Takeover target Graincorp's profit drops

GRAINCORP'S first half profit has fallen by 34 per cent due to costs from its purchase of several food companies and its response to a takeover offer from the United States.

Australia's largest grain handler is currently working with food giant Archer Daniels Midland to complete a $3 billion takeover.

Graincorp said on Thursday it made a net profit of $88 million in the six months to March 31, down from $133.7 million in the same period last year.

The result included $20 million in costs related to Graincorp's response to ADM's takeover offer, plus the company's acquisition of the Gardner Smith and Integro food oils businesses.

Underlying profit, which excludes those costs, was $108 million, down 11 per cent from $122 million in the previous corresponding period.

Chief executive Alison Watkins said the result reflected the eastern Australian harvest returning to a more typical size after several bumper seasons.

The new oils business delivered more than $400 million in additional revenue, contributing to total revenue to $2.4 billion in the six months to March, up 40 per cent from the previous corresponding period.

"Another positive first half performance demonstrates the benefits of GrainCorp's diversification strategy, as grain receivals returned to more normal levels following two very large harvests," Ms Watkins said in a statement.

ADM's due diligence procedures have been completed and management is working with the US company to progress the takeover bid, Graincorp said.

It declared a fully franked interim dividend of 25 cents per share, which included a five cent special dividend.

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$A higher after US unemployment rate drops

THE Australian dollar is still higher after getting a boost from better US employment figures, increasing optimism about the America's economic recovery.

At 1700 AEST on Monday, the local unit was trading at 102.72 US cents, up from 102.54 cents on Friday.

The Australian dollar rallied at the end of last week after US economic data showed the country's unemployment rate fell 0.1 per cent to 7.5 per cent in April.

But during local trade on Monday morning the currency fell as low as 102.72 US cents after official figures showed local retail spending fell 0.4 per cent in March, but was up 2.2 per cent in the March quarter.

CMC Markets senior trader Tim Waterer said the US payrolls figures were warmly received by Asian markets on Monday morning.

"The US jobs data gave the global growth landscape a more convincing appearance, commodities received renewed buying interest and this is reflected in the performance of resource stocks," he said.

"Despite a push higher on Friday night after the US jobs number, the Australian dollar gave back ground today with a potential interest rate cut on the cards over the coming month or two."

The RBA has its May board meeting on Tuesday.

All 13 economists surveyed by AAP last week said they don't think the RBA will reduce the cash rate from its current level of three per cent but the futures market is pricing in a 57 per cent chance of a cut.

At 1700 AEST, the Australian dollar was at 102.04 Japanese yen, up from Friday's close of 100.51 yen, and at 78.37 euro cents, up from 78.26 euro cents.

Meanwhile, Australian bond futures prices were lower.

JP Morgan interest rate strategist Sally Auld said the possibility of another rate cut by the Reserve Bank of Australia and concerns about the local economy prevented a greater bond market sell off.

"The global backdrop isn't as bad as people were getting that nervous about but, in contrast, the domestic story isn't looking that great," Ms Auld said.

Ms Auld said the bond market didn't have much of a reaction to the retail trade figures as traders were more focused on Tuesday's interest rate decision.

At 1630 AEST on Monday, the June 10-year bond futures contract was trading at 96.875 (implying a yield of 3.125 per cent), down from 96.960 (3.040 per cent) on Friday.

The June three-year bond futures contract was at 97.430 (2.570 per cent), down from 97.500 (2.500 per cent).

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Dollar drops one cent after Fed minutes

THE Australian dollar has fallen more than one US cent as it looks likely there could be an early end to the US Federal Reserve's stimulus program.

At 7am AEDT today, the local unit was trading at 102.44 US cents, down from 103.65 cents yesterday.

The currency reached an overnight low of 102.43, its weakest level since Tuesday of last week.

The minutes of the Fed's January policy meeting show that some members were worried that the bond-buying programs could eventually escalate inflation and unsettle financial markets.

BK Asset Management managing director Kathy Lien said the US dollar rallied against all the major currencies after the remarks were released.

"The real reason (the Fed) is considering an end to the program is because they see a significant improvement in the labour market," she said from New York.

Ms Lien also said the Australian dollar was one of the hardest hit because the Reserve Bank of Australia's (RBA) monetary policy stance was in stark contrast to what the US Federal Reserve was now considering.

"Australia is looking at the possibility of cutting the interest rate next month and the US is looking at the possibility of unwinding some of this emergency stimulus," she said.

Tomorrow, RBA governor Glenn Stevens will appear before the House of Representatives committee. Ms Lien said the testimony has become more important after the release of the US central bank's January minutes.

"The Aussie dollar has fallen quite a bit, much more than the euro, the yen or the Canadian dollar," she said. "The reason for that is because the RBA is looking at the possibility of easing."

"If the governor confirms this, that would compound the losses and could take the Aussie dollar to a level below 102.00 US cents."

Ms Lien said she expected the Australian dollar to trade in a range between 101.75 US cents and 102.75 cents today.

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