Graincorp’s full-year profit dipped almost 4% to $30.9 million as its core grains business was impacted by below-average production in eastern Australia, a result that disguised another strong performance from its malt barley business.
In fact without the strong result from the malt business (and demand from craft breweries in Australia and around the world for high quality products), GrainCorp would have reported a loss and no final dividend to shareholders.
The company said its underlying net profit, which excludes the impact of significant items, rose 18.4% to $52.7 million, within the company’s trimmed guidance range.
The company declared a final dividend of 3.5 cents a share, up from 2.5 cents last year, taking total 2015-16 payout to 11 cents, from 10 cents a share in 2014-15.
“Our diversified business model has allowed us to deliver a solid performance in the face of some significant external headwinds,” GrainCorp Chief Executive Officer Mark Palmquist said. “These challenges have largely affected the grains and oils businesses, however they have been partially offset by another strong performance from GrainCorp Malt.
He said GrainCorp expected a return to a stronger year in the current financial year, driven by higher volumes which should boost revenues faster than the 1.8% rise in revenue for the year to September of $4.16 billion.
The company’s malting business performed well thanks that growing craft beer demand, and an improved distribution network in the US where the craft brewery business is still growing faster than mainstream brewing.
Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 15% to $161 million, with the company selling 1.3 million tonnes of malting barley.
“GrainCorp Malt continues to perform well with strong demand for specialty products delivering high capacity utilisation. The business remains well positioned for key customer segments and has made good progress with the expansion of the Pocatello facility and its craft distribution network,” Mr Palmquist said in the statement.
But the tough dairy market and weakening sales of infant milk formula saw EBITDA in its oils business fall 16% to $61 million from $73 million in 2014-15.
The company’s storage business (silos and receivals centres) saw a 23% rise in EBITDA to $48 million from $43 million; the market business turned in an EBITDA of $3 million, up from the $2 million loss for the year before and the Allied Mills operation had an EBITDA of 410 million, up from $9 million.
“Over the past year our grains businesses have again had to contend with a smaller crop in eastern Australia, which means lower volumes and throughput for Storage & Logistics. This is part of the cyclical nature of this business and we are pleased with the work the team has done to reduce cost, manage take-or-pay rail costs and deliver greater efficiency.
“Marketing’s result was restricted by the combination of large global grain inventories and low ocean freight rates, reducing the competitiveness of Australian grain in many export destinations.
“It was a challenging year for GrainCorp Oils with a difficult combination of reduced crush margins and suppressed demand for key products, due to the weak Australasian dairy sector and volatile demand for infant formula in the broader region.
"However, the Liquid Terminals and Feeds businesses continued to perform strongly in Australia and the optimisation of the oilseed refining and packaging footprint should benefit Oils’ performance in FY17.
And looking into 2016-17, GrainCorp sees further improvement, with Australia tipped to produce a bumper wheat harvest off the back of good growing conditions.
GrainCorp said harvest had started at least three weeks later than usual and so far it has received 1.5 million tonnes of grain.
But the company said low grain prices (especially wheat because of bumper harvests around the globe) will continue to make grain exporting tough through the coming year.
GrainCorp shares eased 0.2% to $8.58.
