Australia-based food group Goodman Fielder has said a spike in milk prices and local competition means annual profits from its New Zealand dairy arm are likely to fall.
When Goodman Fielder reported results for its last financial year in August, it indicated it expected some pressure on margins from its dairy business in New Zealand in the new fiscal period.
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The unit, which includes brands like Meadow Fresh milk and Chesdale cheese, accounted for 19% of Goodman Fielder’s EBIT in its last financial year, when it saw earnings climb 18%.
In an update to shareholders on Friday (22 November), the company said farm-gate milk prices had jumped over 40% since June.
Goodman Fielder said it had been unable to recover the higher costs amid “aggressive competitor wholesale pricing”. It warned normalised EBIT from the New Zealand dairy arm would be hit to the tune of A$8-10m (US$7.3-$9.2m) in the first half of its current financial year, which it was “very unlikely” to claw back later in the year.
The pressure on costs in New Zealand, combined with a doubling in marketing investment across its business, means Goodman Fielder continues to expect company profits to be “weighted significantly” to the second half, it added.
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By GlobalData
