Crop outlook to trim grain trader's profit

A return to more typical crop conditions hit GrainCorp's March-half earnings despite its recent moves to diversify.

GrainCorp said the total crop size this year was expected to fall to about 18 million tonnes from 21 million tonnes last year.

"The size of our crop drives our receivals," the company's chief executive, Alison Watkins, told analysts on Thursday. "This crop size is a more normal size", with earnings helped by the above-average carry-over crop from last season.

This helped to limit to 3 per cent the decline in earnings before interest, tax, depreciation and amortisation, as it benefited from its diversification program.

The profit at this level was $227.4 million, down from $235.1 million a year earlier.

But net profit dropped to $88.2 million from $133.7 million, with earnings a share dropping to 38.6¢ from 66.7¢, hit by profit declines across all divisions.

Pre-tax profit of the key storage and logistics division fell to $93.8 million from $122.7 million, with marketing dropping to $15.9 million from $26.6 million and malt to $38.9 million from $57.3 million. The oils division posted an inaugural $22 million pre-tax profit contribution.

Ms Watkins would not be drawn on the crop outlook, saying that she was "very comfortable" with the outlook, pointing to the "good state of preparation" as farmers began work sowing their winter crops.

She said there was likely to be a smaller canola crop this year after the record crop last season.

"Farmers are looking for rain," she said, while pointing to the recent good falls in parts of Victoria and southern NSW. "We're not seeing any cause for concern and expect 10 million hectares to be planted."

Along with expanding into the malt sector, GrainCorp has more recently bought into the oils processing sector in a bid to help reduce earnings volatility.

GrainCorp has also entered into long-term agreements for port throughput, pointing to 3.8 million tonnes of arrangements entered into, although about half of that figure is in-house, coming from its own trading arm.

GrainCorp is subject to a $13.20-a-share takeover offer from US agriculture group Archer Daniels Midland, which comprises $12.20 in cash and $1 in dividends, with the first part of that, 25¢ a share, declared on Thursday.

Analysts said the focus remained on progress, with ADM receiving regulatory approvals for its bid to proceed.

"We are waiting for more definition on progress with the regulatory process," one analyst said, which GrainCorp cannot talk to since it is up to ADM.