Supermarket Discounting Hurts Australia’s Largest ...

Supermarket Discounting Hurts Australia’s Largest Bread Maker

Crunched between rising input costs and supermarket discounting in the bakery sector, Goodman Fielder reported a 9 per cent drop in sales to $1.2 billion and a 17 per cent drop in earnings to $95 million, for the first half of 2012-13.

The results released in February report a normalised net profit after tax of $41.2 million – down 4 per cent from the previous period.

Nonetheless Goodman Fielder chief executive officer Chris Delaney said cheap private label bread sales and rising production costs have been challenging. But he remained confident there are signs of a turnaround in the baking sector.

“The progress we are making, particularly in securing price increases in our baking and grocery divisions, is expected to result in improved performance in the second half of the year,” Chris said.

We improved the alignment with our key retail partners, which resulted in the successful agreement to implement meaningful price increases related to the ‘cost to serve’ model in baking in Australia and also price increases to recover input cost inflation in our baking and grocery divisions in Australia and New Zealand.”

The company – which closed three factories around the country and sold oil business Integro in October 2012 to reduce debts – successfully negotiated with supermarkets for a price rise for bread last December to reflect the cost of grain.

Nonetheless, the company is in the process of re-negotiating its contract to make home-brand bread for Coles. The company’s chief executive officer has publically acknowledged the partnership was as a ‘”mistake” and that Goodman Fielder would not sign another deal under the same conditions.

On a brighter note, Goodman Fielder also announced net debt had been reduced by 35 per cent to $498 million. Its Project Renaissanceplan to achieve $100 million in recurrent savings by 2014-2015 was also reported to be on track, with an expected $16 million in savings for the end of financial year.

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