The 2008 Goodman Fielder result was long on red ink and explanation, and short of the sort of news investors wanted to read about the year past, and the year that’s now underway.
And that was reflected in the share price, which traded through a range of a high of $1.575, a low of $1.39 and a closing price of $1.45, down 6 cents, or 4% on a day when the market was up 1.5%.
Annual profit after write-offs fell and directors said they don’t expect much improvement in earnings this financial year due to uncertainty surrounding the outlook for the Australia and New Zealand economies.
Net profit for the year ended June 30 fell 88.4 per cent to $27.7 million from the prior corresponding period because of an impairment charge on its NZ dairy division of $170 million.
Excluding the charge and restructuring costs, net profit from continuing operations was $220.7 million; roughly steady with the 2007 figure of just over $218 million, despite having to absorb $234 million in increased commodity and logistics costs. (Higher oil and energy costs, plus higher prices for grains and oil seeds, plus dairy products).
The company will pay a steady final dividend of 7.5 cents, taking the total for the year an unchanged 13.5 cents.
"The company sees little improvement in the underlying earnings in fiscal 2009 due to uncertainty around commodity costs and future economic conditions in Australia and New Zealand," Goodman Fielder directors said in their statement to the ASX.
"The company is more optimistic for the fiscal 2010 year and expects to see the benefits flow through from significant capital expenditure and resulting efficiency gains, combined with softening commodity prices."
Revenue rose 10.2% to $2.68 billion in the year to June.
They are not alone in making these comments as quite a few companies, like Boral, Wattyl and others in building, construction and retailing look through what’s expected to be a tough 12 months to hopefully better times from 2010 onwards.
The spreads and breads maker, said "substantial and rapid" increases in commodity costs impacted margins and added $204 million to its costs.
"In the second half of the year international crude oil pricing also reached record high levels, resulting in an increase of $30 million in logistics costs," it added.
"A rapid deterioration in the New Zealand economy towards the end of the financial year also impacted earnings as did the weakening New Zealand dollar.
Earnings before interest and tax (EBIT) for Goodman’s fresh baking business fell 12.9% to $131.4 million.
"This was the first time in the last five years in which the business did not record double digit profit growth," Goodman said.
Earnings for its commercial unit, which supplies flour, fats and oils, fell 4.6% to $66 million, due to rising oil and wheat costs.
But home ingredients EBIT rose 13.8% to $101.3 million.
The result included the first full year of earnings from the Copperpot dips business as well as a few months benefit from biscuit maker Paradise Foods, which it acquired in March.
Meanwhile, EBIT for the troubled dairy and meats arm fell 31.9% to $34.4 million.
"The dairy business had a difficult year with rapidly escalating commodity costs resulting in raw milk costs increasing by over 60 per cent in the year," Goodman said.
"Aggressive cost recovery initiatives resulted in the business taking four price rises but inevitable timing lags and a growth in private label sales had a negative impact on margins."
"During the year the company commenced sourcing locally in China with the signing of a long term contract with a Chinese company to manufacture Goodman Fielder commercial fats and oils at a plant in the Shanghai region.
"This will allow the company to grow its Chinese customer base, reduce its conversion costs and avoid the need to supply finished goods from Australia.
"The company continued to focus on building for the future by pursuing manufacturing efficiency, optimising its logistics platform and investing heavily in brand support.
"The closures of redundant facilities at Mascot in NSW and Geelong in Victoria were announced and construction commenced on a new state-of-the-art packaged food manufacturing plant at Erskine Park in western Sydney.
"During the year the company invested heavily in new product development and in supporting its leading consumer brands.
"Brand support increased by more than 60% and the company’s active new product development program saw the launch of a range of new and redeveloped products.
"In Australia the company launched Lawsons, a new premium bread brand, while in New Zealand every dairy branded product was reformulated, re-designed or repackaged.
"A new Thick and Creamy yogurt range was launched, as was a new milk variant and an extended specialty cheese range, and a new milk bottle shape was launched to increase functionality and increase shelf presence.
"The company moved to optimise its distribution system by commencing a program of outsourcing line haul distribution to third party providers.
“The company has also commenced a program of selling and leasing back selected assets, where holding title in those assets is not essential to the ongoing business, thus freeing tied-up capital that can be invested more effectively elsewhere in the company.
"The company maintained its search for bolt-on acquisitions that would add shareholder value. Paradise Foods, Australia’s no. 2 biscuit manufacturer, was
