Dry Outlook Dents GrainCorp
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Grains handler and maltster GrainCorp’s shares fell nearly 5% yesterday despite the company reporting a quadrupling of full-year profit and a sharp rise in dividend.
Investors were more upset by the weak outlook than the news of a large grain harvest and higher export volumes for the year to September.
GrainCorp’s net profit for the year to September 30 lifted to $125.2 million, from $31 million a year earlier.
Final dividend was set at 15 cents a share (up frm 3.5 cents), taking total payout for the year to 30 cents, nearly triple the previous year’s 11 cents a share. And yet the shares fell 4.9% to $8.13.
GrainCorp says the crop in the current financial year is expected to be substantially smaller in eastern
Australia, with production skewed to Victoria and southern NSW, and resulting in a below-average exportable surplus.
(That’s understandable given the long dry winter and early spring across much of central and northern NSW and in the grain growing areas of Central Queensland).
GrainCorp chief executive Mark Palmquist says GrainCorp benefited from a near-record crop in eastern Australia and another good performance by GrainCorp Malt.
"Across our grains businesses, we benefited from increased storage, handling and merchandising opportunities, aided by the large harvest," Mr Palmquist said in a statement on Tuesday.
“We successfully executed a large grain export program despite persistently high global crop supplies and depressed grain prices, which continued to be a headwind for Australian growers."
“Across our grains businesses, we benefited from increased storage, handling and merchandising opportunities aided by the large harvest. We successfully executed a large grain export program despite persistently high global crop supplies and depressed grain prices, which continued to be a headwind for Australian growers.
“Malt delivered another good result, with earnings consistent year - on - year despite an unfavourable foreign exchange impact from the higher Australian dollar and reduced revenue following the sale of our German malt plants. GrainCorp Malt continued to operate at high capacity utilisation with strong demand for specialty products.
“The Foods business within GrainCorp Oils is facing a number of challenges, with margin compression and prolonged process in capturing efficiency improvements at our plant in West Footscray. We have taken significant steps to reshape this business including removing costs and combining the Foods and Oilseeds businesses to simplify the operating structure and increase efficiencies.
Mr Palmquist said 2018 will be a challenging year for the GrainCorp's grains business but the company had made significant progress on improving network efficiency and controlling costs.
Mr Palmquist also said that rising energy costs continue to be a serious challenge for the long-term sustainability of food and malt processing in Australia.
He said GrainCorp is evaluating various energy efficiency and alternative generation options to mitigate volatile energy prices.
"This is important to remain internationally competitive," he added.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.