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GrainCorp shares plunge on profit outlook
December 22, 2009 - 1:16PM

GrainCorp shares slumped the most in more than 11 years after eastern Australias largest grain handler forecast profits would miss analyst estimates.

GrainCorp shares plunged as much as 10.5 per cent, and were recently down 45 cents, or 7.7 per cent at $5.36, after the company said its Australian depots will receive 7 million to 8.5 million tonnes of grain this year. That compares with its November 25 forecast of between 8 million and 9 million tonnes. The amount delivered so far is 6.3 million tonnes, it said.

Whats going to follow over the next 24 hours is a series of brokers earnings downgrades, said Belinda Moore, an analyst at ABN Amro Morgans, who has a buy rating on the stock.

GrainCorp turned to profit in the 12 months to September 30, after reporting losses in the previous two years as drought cut earnings.

The company today said earnings before interest, tax, depreciation and amortisation may be between $180 million and $210 million in the 12 months ending September 30, 2010. Analysts were predicting $238 million.

GrainCorp bought United Malt Holdings the worlds fourth-largest maker of malt used to make whisky and beer, in October. The malt business is expected to contribute between $100 million to $120 million to earnings, the company said today.

The companys performance reiterates the strategic rationale for acquiring UMH, which will provide it with earnings stability and diversification, Mr Moore said.

The assets are well maintained, and the future maintenance and capital expenditure requirements of the business unit are in line with our due diligence findings, managing director Mark Irwin said in todays statement.

GrainCorp will give further details on its earnings outlook at its annual meeting on February 24.

Bloomberg