Australian food manufacturer Freedom Foods has announced an Operating EBDITA of $11.6 million for the 2013 financial year, an increase of 113 per cent on the previous year.

Freedom Foods said the results reflected increased sales and profitability in the Freedom Foods brand, consolidation of Pactum Australia for 12 months and a contribution from Specialty Seafood.

Operating Pre-tax Profit was $7.5 million for the year to 30 June 2013, reflecting a 117 per cent increase on the previous corresponding 12 month period.

The Company said the reported Net Profit of $13.7 million included non-operating after tax profit of $8 million from the sale of 40 million shares in dairy company A2 Corporation (A2C), employee share option expense of $246,000 (after tax), bad debts provision of $205,000 (after tax) and resolution of a long term employee claim of $140,000 (after tax). Freedom Foods said it would utilise future income tax benefits to reduce cash tax payable on the sale of the A2C shareholding.

Freedom Foods brand

The Freedom Foods business unit continued to build momentum, delivering overall sales growth of 29 per cent compared to the previous corresponding period.

The Company said it drove the Freedom branded portfolio with a focus on promotional price points, new product innovation and increased merchandising in major retailers and independent channels to improve distribution and stock weights. As a result, Freedom Foods sold 1 million cereal cases, equal to volume growth of 50 per cent and gross sales growth of 41 per cent compared to the previous corresponding period, according to the Company.

Freedom Foods said it continued to focus on leveraging its Cereal base into breakfast snack alternatives, as well as meeting demand for “nut free” snacks, with growth in volumes of 127 per cent, albeit from a small base.

According to the Company, dairy alternative beverage sales (soy, rice and almond) continued the trend from the 2012 financial year with volume growth of 14 per cent and sales growth of 24 per cent compared to the previous corresponding period. Freedom Foods said the growth reflected increased market share of Australia’s Own Organic and Blue Diamond Almond Breeze Milk brands.

The business continued its development of export markets, seeing volume growth in North America. The previously announced expansion of Freedom Foods into North America commenced under a new wholly owned subsidiary and the relocation of a senior commercial executive, Michael Bracka, to North America to lead the commercial activities in that region. Freedom Foods said its long term target is to develop a sales base of up to 1 million cases of Freedom branded Cereals and Cereal Snacks.

Specialty Seafood

Freedom Foods said the Specialty Seafood business performed below the previous corresponding period, reflecting lower sales in New Zealand and increased cost of salmon.

The Company said its Brunswick Sardines brand maintained its number one brand leadership position in Australia and New Zealand. In Salmon, the Paramount brand increased its share in the Pink Salmon segment, although the brand suffered some SKU ranging reduction in the second half.

While the business saw the benefit of higher exchange rates on inventories purchase in $USD and $CAD, Freedom Foods said this was not sufficient to meet cost increases in salmon, compared to the previous corresponding period.

Pactum Australia

Pactum Australia, which provides contract manufacture solutions in long-life (UHT) food beverages for private label and proprietary customers, delivered a strong sales and business EBDITA contribution in its 12 months as a consolidated entity.

Pactum Australia non-dairy production volumes increased during the year to support the growth of the Freedom Foods Australia’s Own and Blue Diamond brands, in particular the almond beverage category.

Pactum Dairy Group

In December 2012, Pactum announced that it would build a UHT processing plant at Shepparton in Victoria to meet demand for high quality dairy milk in export and domestic markets. The primary market focus of the new capacity is on supply of high quality UHT dairy milk for export markets to proprietary and private label customers in South East Asia, including China.

The new plant will be operated through a 50/50 joint venture with Australian dairy milk supply group Australian Consolidated Milk (ACM). ACM will be responsible for co-ordinating long term arrangements with Australian dairy farmers.

The new UHT dairy facility at Shepparton is expected to commence trial production in December 2013.

Strategic equity association with A2 Corporation

Freedom Foods is the largest single shareholder in A2C, which reported sales of NZD$94.3 million for the 2013 financial year, an increase of 51 per cent over the prior year, and Net Profit After Tax of NZD$4.1 million.

The Company said A2 branded milk is the “fastest growing milk brand in the Australian market and the major driver of category growth nationally”, accounting for approximately 7.4 per cent of grocery channel market share by value. Sales growth in Australia increased 48 per cent over the previous corresponding period.

Outlook

Freedom Foods said it expected to continue to deliver improved results from growth in existing distribution channels and international markets, aligned with increasing manufacturing efficiencies at its Leeton facility. Overall, the Company said it anticipates growth in sales, operating profitability and improving return on funds employed in the 2014 financial year.