Rise in short-selling flattens bread maker's shares

SHARES in struggling bread maker Goodman Fielder have taken another step down this year, with an increase in short-selling activity by hedge fund investors indicating uncertainty about the company's turnaround strategy.

Goodman Fielder, which faces increasing price pressures and competition from home-brand products as a result of the supermarket wars, has had its shares hit fresh lows over the past 10 days, falling below 40?.

The shares closed down half a cent at 42? yesterday, down on the 45? a share at which the company raised more than $259 million in September-October, and about 74 per cent below its post-financial crisis peak of $1.62, reached in October 2009.

Meanwhile, the company has rejoined the list of the top 20 most-shorted stocks on the ASX, according to Commonwealth Bank analysts using net short position data from the Australian Securities and Investments Commission.

As of last Monday, about 4.1 per cent of Goodman Fielder shares had been sold short, down from a peak of 5.5 per cent during last

year's capital raising but a sharp increase from later last year.

Equities analyst Nizar Torlakovic said the bank expected Goodman Fielder to deliver ''a weak profit result in February, given tough conditions, and an increase in short-selling activity was not unexpected''.

''So far short positions above this [4.1 per cent] level were short-lived,'' Mr Torlakovic said.

''However, that may change if the result proves to be worse than expected.''

Last year was difficult for Goodman Fielder, which endured a profit downgrade, a switch to new chief executive Chris Delaney, $300 million in write-downs, and the dilutive capital raising.

The company also announced a $100 million cost-cutting and supply chain optimisation exercise and the sale of non-core businesses. Goodman Fielder declined to comment yesterday.