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CASTLE MALTING NEWS in partnership with www.e-malt.com Italian
13 May, 2021



Barley news Australia: GrainCorp upgrades full-year earnings and profit guidance

Almost a year to the day since China imposed crippling tariffs on barley imports from Australia, GrainCorp has upgraded its full-year earnings and profit guidance, The Australian Financial Review reported on May 13.

GrainCorp said the upgrade reflected strong margins due to high global demand for Australian grain and oilseeds, in another sign exporters have succeeded in finding markets outside China.

The company has been flat out loading ships with last year’s bumper crop and signs are good for another big harvest later this year.

Managing director Robert Spurway said GrainCorp had been focused on diversifying markets for several years – and not just as a response to the barley tariffs – because it was good business.

“What we have seen is that Australian grain remains competitively priced in most destination markets and that has created opportunities and, as a result of the tariffs, as you always do with tariffs when they are applied, a bit of disruption and dislocation to global trade but the underlying demand remains there,” he said.

“We are seeing that play out, and it’s also been good for pricing and margins.”

Wilsons Advisory head of research James Ferrier said there was buoyant global demand for grain and Australian grain was highly competitive in international markets.

“Our grain is priced well into export markets and that hasn’t been the case for a number of years because of the drought premium,” he said.

Mr Ferrier said barley was flowing into markets other than China a year on from the tariff hit.

“It is like a brick thrown into a bath tub. The market finds its own equilibrium and the world moves on,” he said.

GrainCorp reported underlying first-half earnings before interest, taxes, depreciation and amortisation of A$140 million, up from A$105 million for the same period last year.

Underlying net profit after tax was A$51 million, up from A$27 million, and the company declared a fully franked interim dividend of 8¢.

Mr Spurway said the first-half results included a A$70 million payment to its crop production insurer Aon.

On the other side of the coin, GrainCorp received $58 million from Aon after a poor harvest in 2019-20.

GrainCorp upgraded its full-year underlying EBITDA forecast to A$255 million-A$285 million, previously A$230 million-A$270 million, and underlying NPAT to A$80 million-A$105 million, previously A$60 million-A$85 million.

Mr Spurway said GrainCorp was pleased with the momentum across the business as the company’s share price jumped more than 6 per cent to A$5.49 in trading on May 13.

“There is good export demand, that extends well into fiscal 2022, supported by high levels of carry-out grain anticipated at the full year,” he said.

“Good sub-soil moisture across many parts of east coast Australia is also positive for current winter crop planting. We are looking forward to working with growers and preparing for the next harvest.”

GrainCorp expects to carry 3.5 million to 4.5 million tonnes of grain inventory into next financial year, which for the agribusiness starts on October 1. This is up from the previous forecast of 2.5 million-3.5 million tonnes.

Mr Ferrier said strong trading margins were a contributing factor in GrainCorp’s upgraded full-year guidance.

With GrainCorp now saying it expected to carry 3.5mt-4.5mt of inventory into 2021-22, he said there was every chance of an upgrade in analyst forecasts for next year.

Mr Spurway said on top of the strong export demand for grain, the processing side of the business was performing well.

“Global demand for vegetable oils remains elevated and this is supporting values across our oils portfolio, including canola oil and used cooking oil,” he said.

GrainCorp’s core debt was A$90 million at March 31, up from A$37 million at September 30, in line with seasonal working capital requirements.

China imposed tariffs of more than 80 per cent on Australian barley in May last year but exporters such as GrainCorp and west coast-based CBH have been successful in finding alternative markets in Asia, the Middle East and South America.

One hiccup for GrainCorp is that it has been unable to load ships as quickly as it hoped at the company’s seven port terminals on the east coast to meet customer demand.

It reduced full-year export volume guidance from 7.5 million-8.5 million tonnes to 7 million-8 million tonnes, with all port terminals bar two in Queensland operating at full capacity and booked out well into this year.

Heavy rain and flooding in parts of south Queensland and in NSW in March caused what Mr Spurway described as modest delays of only a day or two in ship loading.





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