Australia: GrainCorp predicts better overall results this year, malt business performing strongly

The carryover from last year's bumper wheat crop is pushing grains handler GrainCorp to a better result this year despite receiving less grain.

GrainCorp, whose financial year runs from the start of October, predicted on February, 16 it would return a net profit of A$165 million-A$185 mln compared with last year's result of A$172 mln.

The company also expects earnings before interest, tax, depreciation and amortisation of A$350 mln - A$380 mln this year, up from A$349.6 mln last year.

These forecasts have been made despite the company receiving 1.5-2.5 million tonnes of grain less than last year. One of the main reasons for this is that the company had six million tonnes of grain in the silos at the start of this financial year, well up from the usual three million tonnes.

This meant GrainCorp's first financial quarter saw more exports than usual as the company worked through the backlog.

While GrainCorp expects to receive somewhere between 11.5-12.5 million tonnes of grain this year - down from the 14 million received in 2011 - it expects to export 8.8-8.9 million tonnes this year, up from 8.1 million tonnes last year.

Another contributing factor is the better quality of this year's harvest, as last year's good season has mostly continued, leading to better quality grain, which benefits GrainCorp's marketing arm.

Chief executive Alison Watkins said: "We are confident we should deliver a year that is somewhere in the order of the year we had, the extraordinary year we had, in 2011."

Ms Watkins said GrainCorp’s malt business is performing strongly, despite continued challenging market conditions. Additional value has been captured over the last few months through production efficiencies and global barley procurement.

“Despite the challenging conditions, our malt business has committed sales to date of 1.25 million tonnes – a testament to the customer proposition offered by our global network,” Ms Watkins said.

GrainCorp purchased a malt business in Germany last year, which it hopes to use to gain entry to the European beer market, and Ms Watkins said that there were some improvements in this business, with 1.3 million tonnes projected to be sold, up from 1.1 million tonnes.

"We still see the industry as being difficult and going through a period of rationalisation. However, we still believe our competitive position is very sound," she said.

17 February, 2012