Goodman Fielder will close two milling and oils manufacturing plants – one in Bunbury, Western Australia and the other in Rotorua, New Zealand – due to a challenging economic climate and weakening consumer confidence in Australia.
The food manufacturing company cites “unacceptable earnings performance” as the driver for the closures. A challenging external environment, weakening consumer confidence, commodity cost increases, severe retail price competition, and floods, cyclones and earthquakes have all contributed to the decision.
Goodman Fielder plans to gear future manufacturing and supply chain development towards its emerging Baking business model, and says it has already identified potential efficiencies and cost savings here.
“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,” said the company’s CEO, Chris Delaney.
“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.
“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.”
The company has already raised capital and gained bank refinancing during the last month; refinancing will not be needed again until 2014.
“In the Strategic Review our clear priority is optimising shareholder value and delivering sustainable earnings growth. We are considering all options to achieve this,” said Delaney.
Goodman Fielder plans to save $100 million through the closures and consolidation, of which $40 million has already been raised.
“Work plans are in place to deliver a further $25 million in financial years 2013 and 2014, with $35 million to be targeted for delivery in financial years 2014 and 2015. These savings will be used to reinvest in the business and to improve the company’s bottom line,” said Delaney.
The company will now focus on three key areas: portfolio prioritisation, group structure renewal, and operations and supply chain optimisation.
View Goodman Fielder’s investor briefing here.