GrainCorp’s Stock Tumbles As Company Announced Lower Earnings And Profit For FY18

The GrainCorp stock fell in early trade after the company announced 43% lower profit for Fiscal Year 2018, compared to previous corresponding period. This translates a downward shift in statutory NPAT from $125 million in FY17 to $71 million in FY18.

Earnings have also landed at lower levels but within the increased guidance range announced by the company. The decline in overall Group result is due to material decline in east coast Australian grain production and consequent impact on throughput exports and volumes.

However, GrainCorp’s Malt business has shown positive performance underpinned by the strong demand for malt and other brewing ingredients from distilleries as well as craft and conventional brewers. The growth in Malt business further reflects the significant contribution received from Grains’ international grain trading book and Bulk Liquid Terminals. As a result, GrainCorp reported FY18 underlying EBITDA of $269 million that is at the upper end of guidance range but well below the prior year’s earnings of $390 million, reflecting the heavy decline in grain exports.

Managing Director and Chief Executive Officer Mark Palmquist told that expanded plant in Idaho and Pocatello has substantially contributed to Malt’s second half performance.

Oils segment has achieved decent improvement in Foods, Bulk Liquid Terminals and Feeds but oilseed crush margins have been reportedly weak due to East Coast Australian (ECA) drought impacting oilseed supply and quality. However, high energy prices in Australia continue to impact both the Malt and Oils processing businesses of GrainCorp.

The Board of Directors have declared the fully franked final dividend of 8 cents per share, in addition to interim dividend of the same amount. This takes total FY18 dividend to 16 cps, in line with company’s dividend payout policy of 40-60% of full year underlying NPAT which was $71 million in FY18. Moreover, this final dividend of 8 cps is payable on 13 December 2018 to shareholders entitled to receive dividend as on the record date of 29 November 2018.

With the ongoing growth in demand for craft and Mexican style beers, GrainCorp’s outlook on Malt business remains positive for current year FY19. The Group expects to witness continued growth in distilling sector with strong demand for whisky. Further, the company has recently announced a significant expansion in its Scotland’ malting capacity for future growth in distilling demand.

Meanwhile, on the front of Grains business the company is undergoing tough cropping conditions due to large New South Wales and Queensland’s areas affected by drought. The company informed that as of 14 November 2018 GrainCorp’s network has received a total of 0.5 million metric tonnes, including 0.2mmt in transshipments. GrainCorp further said that since the domestic demand continues to secure supply, the company expects to see a negligible exportable surplus in Fiscal 2019.

On the news of decline in FY18 results, GrainCorp’s shares nosedived 4.046% to trade at $7.590 on 15 November 2018 (1:05 PM AEST). Over the past one year, the stock of GrainCorp Limited (ASX:GNC) has declined by 8.55%.

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