Shares in Australasia’s biggest food company, Goodman Fielder, have plunged more than 18 per cent, after the company said it would not meet profit expectations.
The company has also signalled writedowns, and said it will accelerate cost cutting plans, which includes job cuts.
At 1243 AEDT, Goodman Fielder shares were down 12 cents, or 19.7 per cent, at 49 cents.
IG market strategist Evan Lucas described the Goodman Fielder profit downgrade as horrible.
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.
Goodman Fielder said it will accelerate its program to find $25 million in cost savings by the 2016 financial year, and is now looking to make those savings by 2015.
Cost savings would be accelerated primarily through job cuts in the fourth quarter of the 2014 financial year.
“The bad news (for Goodman Fielder) isn’t over,” Mr Lucas said.
He said the company was feeling increased competition from generic-branded goods offered by supermarket giants Coles and Woolworths.
Also, the group’s bakery division was being hit by lower average prices.
“It’s not a good place to be at the moment. Goodman Fielder is under a lot of stress,” Mr Lucas said.
Goodman Fielder said trading conditions in Australia and New Zealand had deteriorated and some cost savings had been delayed since the company last provided earnings guidance in February.
When it released its first half results, Goodman Fielder said it expected normalised earnings for the full 2014 financial year to be broadly in line with the previous year.
The group now expects annual normalised earnings to be 10 to 15 per cent lower than current market analysts’ expectations of $180 million.
The company will review the carrying value of its businesses and expects to record impairments, reflecting the deterioration in trading outlook.
As a result of lower forecast earnings, the company’s net debt at 30 June 2014 is not expected to be lower, as previously anticipated.