Awkward market and supply headwinds have dented GrainCorp’s half-year earnings result, with the company reporting a net profit after tax (NPAT), of $32 million, down from $35m last year.
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The big eastern states grain logistics, marketing and processing business has written down about $12m in significant items to post a statutory NPAT of $20m.
It recorded earnings before interest, tax, depreciation and amortisation of $134m - just under last year’s $136m.
The company has declared an interim dividend of 7.5 cents per share, representing a payout ratio of 53 per cent of underlying NPAT.
Managing director, Mark Palmquist, described the profit result as consistent with the earnings guidance provided in February.
Global trading conditions continued to weigh on the Australian grains sector, particularly affecting oilseed crush margins and grain exports from the eastern states.
“It has been a challenging half for GrainCorp Oils, which experienced lower crush margins due to high European demand for canola seed off a smaller crop, resulting in tighter supply and higher procurement costs,” he said.
Ongoing weakness in the New Zealand dairy sector also reduced feeds and liquid terminal earnings across the Tasman.
“We expect all these cyclical factors to improve over time,” he said.
New oilseed refining and packaging infrastructure in Victoria would bring significant efficiencies and a modest uplift to earnings in the second half.
Grain storage and logistics operations had been affected by lower grain carry over and movement to export, compounded by take-or-pay rail costs.
A delayed grain export program from eastern Australia also reduced port elevations for the half.
“We are pleased to report solid progress on our major capital projects, such as the significant expansion of our Brisbane bulk liquid storage capability,” Mr Palmquist said.
“These projects will embed improved performance across our businesses as they are brought online.
“GrainCorp Malt continues to perform well, due to the numerous operational efficiency projects we have been working on for some time now, as well as strong demand for specialty products.
“The expansion of our Pocatello facility in Idaho (US) is well progressed and we expect it to be operational in mid-calendar year 2017.
“GrainCorp Marketing performed well considering the subdued market and relatively expensive price of eastern Australian grain in global markets for much of the half.
“It has been particularly pleasing to see good contributions come from our alternative origination desks in Western Australia, South Australia, Calgary and Hamburg.”
Mr Palmquist noted some good sowing rains reported in many grain growing areas in the past week or two in eastern Australia, after an extended dry and warm early autumn.
While there was a long way to go, the rain was “very welcome at this point in the production cycle” he said.
