Shares in AWB took a pounding again yesterday after yet another profit downgrade.
The company told the ASX that it now expects profit before tax and significant items for the year ending September. 30 will be between $85 million to $110 million, less than its previous guidance of A$115 million to A$140 million..
It is the second or third earnings cut by the company in the past few months.
The shares dropped around 12%, or 13c to a day’s low of 92c, before inching back up to end at 93c, down 12c or 11.4%.
AWB said in its statement that "with the exception of its Australian grain marketing business, all key operating businesses were trading broadly in line with expectations.
"The company now anticipates that its profit before tax and significant items for the full year ending 30 September 2010 will be within the range of $85 million to $110 million which represents a reduction from previous guidance of $115 million to $140 million.
"A contributing factor to this reduction is the expected reduction in annualised profit before tax of $7 million to $10 million due to the sale of the Landmark Financial Services loan and deposit books.
"The company forecasts it will report a profit before tax and significant items within the range of $25 million and $35 million for the half year ending 31 March 2010, subject to finalisation of the half year results to be announced on 19 May 2010.”
In yesterday’s statement, the company’s CEO Gordon Davis said that increases in global wheat stocks, lower transactional margins and reduced price volatility within the Australian and international grain markets have impacted the profitability of the grain marketing business.
"We expect that the domestic grain marketing result will be weighted towards the second half of the financial year but for the full year it is still likely to be significantly lower than the prior comparative period," Mr Davis said.
"The company anticipates the domestic pooling and logistic businesses should provide a stronger result than the prior year comparative despite an increase in grain warehoused or stored on farm.
"In addition, 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 to the prior year.
"AWB Geneva is performing well as it continues to focus on serving key customers across Europe, the Middle East, Africa and Asia," Mr Davis said.
Mr Davis said that after a subdued first quarter, Landmark is now experiencing a significant increase in the level of activity, particularly in fertiliser and merchandise, due to improved seasonal conditions.
"Landmark is benefiting from the extensive cost reduction program which was implemented in 2009 and provided favourable conditions continue across the country, Landmark should continue to perform solidly for the remainder of the year," Mr Davis said.
Mr Davis said that the performance of the Australian grain marketing business was below expectations at this stage however, it is pleasing that all other businesses are performing well on the back of improved seasonal conditions across regional Australia and strong support from our international customers.
AWB said that significant items for the half are forecast to be principally represented by the two matters previously disclosed – the Watson class action settlement and the loss on sale of the Landmark Financial Services loan and deposit books.
With the effective closure of five out of six legal actions against the company and with a more conservative balance sheet structure, the company says it is now in a better position to focus on reshaping the business to achieve more sustainable earnings, build more expansive customer offerings and enhance shareholder value.
