Australian food manufacturer Goodman Fielder has announced the successful negotiation of a private label bread contract with supermarket group Coles, which will be effective from 1 July 2013.

The new contract is an extension of an existing contract with Coles, which was due to expire at the end of June 2013.

“The contract represents the achievement of another strategic milestone in the continued turnaround of our baking business,” said Chris Delaney, Goodman Fielder CEO.

Australian Food News reported in February 2013 that Goodman Fielder’s half yearly results showed a 9 per cent drop in revenue, largely due to supermarket price discounting in the Australian bakery sector. It is understood that Goodman Fielder managed to secure a price increase in its latest contract with Coles.

Goodman Fielder trading update

The new contract comes as Goodman Fielder announced it expected to see an increase in second half earnings before interest and tax (EBIT) from continuing operations before significant items of around 15 to 20 per cent compared to the first half.

The Company said that retail conditions, particularly in the Australian supermarket channel, “remain challenging”, but it was making “steady progress” on its three-year strategic plan to restore sustainable earnings growth.

Goodman Fielder said the progress comes as turnaround in its Baking division continues, together with “stable to positive” earnings growth in its Grocery and Dairy divisions.

At a Group level, EBIT from continuing and discontinued operations for financial year 2013 is expected to be in the range of AU$195-200 million. Goodman Fielder said the result includes a significant increase in direct marketing expenditure on the previous year as the Company reinvests to support “branded innovation” across its core categories.

Asia-Pacific division poultry setback

Meanwhile, Goodman Fielder said second half earnings in the Asia-Pacific division had been impacted primarily by a “one-off capacity issue”, which affected the Company’s poultry business in Fiji.

The Company said a higher than expected livestock mortality rate reduced its ability to supply poultry to the market. The resulting lower volumes, together with the higher costs associated with remediating the issue, impacted earnings in the second half. Goodman Fielder said the performance of its poultry business had stabilised over the past two months as corrective measures were implemented.

Goodman Fielder said that while it is confident that the capacity issue is being appropriately addressed to restore earnings growth in financial year 2014, EBIT for the Asia-Pacific division in financial year 2013 is now expected to be lower than the previous year.

Goodman Fielder expects to announces its full year results for financial year 2013 on 14 August 2013.

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