Wheat exporter AWB has downgraded first half profit guidance after it discovered accounting "errors'' costing $4 million in its Brazil operation.
AWB said today that 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 $8 million to $9 million, down from earlier guidance of $10 million to $12 million.
AWB shares lost 9 cents, or 7%, to close at $1.20.
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.
"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,'' AWB managing director Gordon 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.''
Previous guidance on February 10 was for half year net profit to be about 45 to 55% lower than the previous corresponding half year's result, which was $22.3 million in fiscal 2008.
That put the earlier guidance at $10 million to $12 million for the first half of fiscal 2009.
AWB said it had initiated a review of its Brazil operation as a result of poor performance there.
"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," Mr Davis said.
"The net impact of the restatement is to reduce the NPAT by $4 million to $60.6 million for the year ending 30 September 2008.''
Mr Davis AWB now was "restructuring the management team in Brazil'', appointing an interim general manager and chief financial officer.
As well, AWB's general manager commodities, Mitch Morison, would be based in Brazil to complete the management review of the business, he said.
"Conditions in Brazil remain challenging and it is likely that we will emerge with a smaller and refocused business,'' Mr Davis said.
As for the company's broader operations, Mr 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.''
Mr Davis said operating conditions in Australia during the first half have 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 $140 million and we are well advanced towards exceeding our $200 million debt reduction objective by 30 September 2009.''
AWB will present its half year result on Wednesday May 20.