(Corrects spelling of UPDATE tag)
* GrainCorp reports 43 pct drop in H1 profits
* Shares linger near five-month high
* Takeover by ADM still possible - analyst
By Colin Packham
SYDNEY, May 15 Australia's largest listed
agribusiness GrainCorp posted a sharp fall in profit on
Thursday on lower east coast grain production and could also
face difficult conditions this year with the expected onset of
an El Nino weather pattern.
GrainCorp shares, currently near a five-month high, still
have a premium on expectations that it could eventually be taken
over even after a bid by Archer Daniels Midland Co fell
through last year, analysts say.
ADM's planned A$2.8 billion ($2.62 billion) takeover aimed
at giving the U.S. agribusiness giant greater access to
fast-growing Asian markets was rejected in November by Australia
after Treasurer Joe Hockey said it was not in the national
However, Andrew Robb, Australia's Minister for Trade and
Investment, said in March that "there may be another opportunity
at some stage" for ADM to pursue GrainCorp. He also said he was
open to ADM increasing its holding of GrainCorp to 25 percent
from just below 20 percent currently.
"There is a takeover premium included in GrainCorp's share
price," said Belinda Moore, an equity analyst at RBS Morgans.
Shares in GrainCorp fell as much as 1 percent in early trade
after the announcement of a profit slide. They later pared
losses to trade at A$8.93 by 0225 GMT, just shy of a five-month
high of A$8.97 touched on April 24, the highest since ADM's
acquisition of GrainCorp was rejected.
"We see every few months ADM making some comment about its
commitment to it's GrainCorp shareholding and future plans. We
expect that GrainCorp will be taken over at some point in the
future," added Moore.
GrainCorp's chief executive, Alison Watkins, resigned in
December after the government rejected the takeover deal and the
company said it had not had further contact with ADM.
Interim chief executive Don Taylor said uncertainty
surrounding GrainCorp's future was being addressed in talks with
potential candidates on a new chief executive.
"No one wants to leave a good position and come somewhere
where they think they could be completely out of pocket and out
of a job in the short-term," said Taylor.
DRY EAST COAST
GrainCorp's net profit for the six months to March 31 was
A$50 million ($46.9 million), down 43 percent from A$88.2
million a year ago. Most analysts do not forecast half-year
profits, but Thomson Reuters I/B/E/S consensus forecast pegs
full-year net profit at a four-year low of A$93 million, down
from A$174.5 million a year ago.
The grain handler blamed the fall earnings on a smaller
grain harvest from Australia's east coast, where it has most of
Despite Australian wheat production during the 2013/14
season topping 27 million tonnes for the only the third time,
production across New South Wales and Queensland suffered as
hot, dry weather limited production.
Wheat production across Australia's east coast fell to a
four-year low of 6.6 million tonnes, the Australian Bureau of
Agriculture and Resource Economics and Sciences said.
And GrainCorp could be poised to endure further challenging
While wheat production during the current season has got of
to a better start, buoyed by timely rains, the
Australian Bureau of Meteorology has warned that the chance of
an El Nino as early as July is about 70 percent.
The weather pattern, which can trigger droughts across
Australia's east coast, could see significant curbs on
production, especially if forecasts for a strong El Nino occur.
The last strong El Nino occurred in 1997 when wheat
production fell to just 10.6 million tonnes.
($1 = 1.0671 Australian Dollars)
(Editing by Jane Wardell and Ed Davies)