Australia’s Agricultural Industry: A look at WOA, GNC, ELD

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Australia’s Agricultural Industry: A look at WOA, GNC, ELD

 Australia’s Agricultural Industry: A look at WOA, GNC, ELD

The COVID-19 pandemic has had a severe impact on the global economy and has led to the government all over the world taking several actions to tackle this unprecedented situation. Some of the measures taken by the governments include the provision of financial help for boosting the economy and implementing lockdowns to control the spread of the virus. The Australian economy is also facing a downturn due to complete lockdown in the country. As a recovery measure, the Australian federal government is providing support packages for assisting eligible employers in running their businesses.

DO READ: Opportunities Amid Crisis: Ramsay Health Care, Playing Critical Role in Response to COVID-19

The agriculture industry, which generates exports its products to several nations, including China, has been hit by the coronavirus outbreak as demand from these nations declined significantly. The recent tensions with China have led to the 2nd largest economy in the world levy a significant tariff on Australia’s barley exports and suspend the import of beef from 4 Australian players.

However, the agriculture sector comprises products that form a part of ‘essential products and services’, and thus, the recent negative impact is likely to be short-lived. Besides, the current situation also allows the industry to explore new markets and possibly reduce its dependence on a single economy.

GOOD READ: 5 Agricultural Stocks On ASX: Are There Any Opportunities?

With this backdrop, let us discuss three ASX-listed agriculture stocks- WOA, GNC and ELD.

Wide Open Agriculture’s Plant-based protein market

A regenerative food & farming company, Wide Open Agriculture Limited (ASX:WOA) is engaged in the development and marketing of delicious and healthy food through its farmland portfolio and Dirty Clean FoodTM brand. The Company is seeking robust, sustainable financial returns and is committed to developing a positive, measurable impact on the ecosystems and communities in it operates.

On 18 May 2020, the Company disclosed that it entered an option and licence contract with Curtin University for developing and marketing a proprietary plant-based lupin protein technology.

This agreement offers WOA with the opportunity to have an exclusive global licence covering the unique method for generating an innovative protein from Australian sweet lupin plants, its application as a food ingredient. With this agreement, the Company is permitted to develop as well as launch products to compete in numerous food categories.

Development plans under the agreement

Under the agreement, both WOA and Curtin University will begin to refine the novel technology’s production process to convert raw lupin into a viable protein source to produce high-quality food products.

Moreover, Wide Open Agriculture intends to manage the product development and testing of meat, egg, pasta, dairy and other analogues by using the lupin protein and this activity would be conducted in collaboration with Curtin and potentially an experienced consultant within the food sector where possible.

Source: Company's report

The Company disclosed that it is expected that initial sales would come from the markets of Australia, with the potential to distribute across the world or partner with global food leaders in plant-based protein development.

Industry investment: Lastly, there is growing investment from several food industry giants looking for exposure to this high growth industry. According to the Good Food Institute (GFI) in the previous two years, there was nearly US$13 billion investment has been done for the plant-based food business.

Source: Company's presentation

What is Australian Sweet Lupin?

Lupin is a great high protein legume (32-40%), with high protein digestibility and high fibre. It can be manufactured on low nutrient soils due to its ability to fix atmospheric nitrogen and is utilised for crop rotations by regenerative farmers. In Australia, the vast majority of sweet lupin (nearly more than 60%) is manufactured in Western Australia and has an average annual market of almost AU$200 million.

Stock Performance:

On 20 May 2020, WOA stock was trading at AU$0.275 (at 01:40 PM AEST), down by 8.333% compared to its previous close. The Company has a market cap of AU$21.17 million and ~70.58 million outstanding shares. The stock has delivered outstanding returns of 125.93% in the last three months and 96.77% in the previous six months.

GrainCorp Limited Reported Strong Results for First half of 2020

Australian agricultural company GrainCorp Limited (ASX:GNC) provides grain storage, handling along with the freight services on the east coast of Australia. The focus of the Company is for three grains- barley, wheat, and canola.

According to an ASX announcement dated on 14 May 2020, GrainCorp Limited updated the market with its results for the first half of the fiscal year 2020 (ended 31 March 2020) emphasising the financials and operational highlights-

On the operational front, Agribusiness of GNC gained profit from its new more flexible rail contracts and the first year of the Crop Production Contract, which included nearly AU$45 million net advantage.

On the financial front, GrainCorp recorded a profit after tax of nearly AU$388 million. The underlying net profit after tax (NPAT) and underlying EBITDA were reported to be about AU$55 million and AU$183 million, respectively, and both are significantly up on pcp.

Stock Performance:

On 20 May 2020, GNC stock was trading at AU$3.995 (at 01:40 PM AEST), up by 0.63% compared to its previous close. The Company has a market cap of AU$908.56 million and ~228.86 million outstanding shares. The stock has delivered positive returns of 6.00% in the last three months and 5.62% in the previous six months.

Rains Bring Advantages for Elders Limited

An Australian agribusiness player Elders Limited (ASX:ELD) is into the provision of the extensive range of services including rural services, financial planning, banking, real estate including trading of grain.

Elders Limited disclosed that it had generated reliable financial results for H12020 (ended 31 March 2020). A quick segment-wise performance in the half-year is presented in the image depicted below-

Source: Company's presentation

Financial Highlights:

  • Elders reported that during the first half all the divisions had performed well, and profit almost doubled to nearly AU$52 million.
  • The Company stated a robust performance from rural products with an increased gross margin due to recent winter crop, elevated sheep and cattle prices, and stable income in financial services and real estate. For 1H2020 underlying EBIT was reported to be nearly AU$52.8 million.

Highlights from Operational front:

  • Elders disclosed that due to the consecutive rainfalls in main cropping areas on Australia’s East Coast have had an encouraging effect on operational performance in the previous period. This has boosted the confidence of farmer and driving substantial demand for crop inputs.
  • Notably, the real estate has delivered improved outcome with increased sales turnover in most service offerings.
  • The outcomes were up from the agency services led by solid cattle and sheep prices, constant demand from substantial export markets, and constrained domestic supply.

Outlook for the remaining 2020:

Elders disclosed that the Company is on track for delivering a full year outcome in line with the consensus of analyst views of the EBIT in between AU$96.5-AU$112.9 million and NPAT in between AU$85.8-AU$102.9 million, subject to any future negative effect occurring from global volatility.

TO KNOW MORE, DO READ: Is the boom going to stay for Consumer Staples conglomerate- Elders?

Stock Performance:

On 20 May 2020, GNC stock was trading at AU$10.120 (at 01:40 PM AEST), down by 1.556% compared to its previous close. The Company has a market cap of AU$908.56 million and ~228.86 million outstanding shares. The stock has delivered impressive returns of 25.52% in the last three months and 56.23% in the previous six months.


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