Australian AWB takes a tumble on profit downgrade

Shares in agribusiness AWB Ltd. plunged more than 10% after the group downgraded its guidance for full-year profit due to tougher grain marketing environment.

AWB shares tumbled 12 cents to 93.5 cents on news that profit before tax and one-time items would come in between A$85-110 million (US$78.4-101.5 million) from previous guidance of A$115-140 million (US$106.1-129.1 million). This compares with a A$93 million (US$85.8 million) result in the year to September 30.

AWB now expects to report a first-half profit for the period ended March 31 of A$25-35 million (US$23.0-32.2 million).

The company's managing director Gordon Davis said increases in global wheat stocks, lower transactional margins and reduced price volatility within the Australian and international grain markets had affected the profitability of the grain marketing business.

The domestic grain marketing result would be weighted towards the fiscal second half, but for the full year, it is still likely to be significantly lower than the prior comparative period, Davis said.

The domestic pooling and logistics businesses should provide a stronger result than the prior year, despite an increase in grain stored on farm. The logistics businesses, in particular rail and Melbourne Port Terminal, have benefited from an increase in volumes resulting from the improved crop size on the east coast of Australia compared with the prior year.

Meanwhile, one-time items for the fiscal first half are forecast to be principally represented by two matters previously disclosed, namely the Watson class action settlement, although this is still subject to Federal Court approval, and a loss on the sale of the Landmark Financial Services loan and deposit books.