Sydney / AU. (gfl) Goodman Fielder Limited provided an update on restructuring initiatives and trading conditions and expected non cash impairments in its Australian / New Zealand Baking and Home Ingredients NZ businesses and businesses previously identified as being under review. Summary:
- Reaffirms FY-2012 earnings guidance – normalised Ebit (pre significant items) expected to be at lower end of 230 to 245 million AUD range
- Project Renaissance remains on track
- Business divestments progressing to plan
- Prudent review of asset carrying values – expects to book non cash, impairment charge of approximately 110 million AUD relating to Australian / NZ Baking and Home Ingredients NZ businesses and 80 to 90 million AUD relating to businesses under review
The company also provided an update on the divestment of its non-core businesses and reaffirmed earnings guidance for the financial year ended 30 June 2012 (FY-2012).
Reaffirms normalised Ebit guidance for FY-2012
At its interim results on 16 February 2012, Goodman Fielder announced that it expected normalised Ebit (pre significant items) for FY-2012 to be in the range of 230 million AUD to 245 million AUD, subject to trading conditions. While trading conditions and external markets remain very challenging, Goodman Fielder now confirms that it expects normalised Ebit (pre significant items) to be within this range at the lower end.
Goodman Fielder continues to implement Project Renaissance to reduce the company´s overall cost base and optimise its manufacturing and supply chain. This project is targeting 100 million AUD in annualised savings by FY-2014/2015.
The first phase of this project, targeting 40 million AUD in ongoing overhead savings by FY-2012/2013, is being successfully delivered through a new, more efficient operating model in Australia and the integration of the company´s three retail-facing divisions in New Zealand.
Goodman Fielder has also commenced the second phase of Project Renaissance to optimise manufacturing and supply chain efficiencies to deliver 25 million AUD in ongoing savings by FY-2013/2014, which includes the consolidation of its bakery facilities to improve ongoing manufacturing efficiency and lower distribution costs. The cost savings achieved through Project Renaissance are being used to restore earnings and are also being re-invested to strengthen the business through brand and product innovation and increased productivity.
Restructuring costs for FY-2012 are expected to be approximately 70 to 75 million AUD, the majority of which is related to Project Renaissance, including site closure and redundancy costs affecting approximately 600 positions. This amount also includes costs brought forward from FY-2013 associated with the recently announced bakery consolidation.
As part of its portfolio prioritisation project, Goodman Fielder has advised previously that it is exploring the divestment of its Integro commercial oils division and its NZ Milling business.
This process is well progressed and discussions are ongoing with a number of parties in relation to both businesses. Goodman Fielder expects to provide further information in relation to the divestment of both businesses by the end of August 2012.
Goodman Fielder has also advised previously that as part of its strategic planning process, it is reviewing its business portfolio. That process identified a range of businesses as being under review and the company expects to incur non cash impairment charges relating to these businesses in the range of 80 to 90 million AUD in its FY-2012 accounts. These impairment charges do not relate to the Integro business.
Australian and New Zealand Baking / Home Ingredients NZ
Increased competitive pressure, including price reductions for supermarket private label bread and the resulting pricing pressure on proprietary branded bread, together with higher labour and logistics costs continue to impact earnings in the Australia / New Zealand Baking division.
In response, and as previously disclosed as part of the company´s strategic plan, Goodman Fielder is implementing strategies to strengthen its Baking business. On 25 June, the company announced the first phase of consolidating its bakery facilities in Australia to improve its manufacturing efficiency, in addition to rationalising its product range and implementing measures to reduce distribution costs.
While Goodman Fielder believes its strategy to address these market challenges will increase earnings over the medium term, the company continues to adopt a prudent approach to its review of the carrying value of the Baking business as part of the process of preparing its financial accounts for FY-2012.
Given the continuing challenging conditions in the New Zealand retail market, Goodman Fielder has also adopted a prudent approach to the valuation of its Home Ingredients business in that market.
As a result, Goodman Fielder expects non-cash impairment charges against goodwill in its Australian and New Zealand Baking business and Home Ingredients NZ business of approximately 110 million AUD in its FY-2012 accounts. Goodman Fielder advises that post the non-cash impairments, the company will continue to operate comfortably within its banking covenants.
Significant items for FY-2012 are expected to be approximately 260 to 275 million AUD, representing the non cash impairments in the Baking, Home Ingredients NZ and businesses under review of 190 to 200 million AUD, and restructuring / redundancy costs of 70 to 75 million AUD. Reported Ebit for FY-2012 will include these significant items. The company will release its financial results for the full year ended 30 June 2012 on 14 August 2012.