Australia: ABB Grain full-year profit plunge of 89% after the nation's worst drought
Leading agricultural company ABB Grain announced a net profit after tax of $7.3 million for the full year ending 30 September 2007, which is consistent with ABB’s recent profit revision, according to company’s press release, November 26.
The company will also pay a final fully franked dividend of 5.0 cents per share to shareholders on 21 December 2007 (record date: 6 December).
In making the announcement, ABB Grain’s managing director Michael Iwaniw said the 2006 drought – the worst in 25 years – had impacted significantly on ABB’s earnings.
“There’s no doubt the drought, and the volatile market activity that followed, has had a significant influence on our net profit. Our 2006/07 grain receivals of 1.8 million tonnes were just over a quarter of the previous year’s 6.6 million tonnes,” Mr Iwaniw said.
“However, a strong performance from our expanded malt operations, and growth in non-grain activities and value adding services have been real positives to come from the year.
“Our supply chain activities were boosted by an increase in throughput of non-grain materials including mineral sands, salt, gypsum and fertiliser. ABB has a well maintained network of infrastructure in place to be well positioned to capitalise on the mining boom in South Australia.
“Grain containerisation activities have also increased in line with greater industry demand, with our ProGrain subsidiary being at the forefront of this growth.
“Despite the record low receivals, in the past five years ABB has been able to lower its break-even tonnage figure due to excellent cost management and efficient operations. This has put us in a stronger position for the years ahead.
“Manufacturing efficiencies, effective marketing and a full year of operation from our expanded Perth malthouse have seen the total net profit before tax for malt manufacturing jump to $31.2 million compared to $12.9 million in 2006. ABB’s marketing division were able to ensure supplies of malting barley for the malthouses despite the drought, and supported by the experience of our logistics team who moved considerable volumes of grain interstate, stocks were positioned to achieve the most efficient use of quality stocks.”
Mr Iwaniw said that ABB had incurred a loss from its grain marketing activities, which reflected the severe drought and unprecedented market volatility in the latter part of the year. This included $15 million lower pool-related income than the previous year. He said that since September 30 reporting the marked to market had moved in the company’s favour, substantially improving its position.
ABB’s diversifying business operations were enhanced throughout the year by the purchases of wool broker and marketer Adelaide Wool Company, rural products, services and agency business Wardle Co. Pty Ltd and seed commercialisation company Graintrust. ABB also expanded its global footprint via a Ukrainian joint venture.
Mr Iwaniw said the company was now in its best position yet to capitalise on other non-grain activities to help diversify the business.
“With the establishment of a Pastoral and Rural Services division within ABB, which returned a $2.5 million profit before tax, we are looking to provide a greater amount of services to growers. Synergies between ABB’s existing customer network and our varying services on offer are already being realised, and this provides real growth opportunities for the future.”
In making the results announcement Mr Iwaniw also applauded the efforts by ABB staff in implementing a ‘drought plan’ during the year, which resulted in considerable savings for the company. The plan included reducing costs for casual staff, not opening 41 receival sites, investing only in ‘stay in business’ capital, and providing staff with flexibility through innovative leave alternatives.
Future Outlook
Looking ahead, Mr Iwaniw said the next 12 months for ABB would see further value adding to the company.
“We are looking to extend our New Zealand operations to capitalise on the burgeoning compound feed industry. Our Ukrainian joint venture with agro-industrial group Soufflet complements our Australian export program and will allow us to grow in the EU region. Both of these activities will strengthen our presence in the global grains industry and, coupled with our knowledge and experience, will drive further value for the company.
“Our pastoral and rural services division should continue building momentum as we look for further opportunities and possible acquisitions. We also anticipate continued growth from our ProGrain container activities in light of this year’s deregulation of the wheat container market, which will be supported by our investment in container facilities.”
28 November, 2007
