General News
24 November, 2024
GrainCorp profit sinks 75pc but growth plans afoot and share dividends lift
Last year's leaner harvest and tight oilseed margins take a toll.
Profits have tumbled 75 per cent to $62 million for east coast grain handling, trading and processing heavyweight, GrainCorp.
Last year's lean NSW and Queensland harvest and tighter export and oilseed crush margins took their toll during the 2023-24 trading period.
However, the grain, food processing and stockfeed business' balance sheet has still emerged in relatively robust health, enabling the company to explore more diversification options for its ports and feedlot services and continue with its bio-energy market ambitions.
It will also pay a special 10 cents a share dividend to shareholders, on top of a final 14c ordinary dividend.
By next month GrainCorp will have paid a total of 48c in 2023-24 dividends, plus capital returns from a 3.1m share buyback, all in all amounting to about $130m for the year.
The new season's harvest is also looking better, despite reduced Victorian expectations, including a 25pc smaller canola crop.
Managing director, Robert Spurway, said the year-on-year increase in the volume of grain available, notably from Queensland and much of NSW, improved export opportunities in 2025.
This year's eastern states' winter crop is forecast to yield about 28.8m tonnes, with a favourable, early start in northern regions already reflected in the 5.8m tonnes received at GrainCorp silos so far.
"However, market dynamics are expected to impact margins, with Australian grain exports competing against a relatively strong supply of grains and oilseeds globally," he warned while delivering the past year's trading results.
GrainCorp posted underlying earnings before interest tax, depreciation and amortisation of $268m, down from $565m the prior year, taking the $62m statutory profit down from last year's $250m.
Grain volumes handled, including receivables and outloadings, totalled 28m tonnes, down from 37.4m in 2022-23.
Export numbers were cut from 8.3m tonnes to 5.6m.
GrainCorp's agribusiness division EBITDA from grain handling and marketing activities totalled $162m compared with $351m the prior year.
The nutrition and energy division slipped from $202m to $134m.
However, after a big season in Victoria last year the company achieved a record oilseed crush of 540,000t, although crush margins narrowed in the second half as a big global soybean crop weakened prices and undermined canola oil demand.
The company has also confirmed cost pressures will force it to shut the New Zealand fats and oils food processing site in Auckland, following a review of its options after a run of poor-performing revenue years.
To help insulate itself from global grain market variability, GrainCorp beefed up its stockfeed processing activities in April, paying $35m to buy animal nutrition company, XF Australia to gain four manufacturing sites and closer ties with the expanding feedlot sector.
XF, the name behind brands such as Anipro liquid nutrition supplements and related advisory services, generated $6.5m in earnings in its first six months, ahead of budgeted expectations of $10m for a full year.
Mr Spurway said while a challenging dairy farming environment in NZ had eroded some livestock nutrition division earnings, high numbers of cattle on feedlot fuelled strong demand in Australia.
The acquisition of XF's Performance Feeds business complemented GrainCorp's canola meal sales and methane reduction stockfeed opportunities, which it was aligned with through its stake in the seaweed technology venture, FutureFeed.
"We'll continue to progress our strategy to expand our animal nutrition portfolio with similar, relatively small, acquisitions in that space when opportunities to grow emerge," he said.
"Our balance sheet, with a core cash balance of $337m, provides us with the flexibility to pursue growth opportunities and deliver strong shareholder returns."
The company was also growing revenue from handling non-grain bulk materials such as fertiliser, woodchips and cement, and prioritising pursuing more growth options to improve the product mix and revenue margins at its seven ports in Queensland, NSW and Victoria.
In the past four years port earnings diversification had lifted revenue from $26m to $36m.
Mr Spurway noted it took up to seven days to accumulate grain at port to load into a bulk carrier over a two-day period, which meant there were opportunities to better utilise the wharf berthing space loading or unloading other vessels.
GrainCorp continued to explore its plans to build significantly more canola crushing capacity in both eastern and Western Australia, after signing a memorandum of understanding with energy company, Ampol, and global fund manager, IFM Investors, to assess the feasibility of a domestic renewable fuel supply chain.
"We continue to engage with our MOU partners, industry participants and the Australian Government on establishing a low carbon liquid fuels supply chain," Mr Spurway said.
The company also started a business transformation program to modernise its accounting systems, lift efficiency and reduce business complexity, targeting earnings gains of up to $30m through the cycle once completed.