Agricultural investment company AACL Holdings has slashed its pre-tax earnings forecast for the 2012 financial year from a profit of $2.1 million to a loss of $7.2 million, following a downturn in its business and the adoption of new accounting policies.
The company’s previously announced profit forecast was based on the delivery of nearly 400,000 tonnes of grain expected to be contracted to AACL by farmers for the 2012-13 season.
However in a statement to the Australian Securities Exchange today the company said that based on new information and other information not previously made available to the board its current estimates would likely be in the vicinity 275,000-300,000t of grain.
It said that based on its old accounting principles, the updated forecast for the financial year was a net loss before tax of nearly $1 million.
However based on changes in accounting policy approved by the board, the company’s financial forecast was downgraded by a further $6.2 million.
AACL said it had traditionally sourced investment funds via agricultural management investment schemes, but the overall amount of funds has dissipated in recent times causing it to reassess its accounting policy.
“AACL has reviewed its accounting policy in relation to revenue recognition and in particular the relevant treatment of initial period fees and establishment costs that it is entitled to charge to each project it manages,” it said.
“To more accurately reflect the profit position in future seasons and financial years AACL will no longer take up establishment costs and initial period fees on providing funds to farmers but rather report profits as production gains or losses from each season on completion of grain sales.”
The news comes after AACL chairman Chris Brooks was appointed interim chief executive earlier this year following the resignation of Peter McEwen.
The company is in ongoing confidential negotiations over a funding arrangement for the group and expects to announce the outcome of the negotiations shortly.
AACL Holdings shares closed at 2.2c each.