As we have seen with Fairfax, with the focus on the Federal budget, there’s always some bad news or something unfortunate that a company tries to slip out and hope it won’t be too noticed.
Wheat exporter AWB was one of those: it downgraded first half profit guidance after it discovered accounting "errors" costing $4 million in its Brazil operation.
AWB said on Tuesday that it had changed management in Brazil following the discovery of the "errors".
As a result, net profit in the first half of fiscal 2009 was expected to be in the range of $8 million to $9 million, down from earlier guidance of $10 million to $12 million.
Discovery of the errors, which related to AWB’s 2008 fiscal year, also meant the company would have to restate its comparative figures for that year.
"Due to the poor first half performance of AWB Brazil and the current challenging business environment in Brazil, we are undertaking a comprehensive review of this business," AWB managing director Gordon Davis said.
"During this review, management has become aware of errors in the accounting treatment of certain contracts, particularly in the mark-to-market value of inventory."
AWB half year net profit after significant items was expected to be in the range of $8 million to $9 million, subject to final audit signoff, AWB said in a statement on Tuesday.
The company’s previous guidance in February was for half year net profit to be about 45% to 55% under the previous corresponding half year’s result, which was $22.3 million in fiscal 2008.
That put the earlier guidance at $10 million to $12 million for the first half of fiscal 2009.
AWB said it had initiated a review of its Brazil operation as a result of poor performance there.
Mr Davis said AWB now was "restructuring the management team in Brazil", appointing an interim General Manager and Chief Financial Officer.
As well, AWB said its General Manager Commodities, Mitch Morison, would be based in Brazil to complete the management review of the business, he said.
"Conditions in Brazil remain challenging and it is likely that we will emerge with a smaller and refocused business," Mr Davis said.
As for the company’s broader operations, Mr Davis said its International Commodity Management division had recorded a first half result in line with the prior year.
"A strong performance from AWB Geneva was driven by the grain, oilseed and freight businesses," he said.
"An increased contribution from Australian Commodity Management has been recorded as a result of good performances in grain marketing and chartering offsetting a lower Pool Management Services and Harvest Finance contribution," Mr Davis said in the statement to the ASX.
He said operating conditions in Australia during the first half have been solid in WA, Queensland and northern New South Wales but the ongoing drought has adversely affected trading conditions in Victoria, South Australia and southern New South Wales.
"As previously advised, Landmark Rural Services and its investments, particularly Hifert, have been adversely affected by these seasonal conditions," he said.
"Landmark Financial Services recorded a solid first half result due to active margin management on the loan book and a good contribution from Insurance.
"At a corporate level it is pleasing to report that we have made significant progress toward our debt reduction targets.
"From 30 September 2008, we have reduced the net corporate debt by more than $140 million and we are well advanced towards exceeding our $200 million debt reduction objective by 30 September 2009.
"Lower net corporate debt is being driven by reduced and more efficient use of working capital," Mr Davis said.
AWB will present its half year result on Wednesday 20 May 2009.
AWB shares lost 7% to close at $1.20 yesterday.
The second notable example of a company trying to hide bad news yesterday was zombie company, Ainsworth Gaming Technology, the poker machine maker.
It now says it expects to suffer a trading loss in the second half of fiscal 2009, a casualty of global economic conditions and currency fluctuations.(Source)
Ainsworth provided no figures for its new guidance, but it follows a net loss of $2.76 million in the December 31, 2009 half year and a $10.78 million loss in the first half of the June 2008 year.
The shares were unwanted on 8c yesterday.
Ainsworth however had ‘good news’ among the bad.
It said the success of its product development strategies would allow the company to capitalise on global market opportunities as economic conditions improve, however.
Ainsworth said it had struck a non-exclusive strategic game content licensing agreement with Las Vegas-based gaming devices business Bally Technologies in the US and Canada.
"This relationship with Bally further strengthens the company’s position in North America and complements the game initiatives previously undertaken," Ainsworth chief executive Danny Gladstone said in a statement containing the downgrade.
"The Agreement has an initial term of three years once Bally obtains necessary regulatory approval for the first game licensed under the Agreement.
"AGT will be paid a minimum of USD1.2 million per year from the receipt of the initial approval of
