Bread maker blames loss on supermarket bunfight

Goodman Fielder blamed a fierce price war between Coles and Woolworths, higher raw ingredient costs and a slump in consumer spending. The company also lost a private‑label bread contract and took large impairment charges, which together turned a prior $161 million profit into a $167 million loss.

Coles and Woolworths cut the price of their private‑label bread to $1 a loaf, prompting heavy discounting across the category. Goodman Fielder said that discounting and the loss of a private‑label contract squeezed its margins and was a key factor in its plunging earnings.

The 2011 result included a $250 million impairment charge to the goodwill on the group’s Australian baking operations and a $50 million impairment to its New Zealand baking operations, significantly affecting reported earnings.

Earnings before interest and tax in Goodman Fielder’s main bakery division fell 20.8% to $130.5 million for the year to June 30, reflecting the impact of discounting, higher input costs and weaker consumer spending.

Chris Delaney, who replaced Peter Margin in July, began cutting costs in the bakery division and has so far reduced overheads by $11 million as part of a three‑year plan. He has said the company will stabilise the business and restructure its business model this financial year.

Analysts warned the company could be in peril without dramatic action. Nomura analyst David Cooke said the initial $11 million overhead reduction was mainly scrapping a layer of sales and finance, adding: “It gets harder from here.”

The company announced a final dividend of 2.5 (as reported) payable on November 3, taking total dividends for the year to 7.75 (as reported). The shares firmed about 1% to 77.5 (as reported) on the news.

Goodman Fielder is known for consumer brands such as Helga’s, Wonder White, MeadowLea and White Wings—brands that help everyday investors recognise the company’s retail footprint in baking and spreads.