GrainCorp is the undoubted winner of the profit race among the three (soon to be two) major grain groups listed on the ASX.
Its profit rise this week sits well with the falls revealed yesterday by ABB Grain and AWB.
And with AWB shares falling under $1 yesterday and GrainCorp’s rising (and ABB out of the picture), there’s speculation that there could be some corporate activity in the sector.
AWB shares fell to 94.5c yesterday, down 12c or 11.3%; GrainCorp shares rose 1.5% to $7.40.
AWB has a market cap that’s shrinking: it was down to around just over $340 million yesterday. GrainCorp’s rose to around $475 million, so there’s scope there for activity.
Another player in the rural sector, Elders, is also doing it tough and Tuesday revealed a second half and full year downgrade in earnings.
Elders shares again fell yesterday, down another 16.7% to 27.5c. That was a fall of 5.5c.
So of the quartet, GrainCorp appears to be the healthiest.
GrainCorp said net profit for the half year to March 31 was $32.3 million, up from a loss of $6.5 million in the prior corresponding period.
The company Monday confirmed its full year guidance of net profit of $37 million-$42 million, on the back of "improved seasonal conditions".
Yesterday, ABB, which is facing a takeover offer from a Canadian suitor, said first-half net profit fell 12% after it wrote down stock values and fertiliser prices fell.
Net profit for the six months to March 31 fell to $29.7 million from $33.6 million a year earlier, Adelaide-based ABB said in a statement to the ASX.
Underlying profit dropped 9% to $30.6 million.
The shares rose 15c to $8.75.
ABB said it was revising its full-year underlying profit forecast to between $53 million and $63 million.
"The past six months have been extremely challenging for ABB, as they have for many businesses both here and overseas," ABB chief executive Michael Iwaniw said in the statement.
"The volatility of foreign exchange rates, the global financial crisis and its effect in making customers more cautious about purchases; the large fall in global fertiliser prices, coupled with a slightly lower than expected South Australian harvest, have conspired to have a bearing on the result."
ABB increased its first-half dividend to 10c per share from 7c the year before. (GrainCorp omitted its interim though.)
Revenue jumped 25% to $1.38 billion, mainly because of a strong performance from the supply chain division.
ABB said it lost $9.8 million after tax in the fertiliser business, which echoes similar experiences at Elders and at Incitec Pivot.
AWB yesterday confirmed its lowered guidance from last week with a 61% fall in net earnings.
Helping the fall was the earnings stuff up in Brazil that cost the company millions of dollars.
The former wheat export monopoly said however it had no plans to conduct a capital raising and that it expects to see further consolidation in its industry. (Apart from the ABB takeover situation?)
GrainCorp this week had no trouble raising around $60 million, thanks in part to its better earnings.
AWB’s slump would have made an issue a harder sell.
AWB said net earnings for the March 31 half tumbled to just $8.54 million, from $22.26 million a year earlier.
That was on a 9% rise in revenues to $3.50 billion, mostly due to increased activity in grain marketing.
Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) before significant items was $73.6 million, a fall of 32%.
"The first half was impacted by continuing adverse seasonal conditions in parts of rural Australia, weak demand for fertiliser, and a poor performance by our operations in Brazil," managing director Gordon Davis said.
On May 12, (Budget day) AWB forecast a first half net profit of between $8 million and $9 million.
Mr Davis said the company looked forward to an improvement in the second half, which is traditionally stronger.
"AWB did not declare an interim dividend, so it could retain cash in the current difficult environment."
AWB said it "envisages" paying a final dividend for fiscal 2009.
But this will not be determined until the end of the financial year when the full year results are known and the outlook for 2009-10 is clearer.
That’s a stance more and more companies are adopting this year.
