The boom conditions in rural Australia – especially the East Coast grain and oilseeds sectors – continued for GrainCorp which revealed an upgrade to full year earnings yesterday alongside a solid interim performance.
GrainCorp said it is shipping wheat and other commodities to global markets as fast as it can in response to strong demand, putting it on track for its second-best annual profit.
The company said that during the half it saw increased output and asset utilisation across several businesses. This included oilseed crush volumes, which were up 10% on 1H22, and bulk material volumes (including woodchips and cottonseed), which were up 15% on 1H22.
The company now expects to report full-year earnings before interest, tax, depreciation and amortisation of between $500 million and $560 million, from its February forecast of between $470 million and $530 million.
That’s after it delivered first half EBITDA of $383 million and net after tax profit of $200 million.
But despite the optimism, first half dividend was left unchanged at 24 cents a share but is again being paid in two parts – an unchanged ordinary payment of 12 cents per share and an unchanged special dividend of 10 cents a share. Both will be paid on July 20. Both are fully franked.
The shares jumped 10% by the close to end the day at $7.81.
According to CEO Robert Spurway it was a solid six months, as he explained in Thursday’s ASX statement.
“Both our business segments – Agribusiness and Processing – contributed to the strong performance, with outstanding operational execution and solid supply chain margins.”
“We saw good ongoing demand for Australian grain and oilseeds, and this was supported by a third bumper crop in east coast Australia (ECA).”
“Our teams worked well to move product to our customers, with a continued focus on supply chain efficiencies. We are benefiting from our extensive asset footprint and the operational capability of our teams.”
“GrainCorp’s export program ran at close to full capacity with 4.4mmt of grain and oilseeds exported during the half. Export supply chain margins remained solid, albeit not at the levels we experienced last year.”
Buried in the result was news of a possible major expansion in oilseeds processing.
The company said that in line with its focus on growth opportunities within the agri-energy sector, it is doing preliminary assessments for the creation of new oilseed crush capacity.
“Any increase in oilseed crushing capacity will provide GrainCorp the opportunity to build on its strategic position as a leading supplier of renewable fuel feedstocks, including vegetable oils, used cooking oil (UCO), and tallow.
“As Australasia’s largest exporter of tallow and UCO, and Australia’s largest crusher and processor of oilseeds, GrainCorp is well positioned to play a substantial role in the growing demand for renewable fuel feedstocks,” Mr Spurway said.
The company explained the upgraded EBITDA forecast as being due to a number of positives;
These include: an increase in oilseed crush capacity, from 460,000 tonnes to 500,000 tonnes; an increase in oilseed crush margins, driven by higher demand for oil for food and renewable fuels; an increase in margins for renewable fuel feedstocks; the significant operating leverage GrainCorp has demonstrated in large ECA crop years (East Coast Australia), combined with cash flow support from Crop Production Contract in drought years; and an increase in interest on commodity funding, which is reflected in higher net interest and passed through in cost of inventory.
