This is hardly a surprise – but Goodman Fielder (GFF) says it will earn less this year. And in its own now familiar way, the company chose to highlight a private bread making contract (the good news?) ahead of the downgrade news which was the real fibre in yesterday’s statement to the ASX.
It continues the unfortunate habit the company has shown in the past few years of surprising investors on the downside with downgrades, rather than upgrades of sales and profits.
Goodman Fielder said yesterday it is now expecting earnings before interest and tax from continuing and discontinued operations (before significant items) for the financial year (FY) ending 30 June 2013, in the range of $195 million to $200 million.
This compares with EBIT of $233 million in 2011-12, which however included a 12-month contribution from the oils and fats division, which was sold off in the first half current year (i.e. in the six months to last December). It’s still a fall of around 15%, but it’s one that didn’t hurt the share price yesterday in the end.
Goodman Fielder is Australia’s largest listed food manufacturer, with brands including MeadowLea, Praise, White Wings, Pampas, Mighty Soft, Helga’s and Wonder White.
Goodman said it expects second-half earnings before interest, tax and significant items from continuing operations to rise 15% to 20% from the first half, as it benefits from an improvement in its baking unit and has stable to positive earnings growth in its grocery and dairy divisions.
That growth can be largely attributed to a turnaround in the company’s baking division, and growth in its grocery and dairy divisions, Goodman Fielder said yesterday.
"While retail trading conditions, particularly in the Australian supermarket channel, remain challenging, Goodman Fielder continues to make steady progress on the key initiatives under the company’s three-year strategic plan to restore sustainable earnings growth," the company said in yesterday’s statement (trying to put the best possible stance on what was a disappointment to the market).
So it’s no wonder the shares slid after the news was released to the market. The shares slid 6.5c in early trading to a low of 69.5c before recovering to end at 74c up 3.5c as investors digested the news that the Australian business was still doing well.
GFF YTD – Another downgrade from Goodman Fielder but market not too worried
Its Australian baking unit will start a new private label bread contract on July 1 (next Monday) with an unnamed retailer, but believed to be Coles, with a surprise price rise. These types of bread making contracts have hurt the company’s branded bread sales in the past couple of years.
Full-year earnings for the Asia Pacific unit will be lower than in 2011-12 because a higher-than-expected livestock mortality rate at its Fiji poultry operation in the current half has reduced the company’s ability to supply poultry to the market and increased its remediation costs.
But the poultry business has stabilised over the past two months and the Asia Pacific unit should return to earnings growth in the 2014 financial year, the company said.
Goodman said its financial position continues to strengthen as the proceeds from divestments are used to lower net debt while operational cash flow remains strong. It releases its 2013 full-year earnings on August 14.
Goodman didn’t provide a forecast for its net earnings. The company reported a net loss of $146.9 million in 2011- 12 from a loss of $166.7 million in 2010-11. In both years the company took asset impairment and write down charges.
And still with the growing downgrade club, Sydney-based women’s fashion wear retailer Noni B (NBL) is something of a bellwether for the clothing sector with its policy of making timely and early earnings updates ahead of the June 30 financial year end (and occasionally ahead of the December interim as well).
Over the past five years most of the statements before the end of the reporting period have been negative, warning of downgrades and yesterday was no different with the company telling investors that it will very likely report a loss of up to $4 million after taking a $5 million non-cash impairment charge.
It was the third negative update from Noni B so far this year after ones in January ahead of the interim result, and then in late April.
The news saw the shares sold off to 18 month lows, falling 6.6% to 56 cents. They closed steady down 3c to 5% at 57c.
NBL YTD – Another early profit warning from Noni B
The company warned in a statement to the ASX, that it would slide to a full year loss of between $3.5 million and $4 million after the review of goodwill on its balance sheet.
And, there was some ‘good news’ – the company confirmed April guidance that despite the sluggish trading conditions in the sector, it still expected to report a profit before the impairment charge of between $1 million and $1.5 million.
But that in turn contained some ‘bad’ news because this result is sharply lower than the $2.7 million earned in 2011-12, as earlier guidance in April has suggested.
In 2011 it became the first retailer to issue an earnings warning ahead of the 2010-11 results season, saying at the time its full-year profit could fall by more than 80%. It did.
But in January of this year, the company warned that after tax profit would fall to a range of $1.7 million to $1.9 million, on sales steady for the half (despite one less week in the six months to December). That was a fall of around 30% on the $2.4 million earned in the first half of 2011-12.
First half profit came in at $1.9 million according to the result announced in early February.
Then in April it warned the market that the result for 2012-13 looked like coming in around $1 million to $1.5 million, against $2.7 million earned in 2011-12.
Yesterday’s update means the company probably lost (before the impairment charge) up to $900,000 in the six months to June 30. The trading loss will probably end up closer to half a million dollars.
