Australian food manufacturer Goodman Fielder has said it is “confident” it can turn around its baking division following another “disappointing” year for the unit.

Goodman Fielder has had a challenging two years, with its baking business under pressure from high raw material costs and competition.

Yesterday (14 August), Goodman Fielder reported an annual loss of A$146.9m. The loss was smaller than the A$166.7m recorded a year previously but the results included lower sales, volumes and profits from its baking division.

Goodman Fielder said EBITDA from baking fell 28.9% as sales fell and it was unable to recover cost increases through pricing. Volumes slid 3.3% pushing down sales, which dropped 4.3%.

Nonetheless, CEO Chris Delaney told analysts on the firm’s earnings call the company would “turn around the baking category via a more appropriate cost structure”. This, he said, will involve “improved marketing, selling and operations capabilities that deliver growth and sustained improved earnings”.

CFO Shane Gannon said the performance in bakery had been “disappointing” in 2012. Goodman Fielder cut 340 jobs in Australia and New Zealand but the move was “not sufficient” enough to compensate for higher input costs.

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Gannon added the company’s private-label baking arm was under “tremendous pressure”. However, he said that, through “dramatically” updating the quality of the product, it has grown the business by five share points in four months.

“It seems to be sustainable,” Gannon said. “That’s what we have to do and we have to do that consistently and that’s how we plan on winning in this game in the long term. Our retailing partners are absolutely in agreement with us that we need to restore a sustainable model in baking and we are working very hard collaboratively looking at how you do that.”

Delaney admitted innovation was a “key” part of growing revenues in both bakery and across the company. He admitted it has not invested enough in NPD as a result of the focus on its ongoing restructuring and cost savings initiatives.

“While we had some good innovation it hasn’t been nearly enough and it hasn’t been consistently enough,” Delaney told analysts. “I don’t think you can expect to grow a premium branded consumer products company unless you have very strong brands you are investing in on a continual basis.

“We now know what businesses we can be in and win in. We have put the management structure in place to be able to do that …. at the heart of this is about growing brands but until you start having the plans to start spending with the innovation, I don’t think you can expect significant expansion of your revenue. Therefore the plans in place on the core categories are about doing that.”

Through its Project Renaissance restructuring programme, the company aims to achieve A$100m in cost savings by 2015. It has identified A$40m in savings through fiscal 2012 and 2013, it said.

Of the cost savings plan, Delaney said it would not stop at the A$100m target, adding that “there is a lot more cost to come out of the business”.

“We need to build this into our DNA and culture. It is a challenge out there, we recognise that, but what we’re doing is the heavy lifting to allow us to have the room to reinvest the capital in our plans and the DNA to build those brands going forward. We have another tough year ahead of us, we’re not declaring success at the end of 2012.”