GrainCorp
Mark Palmquist, managing director and chief executive officer.
 
WEST PERTH, AUSTRALIA — A diversified business model allowed GrainCorp to deliver a solid performance in the face of some significant challenges, said Mark Palmquist, managing director and chief executive officer. The company’s earnings before interest, tax, depreciation and amortization (EBITDA) for the 2016 fiscal year ended Sept. 30 was A$256 million ($191.394 million), up 8.9% from A$235 million in the same period of last year.

“These challenges have largely affected the grains and oils businesses, however they have been partially offset by another strong performance from GrainCorp Malt,” Palmquist said, when earnings were released on Nov. 16.

GrainCorp’s Oil segment EBITDA for 2016 was A$61 million, down 16.4% compared to A$73 million in the previous year. The segment was impacted by weaker global crush margins, tighter supply and increased oilseed cost. Oilseeds sales volume for 2016 was 0.33 million tonnes, down slightly from 0.34 million tonnes in the same period last year.

“It was a challenging year for GrainCorp Oils with a difficult combination of reduced crush margins and suppressed demand for key products, due to the weak Australasian dairy sector and volatile demand for infant formula in the broader region,” Palmquist said. “However, the liquid terminals and feeds businesses continued to perform strongly in Australia and the optimization of the oilseed refining and packaging footprint should benefit oils’ performance in fiscal year 2017.”

Storage & Logistics segment EBITDA for fiscal year 2016 was A$48 million, up 11.6% compared to A$43 million in the previous year. Grain throughput was 11.6 million tonnes, down slightly from 12 million tonnes in the same period of last year. Earnings were supported by storage revenue with delayed export program and cost management.

“Over the past year our grains businesses have again had to contend with a smaller crop in eastern Australia, which means lower volumes and throughput for storage and lLogistics,” Palmquist said. “This is part of the cyclical nature of this business, and we are pleased with the work the team has done to reduce cost, manage take-or-pay rail costs and deliver greater efficiency.”

In August, GrainCorp received
funding for rail upgrades from Australia’s New South Wales government. The government said it will provide up to A$6 million funding from its Fixing the Country Rail program to GrainCorp for rail upgrades. The program funds rail infrastructure enhancement projects that eliminate connectivity constraints on the NSW regional rail network and reduce the cost to market for regional businesses.

The Allied Mills segment’s EBITDA was A$26 million, up slightly from A$25 million in the same period of last year. The segment’s performance benefited from value-add product initiatives, the company said.

The Malt segment EBITDA was A$161 million, up 15% from A$140 million in the same period of last year. Strategic initiatives successful in driving operational improvements from energy and water usage, water reduction and labor efficiency. The company expanded its distribution network, servicing craft beer, to 11 warehouses from 7 in North America. Expansion of its malt plant in Pocatello, Idaho, U.S., is on track to be completed mid-2017.

“GrainCorp Malt continues to perform well with strong demand for specialty products delivering high capacity utilization,” Palmquist said. “The business remains well positioned for key customer segments and has made good progress with the expansion of the Pocatello facility and its craft distribution network.”

Palmquist said GrainCorp remained firmly focused on improving underlying performance through successful execution of the strategic capital projects across the business.

“We have successfully delivered many of these projects over the past 12 months, including the new bulk liquid terminal capacity in Brisbane and Project Regeneration rail improvements for our storage and logistics network,” Palmquist said. “The oils footprint optimization was also largely completed during the year, however the commissioning phase was protracted to accommodate the relocation and approval processes for over 140 individual food product lines.”

As of Nov. 15, GrainCorp said it had received approximately 1.5 million tonnes into its network.

“While this year’s larger crop is welcome, harvest is at least three weeks late this year and there is a long way to go before it is all stripped and in the bin,” Palmquist said. “We are expecting a return to a stronger year in fiscal year 2017, driven by larger volumes and the operational efficiencies delivered in storage and logistics over the past two years, partially offset by new port competition. Conditions are likely to remain challenging for marketing, with ongoing competition from alternative supply origins, and a global oversupply of grain. These macro factors will continue to impact international grain flows and Australia’s competitiveness.”