Goodman's bread ops still under pressure
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MELBOURNE, Feb 13 AAP
February 13 2013, 1:49PM
Goodman Fielder says price rises alone won't be enough to boost its underperforming bakery operations, which is the group's biggest business.
The breads and spreads maker, which axed hundreds of jobs in 2012 as part of a major ongoing restructure, on Wednesday booked a net profit of $51 million for the six months ended December 31.
This was up 137 per cent on the net profit of $21.5 million in the prior corresponding period.
Excluding gains from asset sales and restructuring costs, normalised net profit was four per cent lower at $41.2 million.
Shares in Goodman Fielder were 4.5 cents, or 6.25 per cent, lower at 67.5 cents at 1336 AEDT on Wednesday.
Chief executive Chris Delaney said retail trading conditions in Australia continued to be "very challenging", resulting in lower volumes and pricing, which had affected the company's first half performance.
Revenue and normalised earnings in the bakery division fell as price pressure from supermarket private labels continued to place price and volume pressure on proprietary-branded bread.
Mr Delaney said Goodman Fielder had secured price increases in its baking and grocery divisions, which was expected to result in improved performance in the second half of the year.
Asked by reporters if the price increases would be enough to lift the bakery business to the level where Goodman Fielder wanted it, Mr Delaney said: "The pricing by itself will not".
He said the turnaround of the baking business was a three-year process requiring a lowering of its cost structure, price increases, and rejuvenating the brands to make them more relevant to consumers.
Mr Delaney would not reveal the level of price increases secured from supermarkets late in calendar 2012, but said they covered rising input costs such as diesel and wages, and service costs.
"We're satisfied with the level of pricing that retailers have agreed to," Mr Delaney said.
Goodman Fielder was working on developing new revenue streams outside of supermarkets but it was a long-term project.
Mr Delaney said the fresh-loaf business - traditional square bread bought in supermarkets - was worth about $2 billion across Australia and New Zealand, but the broader bakery products business - which included artisan breads - was worth about $4.5 billion.
Mr Delaney said the group's interim result was in line with the company's expectations in delivering strategic objectives.
He said Goodman Fielder was ahead of its target to achieve $100 million in annualised savings by the 2015 financial year under its business improvement program, Project Renaissance.
The company expects to reap an extra $16 million in savings this financial year, bringing the cumulative savings to about $56 million by the end of the 12-month period.
Goodman Fielder did not pay an interim dividend but expects to resume paying dividends at the end of the current financial year.
By Trevor Chappell