Australia: ABB reports AU$18.8 million six month net profit

Listed, integrated agricultural company ABB Grain Ltd reported a net profit after tax of AU$18.8 million for the six months ending 31 March 2007, according to company’s press release, May 28.

The Adelaide-headquartered company announced an interim fully franked dividend for B-class share-holders of 5.0 cents per share, which will be payable on 4 July (with a record date of 15 June 2007).

ABB managing director, Michael Iwaniw, said today’s results, while lower than the previous corresponding period, were consistent with the company’s full year profit forecast.

“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,” he said.

“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,” Mr Iwaniw said.

ABB’s total grain receivals in the last SA harvest was only 1.8 million tonnes, compared to 6.6 m/tonnes in 2005/2006 and 5.9 m/tonnes for the five-year average.

“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,” he said.

“Joe White Maltings, had a very strong half-year with a profit after tax of AU$7.3 million, compared to just AU$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 AU$6.4 million illustrates this division continues to contribute positively to earnings, expanding its operations into freight trading and international trading.”

Mr Iwaniw cautioned that ABB still faced a tough six months ahead. He maintained the forecast (made in February) of full-year net profit after tax of between AU$16 million-AU$19 million, subject to second half sales, shipping volumes and market conditions.

“The marketing and handling of grain and other commodities is affected by seasonality,” he said. “Due to the nature of the grain industry, the majority of earnings are derived during the harvest period in the first half of the financial year.”

Mr Iwaniw said ABB’s support of industry research and continued diversification was illustrated by two acquisitions during the half-year now being reported.

The balancing ownership in Graintrust Pty Ltd – primarily involved in grain research – was concluded late in 2006, while the purchase of the Adelaide Wool Company was completed on 30 March.

“Adelaide Wool is now part of ABB’s pastoral and rural services division, which itself was only formed late last year,” Mr Iwaniw said. “This division is expected to have more impact on the company’s results in 2008 when its activities are fully operational.”

ABB’s dividend reinvestment plan (DRP) would operate for the July dividend at a 2.5% discount to the weighted average price of ABB shares sold on the ASX in the five business days immediately before and including the record date.

ABB’s financial year ends on 30 September 2007.

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