MELBOURNE, June 28 (Reuters) - Salomon Smith Barney has cut its 2002/03 net profit estimate for agricultural services company and car component manufacturer Futuris Corp Ltd by eight percent, the investment bank said in a research report.
Salomon said it had lowered its profit estimate to A$78 million as it expected the company's rural services Elders business to be affected by the weak beef and wool markets.
The Australian Bureau of Agricultural and Resource Economics (ABARE) quarterly report released this week forecast cattle prices would fall 20 percent, while the number of cattle slaughtered was expected to increase by 11 percent.
ABARE said wool prices were expected to fall seven percent with production down five percent while farm revenue was forecast down nine percent.
Salomon said Futuris earnings faced further risk from dry weather which was affecting eastern Australia wheat plantings.
"Further risk in our mind still lies in the eastern wheat crop and we expect that weather patterns in southern Queensland and northern New South Wales over the next two weeks will be a key determinant of sentiment in the price of FCL," Salomon said.
The research report warned that the dry conditions were reminiscent of the Western Australian drought which caused a direct loss of A$5 million earnings before interest and tax (EBIT) in lost business for Futuris in the 2000 financial year and let to a further A$5-A$10 million in lost EBIT potential.
Salomon said it continues to view the stock as in an earnings downgrade cycle, and rated it "underperform".
Futuris shares closed down one cent, or 0.74 percent on Friday in an overall market up 0.1 percent.