SYDNEY, AUSTRALIA – Nearly two years into his tenure as the managing director and chief executive officer of GrainCorp, Robert Spurway believes that a key to survival in the hyper-competitive grain industry is embracing technological advances that benefit not only the Australian-based company but its customers.
In an interview with World Grain in November, Spurway offered numerous examples of how being on ag-technology’s cutting edge is making GrainCorp, which has partnered with growers and producers Down Under for more than a century, more efficient and customer-centric.
Spurway said this customer and grower-centric approach is central to the recent success of GrainCorp, which has seen a significant turnaround in its net promoter score (for growers) of -29 a few years ago to +30 in the 2020-21 financial year. A net promoter score is used to gauge customer satisfaction.
Among the technological developments is GrainCorp’s 15% stake in Australian ag-tech company, Hone, which has developed a handheld device that growers can use to sample their grain in the paddock. Spurway said it’s a natural investment as the two businesses have worked closely together in recent years to develop the technology.
The device makes use of GrainCorp’s historic grain quality and varietal data to give the grower an instant readout on their grain quality.
“Hone is an excellent example of prudent investment,” Spurway explained, adding that it has significant potential outside the grain industry.
“Our 15% stake in Hone allows GrainCorp to take advantage of other opportunities in viticulture, and other horticultural industries,” Spurway said.
However, he is most excited by the opportunity it presents in measuring carbon levels in the soil.
“There are huge opportunities for agriculture and farmers to take advantage of the carbon market,” Spurway said. “The Hone technology is one of a portfolio of projects being worked on that deliver on sustainability and business growth.”
Internally, GrainCorp’s digital platform, Crop Connect, now has 12,000 growers who use it to see how much grain they have in storage, to sell it, and to execute other transactions all from their smartphones. Spurway said CropConnect facilitated the company’s COVID-19 safe contactless deliveries that happened in 2020 and 2021, and will again this year.
He said the company was fortunate it was labeled “an essential business,” which allowed it to continue operating during the COVID-19 pandemic. CropConnect’s functionality meant growers and company employees working on site could stay safe while at the same time cutting down on turnaround times.
When talking about CropConnect, Spurway noted the company has incorporated its product, Croptimiser, into the platform which allows growers to upgrade a lower quality load to reflect the average quality of other loads delivered that harvest.
“It brings a financial benefit for the grower, and is available through CropConnect,” Spurway said.
Outside of the ag-tech space, Spurway spoke with enthusiasm about the potential of plant-based proteins and the opportunity they present GrainCorp’s edible oils business.
“It’s a big global opportunity for GrainCorp,” Spurway said. “The proteins and isolates used to make plant-based proteins are a space the company already operates in.”
Considering GrainCorp handles much of the raw ingredients touted for use in the production of plant-based sausages and patties, it makes sense. Spurway said the process of extracting the protein is similar to that already carried out by GrainCorp Oils in producing canola oil.
While it’s unlikely you’ll see a GrainCorp-branded sausage in the supermarket, Spurway said the company is working with the Australian science agency, CSIRO, and others to explore how the company could get into the global market.
The retail of the product will be left to other businesses GrainCrop partners with that have expertise in this area.
Spurway is an agile operator who seeks the opportunities that make sense for GrainCorp without straying too far from what it knows and does best. A review of the company’s financial results for the 2020-21 fiscal year shows his influence on GrainCorp’s priorities.
Among them are to lift returns, leverage capabilities and drive existing assets, priorities that are paying off as the company has more than doubled its 2017 EBIDTA (another bumper-crop year) in its results released this year.
The company, which had an EBITDA of $331 million during the 2020-21 fiscal year, attributes this strong performance to its capital investment, completion of operating initiatives, and a highly efficient supply chain.
It also pointed out there is strong global demand for Australian grain, oilseeds and vegetable oils.
Among its operating initiatives, GrainCorp stated at its annual general meeting that it had improved its stock management, reduced operating costs with a more efficient out-load program and was able to make improvements to rail performance.
