Queensland Cotton Holdings Ltd on Friday warned a severe drought in Eastern Australia and the weak global economy could impact on its 2003 full year profit by up to 50 per cent.

The group said all of its Australian operating divisions had been affected by the lack of rain with cotton growing regions Queensland and New South Wales suffering a "serious deficiency" in rainfall.

Chief executive Richard Haire said in a statement the group’s annual profit is likely to be 50 per cent below last year’s total of A$15.9 million as a result of the drought and soft worldwide demand.

However he added: "The Western USA is currently experiencing good growing conditions and the company's US operations are expected to deliver a strong result for the year ended February 2003."