Goodman's downturn warning hits shares
Shares in the food group Goodman Fielder fell sharply as it warned of a downturn in December-half earnings, which prompted fears of a full-year decline.
Addressing shareholders at Friday's annual meeting, managing director Chris Delaney said earnings would be "weighted significantly to the second half" of the 2014 financial year due to a squeeze on margins in New Zealand.
When releasing its 2013 results earlier in the year, the company was less concerned about a December-half downturn, telling shareholders only that earnings would be "weighted towards the second half".
Since then, pressures on its domestic bread-baking arm, along with a higher milk price in New Zealand, have weighed on its prospects.
In particular, the New Zealand dairy arm has been hurt by a rise of more than 40 per cent in farm gate prices for milk from the fourth quarter of fiscal 2013.
"Aggressive competitor wholesale pricing" has meant Goodman Fielder has not been able to make up for lost ground, Mr Delaney told shareholders.
As a result, the pre-tax profit of its NZ dairy arm in the December half is expected to be hit by $8 million to $10 million, which is "very unlikely" to be recovered in the second half.
The bad news follows the difficulties that emerged in Fiji late last financial year when an unexpected rise in the mortality rate at its poultry unit there hit earnings.
There had been a reduction in the mortality rate in Fiji, it said, with the focus now on trying to lift sales to try to limit the adverse impact of a loss of sales in the key Christmas market.
Also weighing on the near-term performance is a decision to double marketing spending in the baking, dairy and grocery divisions, it said.
Renewed nervousness over its earnings outlook caused Goodman Fielder shares to fall to a 69¢ low during trading, but they recovered slightly to close at 70.5¢, a fall of .03¢ or 4.08 per cent for the day.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free