There’s nothing like a good grain harvest to juice up the revenue and profit performance of Eastern Australia’s biggest grains handler GrainCorp (GNC), as yesterday’s tripling in interim profit and doubling of dividend confirms.
GrainCorp reported an interim net profit of $90 million, up from $20.4 million a year ago as earnings before interest, tax, depreciation and amortisation soared to $236 million, up from $134 million a year ago.
Underlying interim profit was $100 million, up from $32 million a year ago. As a result interim payout to shareholders was doubled to 15 cents a share from 7.5 cents. The company expects that “its full year dividend will be 40-60% of underlying NPAT, in line with the Company’s policy.”
That helped the shares close more than 8% higher at $9.88.
GrainCorp said its performance was boosted by a record wheat harvest during the 2016-17 season, supporting the company’s storage and handling segment as well as its trading arm.
Australian wheat production totalled 35.13 million tonnes last year, topping the previous record set in the 2011-12 season.
“GrainCorp’s strong first-half performance benefited from the large Australian grain harvest and higher export volumes, combined with our intense focus on improving network efficiency and managing costs,” chief executive Mark Palmquist said in yesterday’s statement.
“Our storage and logistics team performed very well in response to the significant challenges of the record harvest and compressed export program." “Following harvest, our grains businesses and the broader industry are contending with significant supply chain disruptions, due to an extended industrial dispute affecting our Victorian rail provider and earlier bad weather. Nonetheless, it is pleasing to see a stronger result from GrainCorp Marketing which has also benefited from increased exports from the east coast and Western Australia.
Mr Palmquist said GrainCorp was in a very favourable strategic position, having nearly completed its major capital works projects. “In addition, strong volumes and cashflow, combined with the sale of Allied Mills and a German malt house, provides balance sheet flexibility that will allow us to consider growth options in line with our strategic priorities,” Mr Palmquist said.
“GrainCorp Malt has continued to perform strongly, despite an unfavourable foreign exchange impact. We expect the expansion of our malt plant in Pocatello, Idaho to come online in July this year, which will more than double available capacity at the site. The group is also improving its sales mix with a focus on higher margin products.”
