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May 20, 2010

 

AWB banks on hopes for Australian wheat exports

 

 

Australia's improved prospects for wheat exports, and the hopes of another strong harvest, has prompted AWB to stick by profit hopes despite a slide by its domestic commodities business into the red.

 

Australia's former wheat export monopoly said its grain marketing arm fell to an underlying AU$702,000 loss in the October-to-March half, compared with earnings before interest, tax, depreciation and amortisation of AU$29.9 million a year before.

 

The decline reflected growing competition both within Australia for originating wheat, and in export markets for selling it, which hurt both margins and the group's appetite for business.

 

"Australian wheat has been relatively uncompetitive compared with other global origins, so margins have been reduced and the sales profile has been slower," the group said.

 

Wheat volumes handled fell by nearly 30% to 2.3 million tonnes, with revenues falling marginally more to AU$715.8 million.

 

However, the group, which on Tuesday flagged hopes for a flagging Australian dollar boosting the country's export prospects, said the grains division was set for a stronger second half.

 

In addition to strong autumn rains, hopes for another firm EBITDA performance by the group's farm services division has been raised by 31% to AU$24.9 million in the first half despite tumbling chemical and fertilizer prices.

 

AWB left unchanged its forecast of underlying pre-tax profits hitting AU$85-110 million for the year to the end of September. Also, with its balance sheet set to be shored up by the sale of a stake in its domestic commodities business to America's Gavilon, a deal due for completion by June 30 – the group placed takeovers on the agenda.

 

Earlier, the group fell into an after-tax loss of AU$64.8 million for the half, including losses incurred with the sale of its Landmark financial services business and charges relating to the settlement of a shareholder lawsuit.

 

Excluding one-off charges, the company reported a pre-tax profit of AU$32.8 million. However, the results received a mixed welcome from analysts, with Credit Suisse terming it "another messy result full of re-statements and significant items."

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