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Goodman Fielder facing write-downs

Supply chain issues continue to plague Goodman Fielder, with the company issuing a profit downgrade and warning it expects write-downs soon.

On Wednesday, Goodman Fielder cited reliability in its manufacturing and supply chains, a lower selling price for baked goods, poor performances from its groceries division and higher farm-gate milk prices as reasons for earnings coming in up to $27 million lower than its previous full-year guidance of about $180 million.

''The holy grail has always been taking that massive distribution cost out. We have been working very hard on this for several years with the retailers. We've had a lot of dead-ends,'' Goodman Fielder chief executive Chris Delaney said.

Investors reacted negatively to the news, with shares plummeting 20.9 per cent to 48.25ยข in late afternoon trade.

In February, the food wholesaler reported a loss of $64.8 million, but said it was confident that full-year earnings would be broadly in line with last financial year - $185.6 million - but now expects that to be 10-15 per cent lower.

The company warned that businesses within its portfolio would face write-downs as a result of a detailed analysis of its assets.


''While that analysis is to be completed, the company currently expects to record non-cash impairments, reflecting the deterioration in the trading outlook across the portfolio.''

The company's new chief financial officer, Patrick Gibson, while not giving a range for the write-downs, said it would be looking closely at the bakery and grocery businesses.

In the past three years, Goodman Fielder has written off more than $250 million in restructuring costs, losses from sale of under-performing businesses and asset impairment.

During the third quarter, breakdowns at several manufacturing plants hampered its baking division, with the network having to provide increased volumes.

''We really stressed that manufacturing network,'' Mr Delaney said. ''We saw an aggravation in those reliability measures and therefore we basically lost that quarter. This is an ongoing problem. [In] a daily fresh business, you can't build inventory.''

Goodman Fielder expects to bring an additional $25 million in cost savings for the next financial year by bringing forward redundancies of 300 full-time equivalents into the current financial year.

''Today's announcement, a lot of it seems self-inflicted, which is disappointing,'' Perpetual portfolio manager Matt Williams said.

''The business seems to be in a constant state of restructuring. It's hard to get a handle on where maintainable earnings actually are in the business.''