Australia: GrainCorp's malting barley business performs strongly due to US demand for craft beer

GrainCorp's profits have surged off the back of last year's record-breaking grain crop and strong United States demand for craft beer, ABC Online reported on November 21.

The Australian Stock Exchange-listed company said revenue surged as huge stocks of grain moved through its storage, handling and export facilities.

The east-coast grain handler's profits more than doubled, from A$53 million last year to A$142 million by September 30, 2017.

GrainCorp's malting barley business has been a strong performer recently, and continued growth in the craft beer market saw that success continue this year.

"To produce a barrel of an IPA takes anywhere between two or three times the amount of malt that would go into a standard light pilsner" chief executive officer (CEO) Mark Palmquist said.

"It's not just the increased consumption of beer, but the added use of malt to produce these types of craft beers," he said.

The company is eyeing Scotland as the next big source of malt demand.

"That market is changing from a blended scotch whiskey to a single malt, paralleling the craft beer market.

"That is even if the consumption isn't going up — the single malt uses 100 per cent malt inside of the product, whereas blended products will use other carbohydrates like wheat and corn."

The company invested heavily into its oils business in 2014, citing rising demand for canola oil from food manufacturers.

But it said the performance of the business was "disappointing", and the payoff from upgrading its Melbourne refinery was not what they had hoped for.

Selling this year's crop overseas will be increasingly difficult, as Australia's smaller crop will face steep competition from bumper harvests around the Black Sea and Russia.

It is a trend GrainCorp expects to continue, so it is thinking hard about how to keep Australia's offering competitive in the future.

"We have to continue to keep getting supply chain costs down in Australia.

"That's a combination of lower transport costs and making facilities more efficient.

"We also have to stay at the premium end of the market, making sure we're doing everything we can to produce that, and capture the premium from it," he said.

20 November, 2017