Spurway joined GrainCorp in March 2020 from New Zealand dairy giant Fonterra, assuming the company’s leadership from Mark Palmquist, who now heads United Malt, which was spun off by GrainCorp in 2020. Spurway’s tenure at GrainCorp has been challenging, joining at the tail end of significant drought in eastern Australia and at the start of the global pandemic.
Coming from the world of dairy, Spurway brings a fresh set of eyes and ideas to the grains and livestock feed business.
When asked about the peaks and valleys the company traditionally has faced, Spurway said GrainCorp has been working hard to reduce volatility. As an example, he said two years ago GrainCorp took out a crop production contract where the company was paid up to $70 million in a poor year by its insurer, a figure paid back in a good year like 2020, which featured a bumper harvest.
“Looking at our results and how much they’ve improved since the last bumper harvest, you can see there has been a real turnaround in the business,” Spurway said. “We can pay the $70 million comfortably and still achieve very strong results.”
He added that the company achieved an 11% return on invested capital in its most recent quarterly results due to driving the assets harder.
Also, two years ago, GrainCorp negotiated new rail contracts, transitioning from the take-or-pay provision to those that are variable. Spurway said this gave the company’s rail partners an incentive to perform and lower overall costs. .
While the company sold its malting operations, Spurway said its processing businesses, like GrainCorp Oils, were performing strongly, picking up new customers and increasing volumes through its crushing assets by 8%.
Spurway said among the company’s employees there was enthusiasm to drive the business into the future, particularly those areas with the most potential.
“The company has a clear strategy and is setting itself up for a brighter future,” Spurway said.
He said GrainCorp was committed to a $40 million uplift on cycle earnings assisted by improvements on its international operations such as its Canadian operation, GrainsConnect.
And while grain will remain a core business, Spurway said GrainCorp will look to increase its involvement with non-grain bulk products like woodchips, mineral sands and cement, when the company has spare capacity to do so, such as during droughts.
“Our recent results show our strong delivery on diversification and clear financial commitments on how the financial results will be driving over the next three years,” Spurway said, adding the company would seek out new opportunities in areas of strength.
Among these opportunities are GrainCorp Feeds Australia, its livestock feed and supplement business. Within its product range is its investment in Future Feeds that includes a supplement containing a seaweed extract (asparagopsis) that reduces methane by 80% when fed to livestock.
Commitment to sustainability
Spurway said he was excited about where GrainCorp could take Future Feeds, and that it also fit within the company’s sustainability commitment.
“GrainCorp is committed to net-zero by 2050,” Spurway said. “We view it as a huge opportunity not only for us but for Australia and agriculture.
“GrainCorp has released its 2021 Sustainability Report, which outlines our sustainability plans. We will be making more announcements for even more ambitious targets over the next two to three years to make a difference.”
He said the report will set up the company for future success while benefiting the world.
Reflecting on the 2021 harvest outlook, Spurway said the company was expecting a bumper crop coming into the network.
“ABARES estimates 26.5 million tonnes has been received so far (as of November 2021), higher than this time last year, which was a bumper crop,” Spurway said. “Queensland is complete, with the other states well underway with growers quickly harvesting to make use of good conditions.”
Since the interview, however, significant rain has fallen across central-western New South Wales causing floods and some crop losses.
As he mentioned during his appearance in the AGIC 2021 CEO Panel, the company has invested in an additional 1 million tonnes of storage as a sign of GrainCorp’s commitment to growers.
“We’ve also opened up flex sites of another half-million tonnes of storage, so we can do our very best to meet the needs of growers for a second big year in a row,” Spurway said.
Referring to the 2020 harvest, Spurway said the company had done an excellent job moving the bumper crop and selling it both domestically and internationally, with just under 8 million tonnes being exported. Adding to this, Spurway said the company had 4.3 million tonnes of carry-in, which he said is great for GrainCorp’s customers.As of late November, ABARES projected the total 2021 Australian winter grain harvest to reach 58.4 million tonnes, which is 5% higher than last year’s record crop.