Graincorp has slashed its full year profit forecast and warned that dry El Nino conditions in eastern Australia are likely to eat into future earnings.
Eastern Australia's biggest grain handler group cut its underlying profit forecast for fiscal 2014/15 to $45 million, just six months after saying it was on track to produce a result between $45 million and $60 million.
It also predicted net profit will fall to $32 million from $50 million in 2013/14 after facing intense competition and lower grain production.
Adding to Graincorp's woes, the Bureau of Meteorology has forecast drier and hotter conditions across much of eastern Australia linked to the El Nino weather pattern - a shift in sea surface temperatures in the Pacific Ocean.
Managing director Mark Palmquist said Victorian and southern NSW grain growers had experienced particularly hot and dry conditions in September and October which would soften production forecasts for fiscal 2015/2016.
"It has not helped the growers at all," Mr Palmquist told reporters in a conference call on Tuesday.
"It's an issue of the crop that's being harvested right now."
But he added that it was too early to make definitive predictions and late rains would be welcome.
Graincorp is examining how drier El Nino conditions will affect final production, the quality of the harvest and the impact on future plantings.
"The impact is more of an issue in fiscal 2016 than it is in fiscal year 2015," he said.
Mr Palmquist said the group had received 1.4 million tonnes of grain, mostly from Queensland and NSW, out of a predicted winter crop of around 16 million tonnes.
The company's results for 2014/15, due out on November 12, have been affected by continued challenging conditions in global grain markets and lower grain production in eastern Australia which resulted in intense market competition.
The situation had been exacerbated by lower fuel costs and ocean freight rates, which reduced Australia's freight advantage to major export destinations and made Australian grain more expensive and less competitive, Mr Palmquist said.
The group expects to report higher-than-expected significant items of about $12 million due to additional restructuring costs related to its storage and logistics and oils division, as well as an impairment of a malt elevator in Canada.
Shares in Graincorp slumped 41 cents, or 4.6 per cent, to close at $8.48.
