Australia: Graincorp cuts its profit forecast as dry conditions hit grain harvest
GrainCorp Ltd, Australia’s largest grain-handling and storage company, said it downgraded its full year profit forecast for 2004-2005 FY to the end of September to A$10-12 million from A$14-16 million previously expected due to disappointing grain receivals for the 2004-05 harvest as drought conditions hurt production by grain producers. GrainCorp fell $1.10 or 8.7 per cent to $11.50.
“The dry summer and autumn has meant summer crop grain receivals have fallen short of expectations and exports have been subdued as grain is retained by the local market for potential domestic consumption,” GrainCorp said in a statement.
Grain receivals for the 2004-05 harvest have come in at 9.5 million metric tonnes, 500,000 tonnes short of expectations. 'While the summer crop harvest is still underway, the continued dry conditions have clearly impacted on receivals,' Graincorp managing director Tom Keene said.
GrainCorp, which is expected to report its half-year results on May 26, booked a $25.7 million net profit for 2003-04.
Other agricultural stocks also suffered. Barley producer ABB Grain fell 33c to $5.35 and beef producer Australian Agricultural Co 9c to $1.36. Agricultural services provider Futuris fell 10c at $1.75 and wheat exporter AWB 4c to $4.16.
Lonsec Agribusiness Research managing director Norman Graham said agricultural stocks were suffering as the weather bureau started to talk about an El Nino effect taking hold and the market began to focus on that. Shares in companies such as AWB, GrainCorp, ABB Grain, AACo and Futuris had suffered significant falls in the past two months, Mr Graham said.
Agricultural stocks had underperformed small-cap stocks by around 10 per cent. "That 10 per cent underperformance is probably due to meteorological circumstances," Mr Graham said. "[But] if it rains in the next two to three weeks, it's not too late to still get a decent crop and these [stocks] can rebound very quickly because they are going to be cheap," Mr Graham said.
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