NZ margin jolt hits Goodman Fielder

Shares in food products group Goodman Fielder fell sharply as it warned of a downturn in December-half earnings, which prompted concerns whether it can stave off a full-year decline.

Shares in food products group Goodman Fielder fell sharply as it warned of a downturn in December-half earnings, which prompted concerns whether it can stave off a full-year decline.

Managing director Chris Delaney told shareholders at Friday's annual general meeting that earnings would be "weighted significantly to the second half" of the 2014 financial year because of 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 farmgate 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 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 impacted by $8 million to $10 million.

This is "very unlikely" to be recovered in the second half.

The bad news follows the difficulties that emerged in Fiji late last financial year.

There was an unexpected rise in the mortality rate at its poultry unit, which hit earnings.

There has been a reduction in the mortality rate in Fiji.

The focus now is on trying to limit the adverse impact of a loss of sales in the Christmas market.

Also affecting the near-term performance is a decision to double marketing spending in the baking, dairy and grocery divisions.

The shares fell 3.5¢ to 59.5¢.