News
27.11.2009
Australia's Graincorp returns to profitability
Grains handler and marketer GrainCorp Ltd (ASX:GNC) has warned of lower grain receivals in Australia in fiscal 2010 as the drought continues to affect the agricultural sector, particularly in New South Wales.
GrainCorp on Wednesday booked a net profit for fiscal 2009 of $A63.2 million (US$58.07 million), which was a turnaround from the previous year loss of $19.9 million and just above the upper end of it forecast range.
The return to profit allowed Sydney-based GrainCorp to pay a final dividend of 7.27 cents per share for the year, after scrapping its first half payout, as it trebled earnings before interest, tax, depreciation and amortisation (EBITDA) to $165.2 million,
The company benefited from a recovery in grain production in some areas, higher grain receivals, favourable seasonal conditions and an increase in bulk wheat and sorghum exports.
Grain receivals totalled 10.7 million tonnes during fiscal 2009, with 5.2 million tonnes of grain exports handled and 1.3 million tonnes in bulk wheat exports.
"In terms of an outlook for this harvest, we've received just over 4.5 million tonnes into our country system, and we estimate we'll receive between eight and nine million tonnes of winter and summer grains for the full financial year," GrainCorp managing director Mark Irwin told reporters.
"So that's a reduction from last year, and in our view it demonstrates the impact of continued drought conditions in eastern Australia, and sadly, particularly southern New South Wales.
"On that basis we are expecting to elevate, or put through our ports, somewhere between three and four million tonnes of export grain for customers and between 0.9 and 1.4 million tonnes of non-grain exports."
Mr Irwin said GrainCorp would provide guidance on its profit outlook for 2010 at its annual general meeting in February, while signalling that he expected annual earnings to remain in the black.
Meanwhile, GrainCorp is reviewing its merchandise business after a difficult year due to lower prices for fertiliser and farm chemicals, with a decision to be made before Christmas. The merchandise operations reported an EBIT loss of $23 million for fiscal 2009.
Mr Irwin said the fertiliser and farm chemicals sector had seen "a lot of blood on the walls for multi-parties".
"I think merchandise trading conditions will remain tough," he added.
In fiscal 2010, GrainCorp will focus in 2010 on integrating the world's fourth largest commercial malt manufacturer, United Malt Holdings (UMH), which it acquired in October for $757 million.
GrainCorp expects the malt business to generate 43 per cent of the merged entity's EBITDA.
"We've really got to focus on this business for the next couple of years - our primary focus," Mr Irwin said.
In relation to demand from overseas for Australian wheat, Mr Irwin said there was a very large global crop at the moment, which meant buyers had a lot of choice and were very discerning.
However, GrainCorp's focus was on high-protein wheat from Australia's east coast, which was still in demand from global millers and noodle manufacturers.
But Mr Irwin said the current year would be more challenging for Australian wheat exporters generally as a result of the bigger global crop and the high value of the Australian dollar.
GrainCorp's revenue for the 12 months to September 30, 2009 lifted 12.8 per cent to $1.73 billion.
GrainCorp shares closed down seven cents, or 1.1 per cent, at $6.29 on Wednesday.
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