Despite Stemming Losses in the Second Half, Ainsworth’s Outlook Remains Troubled

We maintain our AUD 0.40 fair value estimate for no-moat Ainsworth following a market update on preliminary fiscal 2021 results. Ainsworth expects to report second-half profit before tax of around AUD 1 million, or a full-year underlying pretax loss of around AUD 26 million, after excluding AUD 29 million in first-half impairments--principally in the Latin America business--and an expected AUD 3 million gain on the sale of surplus land in Nevada. We increase our full-year underlying pretax loss forecast to AUD 26 million, from AUD 33 million previously. The increase to our near-term earnings forecast is broadly offset by a recent strengthening in the AUD versus the USD and our probability-weighted estimate for an increase in the U.S. corporate tax rate to 26%, up from the current rate of 21%.