Two consecutive ‘bumper crops’ see GrainCorp’s earnings and profit more than double

Two consecutive ‘bumper crops’ see GrainCorp’s earnings and profit more than double

Australian agribusiness and grain processor GrainCorp (AX: GNC) has seen its earnings and profit more than double during FY22, buoyed by two consecutive ‘bumper crops’ and a skyrocketing wheat price due to the conflict in Ukraine. 

The company saw its earnings before interest, tax, depreciation and amortisation rise to $703 million in the 12 months to 30 September 2022, up from $331 million in the prior corresponding period.

Likewise, net profits after tax rose from $139 million in FY21 to $380 million in the latest financial year.

GrainCorp managing director and CEO Robert Spurway said the record results reflected the quality of the business, which operates an end-to-end supply chain for grains and oilseeds.

He also said the results were achieved despite supply chain challenges, disruptive weather events and the ongoing impacts of COVID-19.

Russian President Vladimir Putin's invasion of Ukraine also proved to be an opportunity for GrainCorp to satisfy global demand for wheat stock, which was at its lowest levels in two decades in large part due to ongoing hostilities resulting in disruptions to grain exports out of the Black Sea region.

The company also undoubtably benefited from the rising price of wheat, which is currently up more than 15 per cent since the beginning of 2022, but hit major highs during March and May, up by around half at their peak.

“Each of our business segments recorded an increase in activity and volumes, with more grain handled and exported, higher oilseed crush volumes and stronger foods sales,” Spurway said.

“Our teams worked hard to navigate supply chain challenges and continue delivering for our customers, while effectively managing costs and broader inflationary pressures.

“Despite these challenges, global demand for Australian grain, oilseeds and vegetable oils remained strong throughout FY22 after two consecutive bumper crops in east coast Australia.”

On a segmentary basis, the company’s agribusiness saw earnings rise by 127 per cent to $624 million, reflecting an increase in total grain handled (41.1 million metric tonnes (mmt) in FY22 compared to 34.4mmt in FY21).

“We operated our ports at close to full capacity in FY22, exporting 9.2mmt of grain and oilseeds to international markets,” Spurway said.

The company’s international agribusiness also performed well according to GrainCorp, which benefitted from healthy export margins from Western Australia. In total, 9.2 million tonnes of grain was exported, up from 7.9 million the year prior.

In addition, the company’s fats and oils businesses performed strongly amidst high global demand for renewable fuel feedstocks, including used cooking oil.

Earnings from the company’s processing arm rose by 63 per cent to $127 million, driven by strong oilseed crush margins and higher volumes at the company’s Numurkah crush plant in Victoria.

The company says crush margins were supported by strong demand for vegetable oils, arising from global production challenges in canola and soybean, disruption of supply out of the Black Sea region, and growing markets in renewable feedstocks.

GrainCorp closed out September with a core cash balance of $177 million - a significant rise from the $1 million in core debt the company held at the end of FY21.

While the agribusiness is anticipating yet another well above-average crop in the 2022/23 harvest, Spurway said he was concerned about ongoing weather events like the above-average rainfall across the east coast.

“Recent heavy rainfall across large parts of ECA has delayed the harvest by several weeks and continues to present challenges for growers, their communities and local businesses,” Spurway said.

“We are working closely with growers to support them in light of the logistical challenges presented by the weather events, and to help maximise the value of their harvest.

“While flooding will impact both yield and quality in parts of ECA, we have a high level of grain inventory in our network, and we expect a large export program to continue throughout FY23.”

The CEO added that while the ‘exceptional margins’ achieved in the first half moderated in the second half as supply improved in the Northern hemisphere, domestic and global demand for feed and milling grades remained strong.

“Oilseed crush margins are expected to remain favourable, and we are well positioned to continue operating our crushing facilities at high utilisation,” Spurway said.

“Overall, GrainCorp is well positioned for the new financial year, with our businesses performing well, a strong balance sheet and pipeline of growth opportunities.”

Shares in GNC are down 3 per cent to $7.75 per share at 11.08am AEDT.

Elders profit rises, CEO departs

GrainCorp’s results come two days after one of Australia’s largest agricultural lenders and rural services providers Elders (ASX: ELD) released its full year results for the 12 months to 30 September, demonstrating a rise in underlying profit before tax to $223.5 million.

However, the company saw its shares dive after announcing the departure of Elders’ long-term CEO Mark Allison, who has been with the company for a decade, as well as an ‘uncertain’ outlook for FY23 due to recent extreme weather events.

Elders’ sales revenue rose by 35 per cent in the full year to $3.45 billion, while earnings rose by 39 per cent to $232.1 million.

"Elders’ performance this year reflects a continued commitment to improvement and growth in accordance with our Eight Point Plan, which allowed us to leverage excellent seasonal and market conditions," said outgoing CEO Allison.

"The business has performed remarkably well, making tremendous progress on its strategic ambitions and contributing to a thriving agriculture sector."

In terms of the company’s outlook for FY23, high demand for agricultural commodities is expected to create ‘favourable’ trading conditions in the first half, but heavy rainfall across the nation’s east is cause for concern according to Elders.

“Recent extreme rainfall events across the eastern states have created some uncertainty in affected cropping regions and concern about reaching full harvest potential for both summer and winter crops,” Elders said.

“The Rural Products outlook remains positive, with high demand particularly for agricultural chemicals, fertiliser and seed. However, the agricultural industry will await assessment of the full impact of the extreme wet conditions and flood events to realign expectations for the FY23 season.”

Record earnings for Nufarm

Also in the agricultural space, Nufarm (ASX: NUF) today reported record earnings and forecast a positive outlook for FY23.

The company saw underlying EBITDA rise by 24 per cent to $447 million on revenue of $3.8 billion, while statutory NPAT rose by 65 per cent to $107.4 million.

The company’s CEO said the result reflected the hard work Nufarm had done over recent years to reset the business.

“Favourable seasonal conditions and attractive soft commodity prices generated strong demand for our seeds and crop protection products. Our seeds business continued to increase earnings as a result of strategic investments in innovative technologies,” CEO Greg Hunt said.

“Conditions remain favourable as we enter into the FY23 financial year and we are on track to meet or exceed our FY26 revenue aspirations.”

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