KEY POINTS:
ABB grain
Australia's largest barley exporter, ABB Grain, announced a full-year profit fall of 89 per cent as a result of the worst drought on record. A cut in production saw net income fall to A$7.3 million ($8.35 million) from A$66.7 million a year earlier.
Drought has reduced wheat and barley production in Australia by 61 per cent, cutting the amount of grain delivered to ABB Grain sites. Its share price has fallen but not as badly as expected and, in recent weeks, it has in fact been rising.
This proves again that bad news you know is coming is not quite as bad as bad news that takes one by surprise. Also, the farming cycles seem easier to understand than economic cycles and always recover eventually.
Nevertheless, the drought in Australia is breaking records and most rural-based shares have been hammered.
The Warehouse
Shares in The Warehouse are firmly back in play after the High Court cleared supermarket giants Woolworths and Foodstuffs to make takeover bids for the discounter.The Warehouse's share price jumped 24 per cent on the news that the court has overturned the Commerce Commission's June ruling blocking either of the supermarket companies from bidding for The Warehouse.
But it's possible the commission may now take the matter to the Court of Appeal, dragging out the process.
The Warehouse has become a punter's share because it is carrying a huge takeover premium that will disappear if no deal eventuates. Punters must weigh the potential for further gains above the current high price against the possibility that there is no deal and the share collapses back to the mid-$4 level it traded at before the action started with bids for control.