In contrast to the caution at the BHP meeting, the upbeat nature of Thursday’s strategic briefing from Goodman Fielder’s newish CEO, Chris Delaney, was at odds with the company’s lacklustre performance.
The company lost money in the June 30 year thanks to asset write-downs here and in NZ totalling $300 million, while underlying profitability fell as the company’s management and board went to sleep and failed to spot problems in its key baking business.
But the message yesterday from the briefing was one of a steadying of the business, cost cuts, possible asset sales and of course, the return to improved profits.
Those longer term Goodman Fielder shareholders would have heard this message at least twice in the last 8 years or so.
One of the messages from the briefing was that the company says it will once again consider selling its commercial milling and oils businesses under a restructure aimed at returning it to profitability.
It tried and failed to do that in 2009-10 when the buyer, Cargill, the giant US owned agri-business was rejected by the ACCC because of competition problems.
The strategic review was started by Mr Delaney and the board after the surprise June full year loss of $166.7 million.
So far, it has found $100 million in ongoing savings, according to a statement from the company yesterday.
Mr Delaney said that $40 million of savings have already been implemented, another $25 million in savings are expected to be realised in the 2013 and 2014 financial years, and $35 million in 2014 and 2015.
"We have determined that our retail businesses are our portfolio priority and therefore our commercial milling and oils businesses, although attractive and well performing, are considered to be non-core," he said in the statement.
Options such as sales are being explored for these non-core businesses, Mr Delaney said.
The milling business is based in New Zealand, and supplies flour to commercial customers, while the Integro business provides edible fats and oils to Australian and New Zealand manufacturers and wholesalers.
Other smaller businesses, such as meat and convenience meals in New Zealand, dips, biscuits and frozen pastry, are also under review.
Brands identified as important to the group in the review include Helga’s, Vogel’s, MeadowLea and Meadow Fresh, Wonder White, Praise and White Wings.
“As a first step in group structure renewal we have consolidated our three retail divisions in New Zealand into one integrated team to provide one face to our customers and to enhance efficiency.
"Work is well advanced on the analysis of the benefits of adopting a similar business model in Australia.
“Our manufacturing and supply chain will be optimised and work is advancing on the development of a new Baking business model with potential efficiencies and cost savings already identified,” Mr Delaney said.
“The Strategic Review also identified the opportunity to consolidate our manufacturing base in Integro and Baking and eliminate unused capacity through proposed plant closures in Bunbury, Western Australia and in Rotorua, New Zealand.
“We have also recently taken action to significantly strengthen our balance sheet, including the successful execution of a $259 million capital raising and a new $500 million bank refinancing facility.
"This will provide the company with increased headroom within our financing facilities and give sufficient flexibility to enable us to pursue value accretive initiatives,” Mr Delaney said.
"The next bank syndicate refinancing is not required until financial year 2014. As well the company has strengthened its top leadership team with four key new appointments.”
Despite the continuation of a challenging external environment the company says the business is beginning to stabilise due to the strengthening of fundamentals in Baking and the impact of cost savings programs enacted in the first quarter.
“We can provide no specific guidance due to the volatility that exists in the market and because our recovery plans are still at an early stage,” Mr Delaney said.
“I believe that in the last four months we have made good progress in setting the foundations for turning around the company’s performance. However we are still a long way from where we need to be.
"We have early indications that the trends are beginning to turn more positively but we still have much hard work in front of us to achieve an acceptable performance for our shareholders.
“I look forward to updating the market on our progress in February at the release of our half year results."
One of the possible changes in the bread division that has not been implemented was to try and get Woolworths, Coles and Metcash IGA to accept bread deliveries to their huge distribution centres and then send the bread to their supermarkets.
The retailers knocked it back on cost grounds, (and the unstated reason that the bread from Goodman Fielder would no longer be ‘fresh’ or daily baked and delivered because the distribution trucks deliver every second or third day).
Other bread makers would have insisted on similar terms to help cut costs.
The big attraction for Goodman and Mr Delaney was cutting back the company’s extensive bread distribution system which is costly and a logistics nightmare. The savings would have been signi
