Goodman Fielder sold off as drought erodes profit

Pointing to the 20 per cent rise in wheat prices in the past 12 months, along with rises for edible oils, Goodman's chief executive, Tom Park, said the company's net operating profit for 2002-03 would now come in at the lower end of the $114 to $128 million range forecast by analysts.

Goodman shares, which have lost 12 per cent of their value in the past six weeks, closed 4c lower at $1.41.

With wheat and edible oils making up 20 per cent of Goodman's cost base, Mr Park said the group's baking division would be the hardest hit.

The Baking Australia division delivers about a quarter of the company's earnings.

``Let me reassure you that every effort will be made to mitigate this impact through increased productivity and strong performances in our [non-baking] divisions," Mr Park said at the company's annual meeting yesterday. Goodman had little scope, however, to offset rising wheat prices by increasing bread prices in the face of stiff competition.

Goodman has lifted wholesale price of its Buttercup, Helga, Vogel, and Riga bread ranges by 5 per cent, but its rival, George Weston, has not changed prices. A Weston's spokesman said the company had no immediate plans to lift the price of its Tip Top and Burgen brands.

Outside the grim news on the baking front, Mr Park said Goodman's transition into a retail branded food company should be complete by mid-2003 with the sale of the group's two remaining gelatine plants and ingredients business.

In August, Goodman sold its milling business to GrainCorp and Cargill for $200 million.

After reaping almost $560 million from divestment of several non-core businesses in the past 18 months, Goodman said yesterday its $200 million buy-back would be extended, with a third tranche of $100 million.

Mr Park said the focus will be on growing core Goodman brands, such as Uncle Toby's, White Wings, Pampas pastry, Praise, Meadow Lea and Buttercup. ``In the past, too much time and effort [has] been put into too many new category initiatives, distracting us from our main focus," he said.

Aside from Goodman's aim to entrench its brand names even deeper in Australia, New Zealand and Fiji, Mr Park said it was looking for several bolt-on acquisitions to beef up the market share of its portfolio brands.