(Reuters) - Australian bulk grain handler GrainCorp Ltd said on Friday it expects to report its first loss in a decade in 2019 as it struggles with drought, knocking its shares down by 10%.
Severe dry weather has threatened grain production across Australia’s east coast, where GrainCorp derives nearly all its income, slashing revenues from crop storage and export.
The downgrade comes just a day after pesticides and crop seeds producer Nufarm Ltd cut its annual earnings guidance, citing the drought as a major cause.
GrainCorp said it expects to report underlying core earnings for the 2019 full year of A$65 million to A$85 million ($44.2 million to $57.8 million) and an underlying net loss after tax of A$70 million to A$90 million.
“This is an extremely difficult year for GrainCorp due to the significant disruptions we’ve seen in global grain markets, compounded by the drought in eastern Australia,” Chief Executive Officer Mark Palmquist said in a statement.
Graincorp’s shares slumped as much as 10.2% in morning trade to hit a near two-month low, in a slightly weaker broader market.
The company has faced a three-year drought in eastern Australia, with another below average production year forecast in 2019/20, while plentiful global supplies have driven many of its traditional buyers to source wheat elsewhere.
GrainCorp said new opportunities for crop trading are no longer expected to materialise in the fourth quarter as international buyers are reluctant to consider new season contracts.
The impact to its core earnings for the year from the disruption to grain trade flows would rise to A$60 million to A$70 million, from the A$40 million it had flagged in April.
The company added, however, that trading conditions for the remainder of its business, including malt, are tracking in line with expectations.
Reporting by Rashmi Ashok in Bengaluru; editing by Richard Pullin