As expected, ABB Grain was hit by the drought in the first half of its 2007 financial year with the performance of its wheat and barley grains businesses hurt.
But its Joe White Maltings subsidiary did gangbusters and was the major profit driver in the half, thanks to a new plant in Perth and strong world prices for malt.
Joe White made $7.3 million after tax while the international grain trading business made more than $6 million in net earnings.
Overall net after tax profit more than halved to $18.8 million from $44.8 million in the opening half of 2006.
The company said it remained on track to record an annual profit of $16 million to $19 million.
While expected, the news seemed to take investors by surprise with the shares sold down yesterday after the release of the figures.
ABB shares ended 27c down at $8.35, after touching a low of $8.25.
ABB managing director, Michael Iwaniw, said that while the results were lower than the previous corresponding period, they were consistent with the company's full year profit forecast.
ABB will pay $7.4 million in interim dividends, with B-class share-holders receiving an interim dividend of 5c per share.
ABB said total grain receivals in the last South Australian harvest were down to 1.8 million tonnes, from 6.6 million tonnes in 2005/06 and the 5.9 million tonne annual average for the past five years up to this year.
Mr Iwaniw said the grain company was on track to book a profit between $16 million and $19 million this year, despite the drought.
That points to a drop in second half earnings, but that will reflect the fact that much of the company's earnings are taken in the first half of the year when the grain harvests happen.
The CEO said "Obviously we couldn't escape Australia's most devastating drought in 25 years but the worst effects have been offset by strong malt and grain marketing earnings.
"Despite some very tough conditions last harvest – resulting in the lowest volume of receivals in South Australia for 25 years – this result reflects a significant improvement over comparable low receivals years experienced before our merger in 2004 with AusBulk.
"The result was mainly due to stronger malt revenues and grain marketing, including a full half-year operation of our expanded Joe White Maltings' plant in Perth.
"Joe White Maltings, had a very strong half-year with a profit after tax of $7.3 million, compared to just $1.5 million in the same six month period in 2005/2006.
"This was due to increased production and cost efficiencies. Notwithstanding the drought, we were still able to supply all of our customers using our innovative logistics management to match grain quality with end user.
"Despite the drought we are still forecasting a small profit for the national supply chain division by the end of the full year.
"Last year we recognised the drought was occurring and implemented a responsive drought plan which included reducing costs for casual staff; not opening 41 receival sites; only investing in ‘stay in business' capital and providing our permanent staff with flexibility through innovative leave arrangements.
"Our grain marketing profit after tax of $6.4 million illustrates this division continues to contribute positively to earnings, expanding its operations into freight trading and international trading," Mr. Iwaniw said.
