arnotts empire has been returned to Australian ownership.
Group revenues were $1.216 billion in the six months. Goodman said no meaningful comparisons could be given for the results as it was not publicly listed during the previous corresponding period.
The company said in a statement that it “remains focused on delivering the full financial year net profit after tax pro forma forecast of $223.9 million, as contained in the company’s initial public offering prospectus”.
Goodman CEO Peter Margin said the company expects commodity costs to rise by between $70 million and $80 million, mainly in wheat and oils, over the full year.
Recovering those higher costs through higher selling prices or cost cutting, or operational efficiencies, will be a major task for the company.
Goodman said in briefing notes that it remained on the lookout for further acquisitions in the Pacific region.
Burns Philp & Co Ltd spun off the Goodman Fielder business in a $2.1 billion float in December 2005, returning the spreads and bakery group to the ASX after a two-year absence.
Goodman Fielder said the group’s Australian businesses are delivering at or above expectations.
“The Australian baking business continued its strong momentum from the prior year despite emerging pressure from increased commodity costs,” Mr Margin said in a statement.
“The commercial and home ingredients businesses also performed well in the face of commodity cost pressures which were managed effectively.
“Returns from the Pacific Islands also increased and the company is looking to further develop this business.
“However the company’s trading performance in New Zealand did not meet expectations and the company is responding to this challenge.”
Goodman Fielder’s recent acquisitions include the La Famiglia chilled bakery business and the Country Life health and organic bakery business in Australia, the Northern Bakeries operations in New Zealand, and New Caledonia baking business La Biscuitiere.
