ABB/TEL

Sydney, Oct 5, 2007 (ABN Newswire) -



Grains handler ABB Grain slashed its 2007 profit guidance by as much as 74% on Thursday, warning Australia's drought had caused "extreme volatility" in domestic and international grain markets.



Shares in ABB, one of the country's largest wheat traders, fell as much as 7% to $7.10.They recovered to close down 43c at $7.20.



The company said its net profit for the year ended September 30 was likely to be in the range of $5 million to $8 million, down sharply from its previous guidance of $16 million to $19 million.



The profit warning came two weeks after the Australian Bureau of Agriculture and Resource Economics cut its forecast of the national wheat crop by more than 30% to 15.5 million tonnes.



Around two-thirds of the country's agricultural land is in drought.



An aid package has been extended and last week Prime Minister John Howard said the government would pay thousands of farmers and graziers up to $170,000 each to leave drought-stricken land.



Wheat prices in world markets have hit record highs in recent weeks on fears of supply shortages.



A report by the government's scientific organisation, CSIRO, warned this week that droughts were likely to become more frequent, particularly in the south-west, because of climate change.



ABB Grain Managing Director Michael Iwaniw said the company's results would be hit by new international accounting rules which require the valuation of future commitments at current prices.



"Global influences, including government decisions on grain stocks and pricing, and uncertainty with current crop conditions in Australia are causing extreme volatility," Iwaniw said.



"As previously stated, international financial reporting standards requires the valuation and recognition of forward commitments at prevailing prices.



"Owing to unprecedented volatility in these prices in recent weeks our results for the 2007 financial year will be unusually impacted.



"Although our underlying business is performing well, we are required to bring to account forward positions by year end, notwithstanding conditions may later change."



The pastoral and rural services division was adversely affected by the drought, but the malting and supply chain businesses continued to perform "exceptionally well in difficult conditions," ABB said.



A report by the government's scientific organisation, CSIRO, warned this week that droughts were likely to become more frequent, particularly in Australia's south-west, because of climate change.



ABB said it was "comfortable" with its underlying commercial positions.



"Above all, the farm outlook is mixed: that is markedly different from the uniformly poor conditions we experienced last year," he said.



ABB is scheduled to report its annual results on November 26.



Last Friday the International Grains Council said that Australian wheat output could fall to 13.5 million tonnes, down from the 15.5 million tonnes from ABARE.



With the dry weather in NSW, Victoria and South Australia continuing for the next week or so that lower estimate is looking like a reality.







Telecom Corp of New Zealand will not sell its access network, which has a book value of $2 billion, after it has completed its operational separation, its new chief executive said on Thursday.



Just a week after the government revealed Telecom NZ still had the option to sell its network, Paul Reynolds, who started this week, said he wanted to keep the country's biggest company together.



 "I have no plans to sell our network,'' he told reporters after the annual general meeting.



"We are fundamentally a communications business and founded on running a network.



 "I have no plans to change that.''



Telecom NZ had flagged earlier this year it might sell the network.



Reynolds, who has doctorate in geology, was head of Britain's BT Group's wholesale division.



BT separated its access network business in 2005, creating Openreach at arm's length.



"BT has already grappled with the complexities and opportunities of operational separation, and has emerged in a formidable position as a globally significant telecommunications company," Reynolds, a Scotsman, told Telecom NZ shareholders at the annual general meeting in Dunedin on Thursday.



"I've learned a lot from being involved in that process, and I believe some of the key lessons are very applicable to the current New Zealand environment."



On its website, Openreach said: "Our remit is to ensure that the UK telecommunications industry, including other parts of BT, has fair and equal access to our local access and backhaul networks."



The New Zealand government announced last week Telecom NZ would be split into three separate operating divisions – wholesale, retail and network – by the end of March next year.



 "It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders," Communications Minister David Cuncliffe said last week.



The operational separation will enable competitors, such as Britain's Vodafone and Australia's Telstra and M2 Telecommunications, to pay the same as Telecom NZ to use its network.



The government had been studying a Telecom NZ plan to spin-off its network.



Telecom NZ is already facing increasing competition from domestic and foreign rivals and, like other former state telecommunications monopolies around the world, changes in telephone usage.



 Consumers are dumping traditional fixed lines for mobile phones and wireless internet access.



Technologies such as inexpensive internet phone calls are also changing the marketplace.



Telecom NZ Chairman Wayne Boyd told its shareholders the company was confident of agreeing on a "workable separation model" with the government by the end of this calendar year.



He said implementing the new structure would cost about NZ$200 million in capital expenditure over the next four years, with operating costs of up to NZ$40 million a year over the same period.



"What else do we know? At present we know that the prices for new regulated services, which allow our competitors to use our network, will be set before Christmas," Boyd told shareholders.



"In addition, there will be potentially different prices for urban and rural customers which will shape the way our competitors may choose to compete in those areas."



Shares in Telecom NZ, which also reaffirmed its 2008 earnings forecast, were little changed.





 



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