Analysts welcome Goodman Fielder sell-off

Peter Reidie. Photo / Dean Purcell

Listed food firm's plan to offload meats and pizza units to focus on core business is a positive move: analysts.

Goodman Fielder's selling its New Zealand meats and pizza businesses is seen as positive by market analysts but news of the deal comes as one research firm cuts its profit forecast for the food manufacturer by almost A$20 million.

The Sydney-based firm, whose products include Meadow Fresh milk and Quality Bakers bread, yesterday announced plans to sell its meats and pizza businesses. The sale is subject to consultation with workers.

If the deal proceeds, the meats business - which makes Kiwi bacon, Brooks Deli, Hutton's, Sizzlers and Milano products - will be sold to Christchurch-based Hellers. The pizza business, whose main brand is Leaning Tower, would be sold to Mommas Frozen Products.

If the sale went ahead, Goodman Fielder's meat processing activities in Hamilton would close.

Goodman Fielder expects to make $15 million to $17 million from the sale, which will be used to reduce debt. The divestment of the businesses would mean a non-cash after-tax impairment charge of between $32 million to $36 million as well as an $8 million cash cost.

Goodman Fielder chief executive Chris Delaney said the deals represented the "near conclusion of the company's strategy to refocus on its core" business.

Morningstar analyst Peter Rae said the research firm supported the move to focus on core areas of business such as dairy and baking.

Other analysts yesterday also saw the merits of the strategy.

However, Rae said weak conditions - including higher milk prices in New Zealand and aggressive competition in Australian baking - together with Goodman Fielder increasing its marketing spend would weigh on the company's earnings.

To reflect this, Morningstar this week cut forecasts for the company's 2014 normalised net profit from A$107.5 million to A$88.2 million.

In November, Goldman Sachs cut its normalised profit estimates for the firm by 7.7 per cent to A$96.3 million.

In the 12 months to June 30 last year, Goodman Fielder recorded normalised net profit of A$86.5 million, down from A$96.5 million the year before.

Goodman Fielder is listed on both the New Zealand and Australian stock exchanges. Its shares on the NZX closed down 7.69 per cent yesterday at .66.

Employees surprised by closure, says union

Goodman Fielder employees facing redundancy had expected the sale of the company's meats division but were led to believe a Hamilton processing plant where they work would remain open, says FIRST Union.

If the sale of the meats business to Hellers goes ahead, work will shift to Christchurch and a processing plant in Hamilton that employs 125 people will close.

Goodman Fielder said the company was consulting employees affected by the decision. They would be redeployed within the business where possible. Those who could not be moved into other jobs at the company would be made redundant.

"Our experience with other closures has been that most people who have sought to work elsewhere within Goodman Fielder have generally been able to do so," said Peter Reidie, managing director Goodman Fielder NZ.

"The key is preparedness to move, which is understandably a challenge."

A Hellers representative said yesterday there could be up to 50 jobs available for workers. FIRST Union general secretary Robert Reid said Goodman Fielder had indicated 40 jobs - mainly in bread manufacturing - were available.

Reid said workers had been led to believe the Hamilton facility would remain open.

"People left for their Christmas holidays thinking that they were coming back to their jobs. In less than two weeks this has changed dramatically."