Ridley Corporation's profit forecast plunges 27%

Blame it on export restrictions.

According to Commonwealth Bank of Australia, RIC released a surprisingly poor trading update, leading to a 27% downgrade to FY13f earnings forecasts.

Export restrictions and weak diary and packaged blamed. RIC’s rendering businesses have suffered from export meal restrictions (both directly and indirectly through lower prices), while weak dairy stockfeed and packaged demand has hurt the remainder of the AgriProducts division.

RIC has not flagged any material items as part of the trading update.

Here's more from CBA:

Lowered bar for new management. RIC’s AgriProducts divisional EBIT will now be in line with FY12, which implies a ~39% downgrade to 2H13 (excluding the contribution from BPL Melbourne).

The new CEO, Tim Hart, begins at RIC in the coming days before his formal transition to CEO on 1 July 2013, and will have a depressed earnings base to work from.

Given the scale of RIC’s earnings deterioration, it will be hard to track whether the new Pakenham mill delivers genuine growth (and this can be extrapolated in forecasts) or if the project proves to be ‘maintenance’ capex dressed up as ‘growth’ capex.

Capital return now in doubt. RIC is working with PSH to determine the best path to terminating its salt supply agreement. There is ~$11m in salt inventories and ~$5m PP&E at risk. While the Dry Creek salt field is more valuable to RIC as land to be developed, the relevant approvals are likely to take years to be received.

Given the risk to balance sheet carrying values, we have removed RIC’s previously flagged 15cps capital return from our forecasts.

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