ABG said its oil seed crushing facility, purchased from Oleo Industries, could process up to 120,000 tonnes per year, depending on the feedstock used. The agreement to buy the facility was signed yesterday and ABG will take possession in October, a spokesperson said.

The $4.5 million cost of the facility will be satisfied by ABG with a payment of $3.25 million cash and 1.25 million ABG shares.

Oil seeds, including cotton, sunflower and canola are suitable feedstock for biodiesel production and can be crushed by the facility, potentially yielding between 16,800 and 38,000tpa at full capacity.

Chief executive Dr Len Humphreys said the crushing facility would supply the company’s biodiesel production facilities at Berkeley Vale in NSW and Narangba in Queensland.

“The Oleo acquisition will assist ABG to manage the cost and supply of edible oil feedstocks, used to improve the cold pour properties of biodiesel during the winter months,” he said.

“The facility will also provide ABG with oil crushing competencies, which will become valuable as the company moves towards the production of biodiesel from non-edible oil plant species in the years ahead.”

Meanwhile, competing biodiesel producer Australian Renewable Fuels has said it can't meet its profit forecasts for 2006 after delays at its Adealide and Picton, Western Australia plants.

The company did not give specific updates on what it expected its profits would be in 2006, but said it was optimistic about 2007.

"The final position for the 2006 year is not yet clear but it is now likely that the company will report a loss rather than a profit in its annual accounts," AR Fuels said.

Delays in ramping up production at the Adelaide plant were creating problems with the commissioning of the Picton plant, the company said.

The delays were due to minor issues and were not caused by any material problems with the Energea process technology, according to AR Fuels.

The company is now unlikely to receive payments of $7.15 million from the Federal Government's Biofuels Capital Infrastructure Grant in 2006, but it said it was confident it would qualify again in 2007.

Last month, ARF secured a $200 million sales agreement with West Australian-based fuel distributor Westfuel, following a similar agreement with South Australian fuel distributor Dermody Petroleum. Contracted sales now stand at $450 million.