* GrainCorp posts 11 percent fall in H1 adjusted net profit
* Australian grain production seen retreating after bumper
* Analysts say dry weather threatens 2014 financial results
By Colin Packham
SYDNEY, May 16 Australia's GrainCorp,
which is being taken over by U.S. agribusiness giant Archer
Daniels Midland Co, faces pressure on near-term results
from lower grain production, after posting an 11 percent fall in
adjusted first-half profit.
The earnings are GrainCorp's first since it accepted a A$3
billion takeover offer from ADM in April, and underscore
analysts' concerns that the U.S. company bought at the peak of
the market following a bumper Australian grain crop.
Wheat production during the current marketing year has got
off to a slow start after dry weather delayed plantings in the
world's second-largest exporter, which threatens GrainCorp's
2014 financial results, analysts said.
"It is always risky this time of year as you can't really
get a great read on the crop at the moment," said an equity
analyst in Australia, who declined to be named as he is not
permitted to talk to media.
"However, the conditions are concerning for the financial
GrainCorp Chief Executive Officer Alision Watkins
acknowledged the need for rains, but she said that she was not
"We are at a point where everyone would like to get some
rain as they get their crop in the ground, but we are not seeing
any excess reason for concern," said Watkins.
GrainCorp, the largest bulk grain handler on the Australian
east coast, said its net profit was A$109 million ($108 million)
versus A$122 million a year ago. The figure did not include
A$20.3 million in one-off charges, mostly costs associated with
its response to the ADM takeover and its purchase of oil seeds
The Australian bulk grain handler attributed the fall in
first-half profit to a smaller grain harvest from Australia's
GrainCorp did not give a 2013 full-year financial forecast,
but the Thomson Reuters I/B/E/S consensus forecast pegs net
profit at A$174.41 million, down from a record A$205 million a
ADM said on May 2 that it would proceed with the takeover,
though both companies expect regulatory approval delays. The
offer price included an extra payment for shareholders from
October to reflect an expected delay in approval from China.
Analysts in ADM's quarterly earnings call on May 2
questioned Chief Executive Patricia Woertz about her confidence
in GrainCorp's future earnings.
She said ADM expected synergies of A$50 million to A$70
million by the end of the second year and had modelled
GrainCorp's earnings under varying crop conditions over a number
"I think it's more about what we can do together once we
have closed on the deal," she said.
Wheat production, the largest produced Australian grain, in
the 2012/13 marketing year fell 26 percent to 22.08 million
tonnes from a record 29.923 million tonnes, the Australian
Bureau of Agricultural and Resource Economics and Sciences said.
ABARES has forecast total production at 24.9 million tonnes
for the 2013/14 marketing year, up 13 percent from the previous
season. But traders are skeptical.
The ADM purchase of GrainCorp requires Chinese regulatory
approval because of the Australian grain handler's ownership of
the bulk liquid port terminal in Shanghai, China.