October 4, 2007

ABB Grains expect drought to hurt '07 profit

South Australian-based ABB Grain Ltd. slashed estimated net profit for last fiscal year ended September 30 to a range of A$5 million (US$4.42 million) to A$8 million (US$7.07 million), from previous guidance in a range of A$16 million to A$19 million, reflecting the impact of drought and out-of-the-money forward positions.

Profit will be adversely impacted by recent drought that has caused unprecedented volatility in grain markets, it said in a statement.

"Global influences, including government decisions on grain stocks and pricing, and uncertainty with current crop conditions in Australia are causing extreme volatility on Australian and global grain markets," Managing Director Michael Iwaniw said.

Accounting standards require forward positions are brought to account even though conditions might change after the end of the fiscal year, which has indeed occurred, he said.

That said, Iwaniw said he remains "comfortable with ABB's underlying commercial position."

The farm outlook is mixed, which markedly different from the uniformly poor conditions experienced last year, he said.

The company's pastoral and rural services divisions have been hard hit by drought but its malting and supply chain operations are performing well in difficult conditions, he said.

US$1 = A$1.1311 (as of October 4, 2007)