Australasia’s biggest food company, Goodman Fielder, is bringing forward its plans for 300 job cuts in response to a weaker than expected financial performance.
The owner of Helga’s, Vogel’s, Meadow Fresh, MeadowLea and Olive Grove brands, said trading conditions in Australia and New Zealand had deteriorated, meaning it will not meet profit expectations.
Selling prices in the group’s baking business were lower than expected, and about $10 million to $15 million in manufacturing and supply chain cost savings had been delayed.
Earnings in its grocery division were lower than expected due to increased competition, and the group’s New Zealand dairy business was paying higher farmgate milk prices.
Goodman Fielder’s share price plummeted on the news, losing 13.5 cents, or 22.1 per cent, to 47.5 cents, their lowest level since August 2012.
Goodman Fielder had planned to cut 300 jobs in the 2014/15 financial year in a bid to save $25 million by 2015/16.
But those cuts are to be brought forward, and will now be made in the next three months, in order to produce the $25 million of savings in the 2014/15 year.
“This is a plan that we had on the books for execution in (fiscal) 2015,” Goodman Fielder chief executive Chris Delaney said.
“We did pull it forward by about three to four months.
“We are committed to being a lean organisation.”
A little more than half of the job cuts will come in Australia and New Zealand, with the rest in Goodman Fielder’s businesses elsewhere in the Pacific region.
When it released its half year results in February, Goodman Fielder expected normalised earnings for the full 2013/14 financial year to be broadly in line with the previous year’s $185.6 million.
The group now expects annual normalised earnings to be 10 to 15 per cent lower than market analysts’ current expectations of $180 million.
The company said it will also review the carrying value of its businesses, and expects to record impairments, reflecting the deterioration in its trading outlook.
As a result of the lower forecast earnings, the company’s net debt at June 30, 2014 is not expected to be lower, as previously anticipated.
IG market strategist Evan Lucas said Goodman Fielder was under a lot of stress, and the bad news wasn’t over yet.
He said the company would still have to generate significant earnings in the second half of the financial year to meet its revised earnings expectation.