FCL 0.85% $3.52 fineos corporation holdings plc

Futuris downhill skiing!, page-8

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    Uncertainty as Futuris Corp falls 13/06/02

    AFR News - 13.06.02 03:35

    Cathy Bolt

    A slump in Futuris Corporation's share price to its lowest point for nearly four years has split analysts. Some suggest it represents good value considering its growth outlook. But others are wary of the potential impact of dry conditions on its rural operations.

    Adding to uncertainty is the possible disruption to its automotive components division, Air International, caused by the industrial dispute at BHP Steel.

    Salomon Smith Barney's Jonathan Snape, who downgraded Futuris from a hold to underperform six weeks ago, said the stock had since been hit by a 20per cent drop in cattle prices and a looming drought, which has affected wheat plantings in Queensland and NSW.

    But Paterson Ord Minnett's Craig Sherlock, who has a buy on the stock, said the medium-term outlook was extremely strong.

    The immediate negatives were: the sharp decline in beef prices - Futuris felt the impact through its Elders agency business and its 40per cent stake in cattle giant Australian Agricultural Company; the dry start to winter, which has affected chemical and fertiliser sales; the BHP Steel dispute; and a selldown by institutions which had reduced their shareholding from about 45 per cent to 40 per cent.

    But in the medium term, Air International had a $2.2 billion order book and Elders's core business was growing strongly.

    Sherlock valued Futuris at $2.39 a share compared with yesterday's close of $1.40, a price to earnings multiple of about 10 on analysts' forecasts for 2002-03.

    Futuris's corporate director, Les Wozniczka, said yesterday he saw no reason to change the guidance that was given last month that its full-year earnings would be in the $80 million to $90 million range, with the usual overreaction to fears about rural Australia's outlook.

    "At this point in time we are pretty well home and hosed," Wozniczka said.

    "The Elders business is actually going extremely well.

    "It's not the best season, but we budget for an average season and that's what we've got."

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