GrainCorp silo
WEST PERTH, AUSTRALIA – A near record crop in eastern Australia and another good performance by GrainCorp’s malt division pushed the company’s year-end earnings up.

GrainCorp’s underlying net profit after tax was A$142 million, up $89 million on the prior year. Underlying earnings before interest, tax, depreciation and amortization (EBITDA) increased by A$134 million, or 52%, to A$390 million compared to 2016 fiscal year. Revenue from continuing operations increased 10% to A$4.576 billion.

“Across our grains businesses, we benefited from increased storage, handling and merchandising opportunities aided by the large harvest,” said Mark Palmquist, GrainCorp managing director and chief executive officer on Nov. 21 when the earnings were released. “We successfully executed a large grain export program despite persistently high global crop supplies and depressed grain prices, which continued to be a headwind for Australian growers.”

In August, GrainCorp’s Storage & Logistics and Marketing business were combined into a single “Grains” business unit. In the current earnings report the company has continued to report the financial results for the two business units separately.

Storage & Logistics EBITDA for 2017, jumped to A$152 million from A$48.1 million. Revenue also saw an increase to A$664.5 million compared to A$339.3 million in 2016. Its grain throughput was 19.9 million tonnes up compared to 11.6 million tonnes in 2016. GrainCorp noted higher earnings derived from higher grain receivals and increased bulk grain export activity; benefiting from large increase in east coast Australia grain production.

The Marketing division benefited from a large export program and 8.3 million tonnes in sales. EBITDA for the division amounted to A$53.9 million compared to A$3.3 million in 2016. Revenue jumped from A$1.938 billion in 2016 to A$2.209 billion in 2017. Alternative origination sources continued to compete strongly with Australian grain due to abundant global supply and low ocean freight rates. GrainsConnect Canada, the 50-50 JV with Zen-Noh Grain Corporation, made good progress during the year, with all four sites now announced and the first to become operational in late 2017. 

Mark Palmquist GrainCorp Managing Director and CEO
Mark Palmquist, GrainCorp managing director and CEO.
“As of Nov. 20, GrainCorp had received approximately 1.45 million tonnes into our east coast Australia network. Overall, we are expecting a substantially smaller crop in eastern Australia, with production skewed to Victoria and southern NSW, and below average exportable surplus,” Palmquist said. “Our focus remains on becoming more versatile across the Grains business and ensuring we are adding value for growers and buyers in these challenging times. The marketing team will continue to explore opportunities to meet our customers’ needs, including the possibility of domestic shipping to meet demand in northern areas.” 

GrainCorp’s malt business EBITDA was recorded at A$158.4 million, down slightly from A$161.4 million compared to the same period of last year. Revenue also saw a slight decrease for the 2017 fiscal year of A$1.105 billion from A$1.190 billion in 2016.

“Malt delivered another good result, with earnings consistent year-on-year despite an unfavorable foreign exchange impact from the higher Australian dollar and reduced revenue following the sale of our German malt plants,” Palmquist said. “GrainCorp Malt continued to operate at high capacity utilization with strong demand for specialty products.”

GrainCorp completed the expansion of its malt facility in Pocatello, Idaho, U.S. It is expected to be operating throughout the full fiscal 2018 year.

“The Foods business within GrainCorp Oils is facing a number of challenges, with margin compression and prolonged process in capturing efficiency improvements at our plant in West Footscray,” said Palmquist. “We have taken significant steps to reshape this business including removing costs and combining the Foods and Oilseeds businesses to simplify the operating structure and increase efficiencies.” 

The oils business EBITDA for fiscal year 2017 was down slightly to A$58 million compared to A$61 million. Revenue experienced an uptick to A$945.5 million in 2017 from A$923.5 million in 2016 fiscal year. 

“Rising energy costs continue to be a serious challenge for the long-term sustainability of food and malt processing in Australia and we are evaluating a range of energy efficiency and alternative generation options to mitigate the impact of energy price volatility. This is important to remain internationally competitive,” Palmquist said. 

During the year GrainCorp continued to improve its safety processes and controls, striving toward the company’s vision of Zero Harm, Safe for Life. However, its Recordable Injury Frequency Rate (RIFR) did increase marginally in fiscal year 2017 and the company said it is working to continue to drive sustained performance improvements.

“GrainCorp is in a strong financial position with core debt gearing at 20% at Sept. 30, 2017, Palmquist said. “While 2018 will be a challenging year for our grains business, we have made significant progress in recent years to optimize our network and more closely align operational costs with volumes. Our processing businesses continue to underpin earnings for the Group and demonstrate the benefits of having a diversified portfolio.”