November 26, 2007

AWB's net profit down 53.3 percent in 2007

Australian Wheat Board Limited on November 21 said that its net profit for the fiscal year ended September 30 fell 53.3 percent to A$27.1 million from $58.1 million for the previous year. The company's underlying net profit was down 45.2 percent to A$58 million, and its revenues fell 4 percent to A$4.67 billion from A$4.87 billion.

AWB chairman Brendan Stewart said there is an underlying profit before tax and amortization of A$91.8 million for the full year ended Sept. 30.

According to Stewart, AWB Limited's reported profit before tax was A$52 million, and after tax and significant items, the reported net profit was A$27.1 million. The Board of Directors has declared a fully franked interim dividend of four cents per share. This brings the full year dividend to eight cents per share fully franked, he said. 

AWB Managing Director, Gordon Davis, said all divisions were profitable despite one of the worst droughts on record, changes in wheat export marketing arrangements and company restructuring.

AWB posted the following results:

• A$43.3 million in full year net cost reductions on the previous corresponding period;
   
• Significant items pre tax of $41.7 million, reflecting ongoing restructuring of the business; and
   
• A solid balance sheet with corporate gearing at 69% and net corporate interest cover at 3.5 times. Key aspects of operational performance include: 
   
• International Commodities - strong profit growth, especially Geneva, on the back of good global trading conditions, and Brazil, which is well positioned to take advantage of the positive global agriculture outlook;
   
• Australian Commodities & supply chain - stabilizing earnings with better trading conditions in the second half; and
   
• National Pool - good performance despite drought and changes in wheat export marketing arrangements.

Davis said the results demonstrated underlying resilience in the business and highlighted the benefit of the company's diversification strategy. Approximately 40 percent of the company's business earnings is generated off shore and therefore not affected by drought in Australia, and only 10 percent of earnings are directly related to Australian bulk wheat exports.

The strategy priorities for the business include:

• Landmark = continue to build the business platform, lift operational performance, adapt to new opportunities and drive synergies with other parts of the business;
   
• Landmark Financial Services - continue product extension and improved offering, expand customer base and maintain credit quality; and
   
• Commodities - continue to build structural earnings component in International Commodity Management, ensure orderly transition of Pool Management Services following changes to Australian wheat export marketing arrangements and restructure Australian Commodity Management for the new operating environment.

Davis said the outlook for Australian agribusiness was very positive given the international growth of the biofuels industry, the global shortage of agricultural commodities and record agriculture commodity prices. Davis said the company's overall strategy will increase shareholder returns by continuing to rebuild and grow the business domestically and internationally.