GrainCorp saw a $456 million turnaround from loss to profit in the year to September as the breaking of the drought and higher demand and prices for rural products boosted returns.
As a result, the company will pay its first dividend to shareholders since late 2018 when the drought started whacking the company’s finances, forcing it to sell its malting business.
The 7 cents a share is one cent a share less than the 8 cents a share final paid in late 2018.
Chances are that will be followed by an interim next year, which, if paid, would also be the first since 2018 when an 8 cents a share payment was also made.
GrainCorp told the ASX on Thursday it earned a statutory net profit of $343 million for the 2019-20 financial year – a result boosted by profits generated from asset sales and the demerger of its malt business and a new insurance style contract that generates money in weaker grain harvests.
The statutory net profit was $456 million better than the $113 million statutory loss in 2018-19.
The bulk grain handler and exporter reported a 3.6% rise in revenue to $3.66 billion for the year tog September 30, which was much higher than market estimates of $3.32 billion.
GrainCorp CEO Robert Spurway said the results were also lifted by a better performance by its east coast grains business (after drought-breaking rains and higher plantings) and stronger margins and volumes delivered by its oilseed crush operations.
Early this year GrainCorp completed the demerger of its malting operations, with this business now trading on the ASX as United Malt Group.
The company also completed the sale of its Bulk Liquids Terminals business for $333 million.
GrainCorp also received $58 million of payments thanks to its crop production contract, because of the drought-hit 2019 harvest.
Combined, the impact of these factors help push GrainCorp from an underlying loss for continuing operations of $16 million, to an overall $343 million statutory profit.
“GrainCorp reported a substantially improved financial performance in financial year 2020, despite a third year of drought. We are delivering on our operational initiatives and these are providing more consistent and stable earnings for the business,” Mr. Spurway said.
GrainCorp shares opened up more than 5% on the results and dividend news and an encouraging outlook but eased over the session to end down 1% at $3.95.
Directors said they expect the company to see “growth in earnings in FY21 due to the anticipated larger ECA (East Coast Australia) winter crop and the ongoing benefits from recent operating initiatives.
“In Agribusiness, improved growing conditions and current grain receival year to date, indicate a very strong 2020/21 winter crop, similar in size to the FY17 harvest (subject to ongoing weather conditions and other variables).
“In Processing, the expected increased supply of Canola seed will continue to support strong oilseed crush margins, partially offset by reduced meal values. GrainCorp expects trading conditions in the Foods sector to remain highly competitive.”
