Goodman Fielder says it will speed up its cost-cutting program as a result of deteriorating market conditions, and the company is predicting lower than expected full-year financial results.
According to the bakery and grocery products company, tough trading conditions affected its third-quarter performance, and as a result, 2014 earnings before interest and taxation (EBIT) are expected to be between 10 per cent and 15 per cent lower than the $180 million expected for the year to June 30.
In February, Goodman Fielder said it expected its results to be broadly in line with last year's $185.6m result. Since then, however, trading conditions in Australia and New Zealand deteriorated and planned manufacturing and supply chain cost savings were delayed, according to the company.
“This has required the company to revise its earnings expectations for the fourth quarter,” Goodman Fielder said.
As a result, the company has said it will accelerate its cost-saving plan – mostly through staff reductions, in order to cut $25 million in costs by the end of the 2015 financial year.
“At its interim result, the company had identified an additional $25 million in cost savings under Project Renaissance to be achieved by FY16. The company has accelerated these cost saving initiatives, primarily through headcount reduction in the fourth quarter of FY14, and now expects to achieve the additional $25 million in cost savings by FY15,” the company said.
Though its baking business increased volumes in the third quarter, the net sale price was lower than expected, so it wasn't able to achieve between $10m-$15m in expected cost-savings.
Goodman Fielder also pointed to continuing reliability issues across the manufacturing and supply chain network which have required the company to continue to invest to maintain customer service metrics, which impacted earnings in the short term.
The earnings from its grocery business were weaker than expected due to increased competition impacting price and volume across the portfolio, and Goodman Fielder says it expects difficult trading conditions and lower customer inventory levels to impact its fourth quarter earnings.
The company predicts its New Zealand dairy business will be impacted in the short term by an increase in the farmgate milk price, due to a time lag between the increase in raw milk prices and cost recovery.
Goodman Fielder said its baking business increased volumes in the third quarter, but the net sale price was lower than expected.
