October 22, 2007

 

Positive profit forecast raises AWB shares

 

 

Shares of AWB Ltd., Australia's largest wheat exporter, rose by a record in Sydney trading after declaration of anticipated good profits this year because of higher grain prices.

 

Underlying profit before tax may be between A$80 million (US$71.5 million) and A$90 million in the year ended September 30, the Melbourne-based company said. It said in February underlying profit may be at the lower end of analysts' expectations of between A$67 million and A$116 million.

 

Wheat prices surged to a record last month with global supplies failing to keep pace with demand and inventories head for a 32-year low. AWB shares had fallen 64 percent before January 2006 when a government inquiry began into claims kickbacks were made to Saddam Hussein's regime in Iraq.

 

Shane Oliver, who helps manage A$83 billion at AMP Capital Investors in Sydney, said AWB is now getting back on their feet.

 

AWB shares surged 46 cents, or 20 percent, to A$2.76 on the Australian Stock Exchange at the 4:10 p.m. close of trade in Sydney on Friday (October 19), their biggest gain since the shares began trading in 2001. The stock has fallen from the record A$6.40 reached on January 12, 2006, after it lost its monopoly over Australia's wheat exports following the inquiry and as two years of drought cut wheat supplies.

 

The better-than-expected forecast trading result was largely due to the company's international commodities business, according to AWB spokesman Peter McBride.

 

The company also had more favourable trading conditions in Australia, he said.

 

The forecast is positive given rivals such as ABB Grain Ltd. have cut their profit estimates recently, said John Welsh, Sydney-based research analyst at BBY Ltd. who rates AWB a "buy''.

 

Welsh added the "international commodity trading business is obviously an effective earner for the company and should continue to be a strong supporter of company earnings going forward.''

 

Full-year net income may be between A$25 million and A$30 million, AWB said today. It forecast in February net income may be as much as 40 percent below last year's A$58.1 million.

 

AWB was stripped of its monopoly after the government inquiry recommended charges against 11 former AWB employees for the Iraqi kickbacks. A United Nations report found AWB paid $222 million in illegal payments to Hussein's regime.

 

Rival grain exporters also gained. GrainCorp Ltd., eastern Australia's biggest grain handler, rose 56 cents, or 5.8 percent, to A$10.24 at the 4:10 p.m. close of trade in Sydney. ABB Grain Ltd., the nation's biggest barley exporter, added 6.7 percent.