investors dump awb

Investors dump AWB over scandal
Geoffrey Newman
January 18, 2006
INVESTORS have begun deserting wheat marketer AWB after two days of damaging evidence into its involvement in the Iraq oil-for-food scandal as an ethical investment adviser dumped the company from its portfolio.

AWB shares have plunged 5.5 per cent over the first two days of the inquiry, amid evidence that executives knew the company was paying illegal kickbacks to Saddam Hussein's regime.

Shaw Stockbroking analyst Scott Marshall said that with the share market at record highs and looking fully valued, any adverse publicity surrounding a company would knock the share price.

"It certainly increases the risk profile for AWB," Mr Marshall said. "A lot of investors just don't want to be associated with companies that have, potentially, a negative outlook."

ABN AMRO analyst Belinda Moore agreed the evidence from the inquiry was the reason for the plunging share price, since the company was expected to put in a good financial performance this year. "I believe it's all (due to) the inquiry," she said.









The fall is in contrast to AWB's performance in the 2 1/2 months until Friday, when the shares rose 14 per cent after the company posted a $115 million profit in the year to September, and the federal Government backed its claims it did not know the payments were improper.

As the shares fell another 16c to $6.02 yesterday, ratings agency Reputex announced it was dumping AWB from its SRI (socially responsible investment) index. Although the inquiry has yet to make any adverse findings against AWB, Reputex associate research director Philip Cohn said the allegations already highlighted inadequate due diligence and oversight systems.

Duncan Paterson, chief executive of the Centre for Australian Ethical Research, said AWB would be under review at all SRI funds which held the stock.

"I would expect a lot of funds to dump AWB if the findings were adverse," he said.

Counsel assisting the Cole inquiry said on Monday that the evidence over the next four weeks would show AWB knew at a high level it was paying kickbacks in breach of UN sanctions.

Penalties for breaching UN sanctions are relatively light but executives could be prosecuted under a recently introduced law outlawing the bribing of foreign officials, for which the maximum penalty is 10 years' jail.

Mr Marshall said although the Government had stated it would not review AWB's monopoly on bulk wheat exports until 2010, a damning outcome could pressure it to weaken AWB's veto over rival wheat sales. "It increases the pressure both internationally and in Australia for AWB's monopoly to be dissolved or restructured," he said.

WA grain handler CBH's request to export wheat to its part-owned mills in Indonesia was last month knocked back by AWB, sparking calls for an immediate review of its single-desk powers.