Australia’s Freedom Foods Group expects full-year profits to be “materially impacted” by the Covid-19 outbreak as the crisis hit sales in the out-of-home segment.
The free-from cereals and snacks manufacturer, which also supplies fresh milk and milk drinks and plant-based beverages, said in a trading update today (29 May) it also expects to incur an estimated writedown of AUD25m (US$16.6m) on the carrying value of inventory linked to the consolidation of the company’s “external warehousing activities, together with a detailed review of product offerings and formats”.
And the Sydney-listed business also revealed it had made “some redundancies” across the company as a result of the “reshaping of its commercial and organisational structures to reflect the new operational footprint”, which is based around Freedom Foods focus on markets in Australia, China and south-east Asia.
just-food has asked the company for finer details on the numbers and affected business units.
While Covid-19 has weighted on the company’s foodservice segment, retail sales experienced “strong growth” in March and April as more people ate at home and as it adjusted the product mix across those sectors. However, Freedom Foods said it is seeing early signs of a pick-up in both channels.
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Chief executive Rory Macleod said: “The recent macro-environment has highlighted that the company’s unique scale, diversification of activities and channels, strong brands and Australian-based food manufacturing capabilities, provide an important hedge against the adverse impacts from the current disruption.
“We continue to see increasing demand and customer enquiry across our key brands and markets with an emphasis on dairy, nutritionals and plant beverages. This indicates a strong signal about the opportunities ahead for the company as Covid-19-related market uncertainties recede.”
Nevertheless, the company expects operating EBITDA to take a material impact in the second half due to the “combination of the level of sales, changed sales mix from March to June, the impact of doubtful debts and an unrecovered higher seasonal milk pricing”.
Freedom Foods added sales to south-east Asia and China accounted for 17% of the group total in the first half, although the latter witnessed a 35% decline “relative to the pre-Covid-19 plan” as a result of government restrictions in February and March.
