Foods giant Goodman Fielder has renegotiated its private label bread contract with supermarket chain Coles.
But in a case of good news, bad news, Goodman Fielder expects its earnings for the 2012/13 financial year to be lower than in the previous year.
Full year earnings before interest and tax (EBIT) are set to be in the range of $195 million to $200 million, down from $233 million in 2011/12, it said on Tuesday.
Goodman Fielder is Australia’s largest listed food manufacturer, with brands including MeadowLea, Praise, White Wings, Pampas, Mighty Soft, Helga’s and Wonder White.
Retail trading conditions remain challenging, it said, but insisted it was on track with its three-year plan to restore sustainable earnings growth.
Earnings in the second half of 2012/13 are expected to be up 20 per cent from the first half, despite problems in a poultry business in Fiji.
That growth can be largely attributed to a turnaround in the company’s baking division, and growth in its grocery and dairy divisions, Goodman Fielder said.
The baking division has also successfully negotiated a private label bread contract, with the new contract effective from July 1.
Goodman Fielder did not reveal how much the contract was worth.
“The contract represents the achievement of another strategic milestone in the continued turnaround of our baking business,” chief executive Chris Delaney said.
Despite an overall improvement in earnings from the first half, the company’s second half earnings in its Asia Pacific operations were dented by a higher than expected number of deaths in its chicken stocks in Fiji, Goodman Fielder said.
“A higher than expected livestock mortality rate reduced the company’s ability to supply poultry to the market,” it said.
Goodman Fielder said its financial position continues to strengthen, as proceeds from divestments are used to lower its debt.
Last year the company sold its oils business Integro for $170 million to a consortium made up of GrainCorp and Gardner Smith.
It also last year sold its Champion flour milling business in New Zealand to Nisshin Flour Milling for $51 million.
At 1240 AEST, Goodman Fielder’s shares were up four cents, or 5.6 per cent, at 75 cents.
