GrainCorp (GNC) shares edged higher yesterday despite a weak profit for the six months to March.
The five cents a share rise to $8.98 had been well forecast by the company (there was a major warning issued at the annual meeting in February), so that limited the fallout yesterday.
GrainCorp said underlying half-year profit fell 43% to $61.2 million thanks to a smaller grain crop in eastern states and increased competition.
Earnings before interest, tax, depreciation and amortisation fell to $166 million from $227 million in the first half of the 2012-13 year.
With the slide in profit, GrainCorp’s Board cut its interim dividend to 15c per share, compared with the 20c a share and 5c a share special payout for the first half of 2012-13.
As well, the drought in parts of Queensland and NSW had a big impact on grain growers.
The company said that total country grain receivals during the six months ended March 31 were 7.6 million tonnes, compared with 9.7 million tonnes for the same period last year, while 2.8 million tonnes of grain were exported through Graincorp’s ports, down from 4.3 million.
GNC 1Y – GrainCorp cuts dividend after profit hit by drought
Executive chairman Don Taylor, who is acting chief executive while the company conducts an executive search to replace the departed Alison Watkins (who went to Coca Cola Amatil), said in a statement yesterday that the result was pleasing given the challenging conditions.
"Our storage and logistics business earnings were affected by a below-average carry-in and the smaller crop in northern regions," Mr Taylor said in a statement.
"GrainCorp Malt and GrainCorp Oils have both delivered consistent results, with Malt continuing to operate at high capacity and GrainCorp Oils performing well despite continuing pressure on refining volumes," he said.
Mr Taylor said "intense competition" for a smaller crop had also hurt earnings in Graincorp’s marketing division.
Competition to GrainCorp is on the rise. Sydney-based logistics group Qube Holdings last month announced plans to team up with two of Graincorp’s customers Emerald Grain and Cargill to build a rival bulk grain export terminal at Port Kembla in NSW. The cost will be more than $200 million.
The company said it would close some of its least productive facilities in the next year.
Looking to the rest of the year, Mr Taylor said, “It remained GrainCorp’s expectation that FY14 earnings would be heavily weighted to the first half as a result of the busy export program and low residual levels of grain in the network.
"As a result, the company was maintaining the full year earnings guidance it provided in February (EBITDA of $275 – $315 million and underlying NPAT of $80 – $100 million).
“Looking further ahead, some good pre-planting rains have been recorded in many areas of our catchment with canola planting substantially underway in many areas and good starts for wheat and barley. However, it’s a long season and, as always, favourable conditions and good finishing rains will be critical to the delivery of a good crop in eastern Australia,” he said.
Mr Taylor said the company’s search for a new CEO was progressing well, with an announcement expected in the middle of the calendar year, as previously indicated.
Separately, Ellerston Capital has increased its stake in Graincorp to 7.6% after selling down 18 months ago to Archer Daniels Midland in its unsuccessful $3 billion bid for the company.
