Lower yields trim profits at GrainCorp

A return to more normal crop conditions hit GrainCorp's March half-year earnings, with its recent moves to diversify earnings helping to offset the traditional earnings volatility.

A return to more normal crop conditions hit GrainCorp's March half-year earnings, with its recent moves to diversify earnings helping to offset the traditional earnings volatility.

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," chief executive Alison Watkins said. "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.

EBITDA was $227.4 million, down from $235.1 million a year earlier. However the net profit dropped to $88.2 million from $133.7 million, with earnings a share dropping to 38.6¢ from 66.7¢, hit by declines across all divisions.

Pre-tax profits of the key storage and logistics division fell to $93.8 million from $122.7 million, marketing dropped 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 contribution.

Ms Watkins would not be drawn on the crop outlook, saying she was "very comfortable" with the outlook and pointed to the "good state of preparation" as farmers begin work sowing 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 recently bought into the oils processing sector to help reduce earnings volatility. It has also entered into long-term agreements for port throughput, with 3.8 million tonnes of arrangements entered into.

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

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