AWB sale on track despite Geneva job fears

However, the reality may be less damaging. A source close to AWB indicated on Friday that in fact just one trader had resigned, while the back-office team had also weathered a couple of departures. Apparently the staff members have not left to join a competitor, although the departures could be a tactical move, as they may seek to negotiate employment terms with a purchaser of the business down the track.

A sale of AWB Geneva would be a substantial transaction for AWB. The profitability of the business is quite volatile but it typically generates earnings before interest and tax of between $30 million and $50 million, almost one-quarter of AWB's total profits. While trading businesses are notoriously hard to value, last December analysts from Goldman Sachs JBWere estimated a sale price of $125 million.

At this stage, the US group Gavilon(formerly ConAgra Trade Group) is thought to be the frontrunner for the acquisition of AWB Geneva and a majority stake in AWB's Australian Commodities Management Division. If a sale is completed AWB's only key remaining operating business will be the Landmark rural services operation.

Discussions with Gavilon have been dragging on for months, but a prompt conclusion is looking unlikely, with no update expected for at least another month.

EYE ON NUFARM

Nufarm's response to an "ASX Aware" letter this month, asking it to explain the timing of a profit downgrade for the six-month period ended January 2010, has attracted raised eyebrows from followers of the agricultural chemicals sector.

The crux of Nufarm's justification for releasing its downgrade on March 2 was that the bulk of sales of the herbicide glyphosate (the key driver of Nufarm's profitability) for the first half of every year take place in the final weeks of January, and it was not until the end of February that all the necessary sales and accounting information had been collated to provide a true picture of the company's performance.

However, some in the sector think that Nufarm has not told the full story. While it is correct that most glyphosate buying is usually done between January and March, the last six months have been different.

Apparently Nufarm slashed its pricing on glyphosate in October, bringing forward a significant amount of retail buying, in Australia at least, to October and November. Stories abound of farmers who, incredulous at the depth of Nufarm's discounting and sure that it could not last, signed up to buy as much as five years' glyphosate requirements.

The argument goes that Nufarm must have realised that sales being made at heavily discounted prices offered marginal profitability at best, and that (particularly with sales brought forward from the usual late January start to the selling season) the company should have had a better handle on profitability, sooner.

So why would Nufarm have taken such an uncharacteristically aggressive stance on pricing? It could be that corporate discussions under way with Sinochem had some bearing. Chinese producers of agricultural chemicals have long had a reputation for chasing volume over profitability, and Nufarm may have figured that managing the top line would maximise the chance of eliciting a firm takeover offer at the indicatively agreed price of $13 a share.

If Nufarm was trying to run a strategy that would appeal to Sinochem, it clearly backfired. Sinochem walked away from a deal just after Christmas, while the market's reaction to poor first-half profitability has seen the company's share price fall sharply, closing last week at just $8.70.

GRIFFIN SALEThe sale process for the sprawling, privately held Griffin Coal empire is yet to kick off after the company was placed in administration in January with total indebtedness of about $2 billion.

However, the minutes of a meeting of the committee of creditors lodged with the Australian Securities and Investments Commission last week provide clues to what potential buyers of the coal business will find when they get to look under the hood.

The meeting was held last month, five weeks after the company was put into administration after failing to pay a $25 million bond instalment last December. It seems that, as Griffin Coal fought to keep one step in front of its creditors late last year, management may have skimped a little on maintenance. As a result, the committee identified that "maintenance of equipment had not been a priority in the past", while the fact that "there was no headroom in the cash flow for emergency maintenance ... was the most significant contingent issue".

Elsewhere, the situation looked a little more positive. Coal production levels were being maintained and "there were no major operational issues to report". The company's day-to-day cash flow also looks to be reasonably robust, with the minutes noting that "the cash flow is positive although not substantially positive".

The lead administrator, Brian McMaster of KordaMentha, has confirmed that submissions have been received from investment banks in relation to the sale of Griffin Coal's assets and that appointments are imminent.