KEY POINTS:
MELBOURNE - JP Morgan said yesterday that it had cut its earnings forecasts for a number of Australian food and beverage companies because of worsening drought conditions.
A smaller 2008 wine grape crop, which could be down as much as 75 per cent in some drought-affected areas, would raise raw material costs for winemakers.
JP Morgan analysts Stuart Jackson and Shaun Cousins said in a research report that they had cut their earnings estimates for winemaker McGuigan Simeon Wines to an operating net loss of A$1.1 million ($1.29 million) from a net profit of A$2.5 million for 2008, a cut of 142 per cent.
For Foster's Group, the world's second-biggest winemaker, the average cost of grapes in 2008 was forecast to rise by 15 per cent, while export volumes were forecast to shrink by 5 per cent, though the impact on the wine and beer group's total net profit would be small in 2008 and 2009.
JP Morgan said it had trimmed its estimates for Coca-Cola Amatil by 1.3 per cent in 2007 and 2.5 per cent in 2008 because of the impact of the drought on its SPC canned fruit business, with stone fruit trees being aggressively pruned back and some dying.
The analysts said they had already downgraded estimates for food company Goodman Fielder based on the impact of higher wheat, dairy and oilseed prices.
But incorporating higher Australian dollar forecasts resulted in a 2.8 per cent cut in 2008 earnings estimates to A$216.1 million.
- Reuters
