Analysts downgrade stock ahead of slump in earnings

Analysts have started to downgrade their recommendations for GrainCorp because of the failure to win government backing for the $3.4 billion takeover bid for the company and an expected earnings slump blamed on dry growing conditions.

Analysts have started to downgrade their recommendations for GrainCorp because of the failure to win government backing for the $3.4 billion takeover bid for the company and an expected earnings slump blamed on dry growing conditions.

GrainCorp chief executive Alison Watkins will leave the company in January to join Coca-Cola Amatil in March. Her announcement caught investors by surprise, although the planned shift had clearly been in the works for some time.

"I had planned to leave the company at the time control passed over to ADM," she said in a statement.

"Given last week's unexpected developments, I feel it is in the best interests of GrainCorp that I move on now and allow the board to find new leadership."

GrainCorp chairman Don Taylor will act as executive chairman from mid-January, pending the appointment of a new chief executive.

Mr Taylor is a former executive chairman at Grainco Australia before its merger with GrainCorp.

On Friday, the government blocked a takeover of GrainCorp by US company Archer Daniels Midland, although the Treasurer did open the door for ADM to raise its stake in the company from 19.86 to 25 per cent.

On Monday ADM withdrew its offer, opening the door for it to raise its stake at a lower price than offered to shareholders under the terms of its offer.

No discussion has taken place on either the appointment of ADM representatives to the GrainCorp board or of it raising its stake in the company.

An ADM spokesman said the company would review all options.

GrainCorp was hit by "sell" and "underperform" recommendations from some analysts when the shares dropped from ADM's $13.20 offer to $8.41 on Monday.

Broker BellPotter placed a "sell" recommendation on the stock, highlighting the looming decline in core grains handling earnings amid the prolonged dry weather in Queensland and northern NSW.

"While GNC has shed 20 per cent of its value it continues to trade at a relatively high PE of 14.5 times [full year 2014 estimated] earnings and levels consistent with those just prior to the ADM bid," analyst Jonathan Snape said.

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