AWB downgrades profit guidance

SYDNEY - Wheat exporter AWB has downgraded first-half profit guidance after it discovered accounting "errors" costing A$4 million ($5.06 million) in its Brazil operation.

AWB said yesterday it had changed management in Brazil following the discovery of the "errors".

As a result, net profit in the first half of fiscal 2009 was expected to be in the range of A$8 million to A$9 million, down from earlier guidance of A$10 million to A$12 million.

Discovery of the errors, which related to AWB's 2008 fiscal year, also meant the company would have to restate its comparative figures for that year.

AWB half-year net profit after significant items was expected to be in the range of A$8 million to A$9 million, subject to final audit signoff, AWB said.

Previous guidance on February 10 was for half-year net profit to be about 45 to 55 per cent lower than the previous corresponding half-year's result, which was A$22.3 million in fiscal 2008.

That put the earlier guidance at A$10 million to A$12 million for the first half of fiscal 2009.

"Due to the poor first-half performance of AWB Brazil and the current challenging business environment in Brazil, we are undertaking a comprehensive review of this business," Davis said. "During this review, management has become aware of errors in the accounting treatment of certain contracts, particularly in the mark-to-market value of inventory.

"The identification of these errors has led to a requirement to restate the comparatives of AWB Limited for the year ending 30 September 2008.

"The net impact of the restatement is to reduce the NPAT by A$4 million to A$60.6 million for the year ending 30 September 2008."

Davis said AWB now was "restructuring the management team in Brazil", appointing an interim general manager and chief financial officer. AWB's general manager of commodities, Mitch Morison, would be based in Brazil to complete the management review of the business.

"Conditions in Brazil remain challenging, and it is likely that we will emerge with a smaller and refocused business," Davis said.

As for the company's broader operations, Davis said its International Commodity Management division had recorded a first-half result in line with the prior year.

"A strong performance from AWB Geneva was driven by the grain, oilseed and freight businesses," he said.

"However, the strength of the Geneva business was offset by poor results from Brazil."

Davis said operating conditions in Australia during the first half had been solid in WA, Queensland and northern NSW, but the ongoing drought had adversely affected trading conditions in Victoria, South Australia and southern NSW. The company said it had made significant progress in debt reduction.

"From 30 September 2008, we have reduced the net corporate debt by more than A$140 million and we are well advanced towards exceeding our A$200 million debt-reduction objective by 30 September 2009."

AWB will present its half-year result next Wednesday.

- AAP