Forum Archive Index - August 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Q/ What's the best way to buy a balanced portfolio of international 
shares?

A/ Buy a balanced portfolio of decent sized New Zealand companies and 
just wait for them to move offshore!

Thus I acquired a shareholding in Goodman Fielder (Wattie), although 
it is still listed on the NZ market too.   For a long time this 
investment has been in my bottom drawer waiting for the right time 
for disposal.  It's been a disappointing investment, perhaps a little 
better than having money in the bank, but not much.  Now in the wake 
of yet another restructuring, one has to ask is now the time to get 
out?

Those of you who have attempted to bake home made bread, will know 
that the best results are obtained if the dough is gathered up and 
knocked back in between periods of leaving the dough ball to grow.

GMF has certainly had their knock backs.  There was an ill advised 
period where they tried to expand to Asia and Europe under Michael 
Nugent.  This was undone by a food industry business wizard head 
hunted from Europe, saviour David Hearn.  Then there was a period of 
prolonged cost cutting and streamlining.  All was looking good for a 
time until the commodity businesses that underpinned GMF collapsed 
yet again and 'Emperor' David Hearn was left standing somewhat short 
in the clothing department.

Now, new Chief executive Tom Park has changed the direction of the 
company again, to focus on branded consumer food products.  The idea 
is to make the business in Australia take a lesson from the New 
Zealand arm where consumer icons 'Bluebird' and 'Earnest Adams' 
are showing good margins and growth.  Good progress has been made to 
get return on equity up towards 15%, and there was a stated intention 
to get GMF out of the 'commodity' business.  On Friday it happened, 
with GMF announcing an unconditional deal to dispose of its milling 
business in Australia to joint venture partners GrainCorp (60%) and 
Cargill Australia (40%). 

However, rival Manildra Group confirmed it was investigating taking 
legal action to block the deal citing 90% dominance in the NSW 
flour milling market as an undesirable side effect of the deal.  
Perhaps it is just sour grapes on Manildra's part, at being excluded 
from the bidding process but either way it would seem the game isn't 
quite played out.

Unknown in detail is the commercially sensitive 'we'll buy your 
flour into the future' agreement, that GMF has entered 
into with the buyers of the flour mills.  GMF may be in line for 
$200m cash from the flour mill sales, but at what price?

GMF have had two solid knock-backs (Nugent, Hearn), so are we now 
seeing the final rise that will create the perfect loaf?  I guess, 
just like in bread making time will tell.   In the meantime GMF 
might just be worth keeping an eye on. 

SNOOPY

disclosure: Hold GMF





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