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UPDATE 2-Australia's AWB year profit halved by drought
November 21, 2007 / 6:11 AM / 10 years ago

UPDATE 2-Australia's AWB year profit halved by drought

(Adds analyst comment, details, further company statements)

By Michael Byrnes

SYDNEY, Nov 21 (Reuters) - Australia’s AWB Ltd AWB.AX posted a 53 percent drop in full-year net profit, hit by the country’s worst drought in a century, but its shares rose on plans to expand after a scandal stripped it of its wheat export monopoly.

AWB lost its role as Australia’s exclusive wheat exporter after a government inquiry late last year found it had paid kickbacks to the former Iraqi government of Saddam Hussein to win grain sales. The company faces several lawsuits over the scandal.

AWB said it was positioning itself for future growth without the so-called single desk monopoly, looking to expand in financial services and commodities trading at home and abroad and to grow its rural services business in Australia.

“They made quite a strong statement about diversification away from the wheat single desk,” said Commsec analyst Grant Saligari. “We’ll just have to see how much substance there is to that ... but I think there is a strong element of truth to what they’re saying.”

AWB shares rose as much as 6 percent to A$2.84. By 0145 GMT, the stock traded up 2.2 percent at A$2.74.

Net profit fell to A$27.1 million ($24 million) after one-off costs of A$30.9 million, including A$15.4 million for redundancies and restructuring, from A$58.1 million in the previous year -- in line with the company’s forecast.

“The result was affected by a full year of drought,” said managing director Gordon Davis. “But the outlook for Australian agribusiness is very positive.”

GROWTH PHASE

Davis said the growth of the biofuels industry, a global shortage of agricultural commodities and record commodity prices made for an upbeat outlook for agribusiness.

“We’re moving into a phase of growth and improving the quality of earnings,” he said.

AWB has cut its earnings reliance on the wheat export monopoly from 90 percent in past decades to 10 percent in the past year. In recent years it has opened trading offices in Geneva, India, Brazil and Singapore and all were operating well, Davis said.

He said that AWB’s role in any new wheat export arrangement would not be the same as in the past, under whatever government was formed after this weekend’s general election.

“There is no middle ground,” he said of the single desk. Both the government of Prime Minister John Howard and the Labor opposition have said they will keep the single desk, but introduce new players.

AWB’s operating revenue fell 4 percent to A$4.67 billion, largely because of the drought and the associated impact of reduced crop size on group businesses.

AWB said it would continue to vigorously defend all legal actions against it.

Davis told Reuters he was confident the company would win an appeal against a preliminary court ruling this week which awarded $35 million in compensation to Standard Chartered Bank in a dispute over soybean contracts in 2003 and 2004.

AWB also faces four class action claims in the United States and Australia by different plaintiffs over the Iraqi kickbacks.

AWB will pay a final dividend of 4 cents a share, making 8 cents for the year, down from 20 cents last year.

($1=A$1.13)

(Editing by Ian Geoghegan)

((michael.byrnes@reuters.com; +61-2-9373 1825; Reuters Messaging: michael.byrnes.reuters.com@reuters.net)) Keywords: AWB/

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