After a few years in the corporate wilderness, the bread-to-spreads maker Goodman Fielder (ASX: GFF) has today reported a better-than-consensus profit result as it returns to profit.
Encouragingly for shareholders, too, the company has reinstated its dividend, with a 3 cent per share payout being declared.
Higher bread and milk prices helped the company post an $86.5 million normalised profit, but Goodman Fielder remained cautious about the company’s outlook highlighting pressure on both its product margins and growth in the volume of products sold.
Importantly for the company’s long-term future, debt has been significantly reduced, and its interest cover has been improved. Additionally, its cost reduction program, Project Renaissance has delivered annualised savings of $65m thus far, with the company saying it remains on track for $100m of annualised savings by the end of its 2015 financial year.
Of course, being a supplier to the grocery triumvirate of Woolworths (ASX: WOW), Wesfarmers’ (ASX: WES) Coles and Metcash (ASX: MTS) –supplied IGA stores isn’t easy. The retailers continue to look to suppliers to help fund lower prices – and when you produce ‘bread and butter’ products like, well, bread and butter as Goodman Fielder does, it’s tough to maintain and grow your margins.
Still, long suffering shareholders can at least enjoy their day in the sun – and the dividend cheque in the bank accounts. It remains to be seen whether this is a genuine change in fortunes, or a high point in a tough business cycle.
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Motley Fool advisor Scott Phillips owns shares in Woolworths.