Shares in GrainCorp have fallen by more than four per cent after the agribusiness suffered a bigger-than-expected slide in first half profit.
GrainCorp blamed lower grain production and prices for pulling its net profit down 40 per cent to $30.2 million, well below the $45-$60 million it forecast in February.
Shares in GrainCorp were 44 cents, or 4.4 per cent, lower at $9.67 by 1110 AEST.
The grains marketer has, however, maintained its guidance of a fall of up to 18 per cent in annual underlying earnings to between $240 million and $270 million.
Chief executive Mark Palmquist warned more rain was needed across the country’s grain growing region.
“Plantings are well advanced in many growing areas, however progress has slowed substantially and further rain is needed across the grain belt to complete planting and help crops establish,” he said.
“Generally, conditions are looking more favourable in the eastern half of the eastern Australian grain belt; areas further inland remain very dry.”
Palmquist said good performances by GrainCorp’s malt and edible oils division had helped offset softer results from the group’s grains operations, its most significant business.
The malt business, which supplies malt to brewers and distillers, contributed about half of the group’s earnings during the six-month period, partly aided by a fall in the Australian dollar and cost cuts.
But the grains business suffered from a smaller crop in eastern Australia during 2014.
Lower grain production meant GrainCorp handled and exported less grain during the first half.
Palmquist said while an efficiency drive would help drive improvements when crops return to normal levels, GrainCorp was facing strong competition from foreign rivals.
Analysts believe GrainCorp is facing tough times ahead, with the Bureau of Meteorology forecasting a moderate-to-strong El Nino in the second half of 2015, potentially exacerbating prolonged drought in the eastern states.
The hotter and drier conditions could potentially cause a fall in the amount of grain that GrainCorp handles and stores.
GrainCorp in February warned its full year underlying earnings would fall from $95 million in 2013/14, due to weaker prices and a disappointing winter crop.
