GrainCorp shares slumped 7% to their lowest for eight months after the grain handler warned that its underlying earnings would fall below investors' hopes, blaming the impact of "drought" on Australian crops.

The Sydney-based group cut to 7m-8.5m tonnes, from 8m-9m tonnes, its forecast for grain receivals in its financial year to the end of September next year, citing "drought conditions" in Queensland and New South Wales.

The group's earnings before interest, tax, depreciation and amortisation (ebitda) for the year would come in at Aus$180m-210m.

Shares tumble 

The figure was below analysts' forecasts of a Aus$250m result, according to Reuters data, and implied ebitda from core grain operations of less than Aus$100m once the results of its new malt acquisitions are stripped out.

GraiCorp achieved ebitda of Aus$152.7m in the year to September 2009, which excluded any malt contribution.

GrainCorp shares slumped 10% to Aus$5.20 at one point before recovering some ground to close at Aus$5.38, the lowest since April 1.

Better times ahead? 

Nonetheless, some analysts remained sanguine over GrainCorp's prospects, with Credit Suisse keeping its price target on the stock at Aus$10.00

"We expect to see underlying earnings strengthen on the basis that GrainCorp continues to improve its position in domestic and export grain logistics," the bank said.

The acquired malt assets had "strong domestic malting positions" and provided "potential growth opportunities in export markets".

GrainCorp managing director Mark Irwin, fresh back from a tour of the malt operations, said they would be running at about 95% of capacity over the year, and achieve sales of 920,000-950,000 tonnes of malt.