GrainCorp declares improved financial performance but best is yet to come

GrainCorp has delivered a 7 cents per share dividend to shareholders on the back of a solid full year performance but eyes are already turning to the current bumper winter harvest
GrainCorp
While GrainCorp declared a dividend of 7 cents per share, fully franked, for the FY20 year ended 30 September, since then their grain receival depots have been breaking all-time previous records from this winter’s harvest – photo GrainCorp

GrainCorp Limited (ASX: GNC) has announced its full year results for the year ended 30 September 2020 and a fully franked 7 cents per share dividend was declared.

But following that result grain receivals have been bursting at the seams from near record grain harvests in NSW, Victoria and to a lesser extent Queensland.

On days where growers can get their harvesters into long paddock sessions, deliveries to the GrainCorp storage depots have been breaking records.

When more than 360,000 tonnes of grain were delivered on Wednesday 18 November to GrainCorp it broke the previous largest daily receival record that had been set in the historically high 2016/17 season.

These are the highlights from the full year GrainCorp results.

• Underlying EBITDA1 for continuing operations: $108 million (FY19: $107 million loss)

• Underlying NPAT2 for continuing operations: $16 million loss (FY19: $158 million loss)

• Statutory NPAT3 : $343 million (FY19: $113 million loss)

• Declared dividend 7 cents per share fully franked (FY19: nil dividend)

• Recordable Injury Frequency Rate4 of 6.5 (FY19: 7.7)

Managing Director and CEO, Robert Spurway, commented: “GrainCorp reported a substantially improved financial performance in FY20, despite a third year of drought.

We are delivering on our operational initiatives and these are providing more consistent and stable earnings for the business.

“The most significant drivers in the year were the positive impact from the Crop Production Contract (CPC), improved performance from our East Coast of Australia (ECA) grains and international trading businesses, and stronger oilseed crush volumes and margins.

“The Company has a strong balance sheet and is in a privileged position with a high quality, integrated network of infrastructure assets to receive and export the much larger crop currently in harvest across ECA.”

Dividend declared

The Board of Directors has declared a dividend of 7 cents per share, fully franked, for the FY20 year.

Chairman, Peter Richards, commented, “Following a year of transformation, we are pleased to be in a position to pay a dividend of 7 cents per share, fully franked.

“The dividend reflects the strength of our balance sheet, the benefits of the Crop Production Contract and our confidence in the outlook and the sustainability of earnings and cash flows into the future.”

“The dividend will be paid on 10 December 2020 to ordinary shareholders at a record date of 26 November 2020.

“Strong financial performance Underlying EBITDA from continuing operations was $108 million, up from a loss of $107 million. Chief Financial Officer, Ian Morrison, commented.

“Although ECA grain production was again adversely impacted by drought, the Company benefited from the first year of the CPC, receiving a total gross payment of $58 million due to the reduced size of the harvest.

“Throughout the year, the business continued to import grain from other states to manage east coast grain deficits, although these trans-shipments slowed in the second half as expectations for the 2020/21 crop improved.

“It is pleasing to see improvements in performance right across the business and the benefits being delivered from our capital investments and operating initiatives.”

COVID-19 Resilience

At the outset of the COVID-19 pandemic, GrainCorp was confirmed as an essential service.

Throughout the pandemic, GrainCorp has continued to operate across all business units without interruption and has accelerated the introduction of digital solutions including CropConnect and FastWeigh.

Allowing safer and more efficient contactless processes at all receival sites for the 2020/21 winter harvest.

GrainCorp did not access any financial support from state or federal governments during the pandemic and, indeed, significantly increased employee numbers ahead of the harvest.

Outlook GrainCorp expects growth in earnings in FY21 due to the anticipated larger ECA winter crop and the ongoing benefits from recent operating initiatives.

In Agribusiness, improved growing conditions and current grain receival year to date, indicate a very strong 2020/21 winter crop, similar in size to the FY17 harvest (subject to ongoing weather conditions and other variables).

In Processing, the expected increased supply of Canola seed will continue to support strong oilseed crush margins, partially offset by reduced meal values.

GrainCorp expects trading conditions in the Foods sector to remain highly competitive.

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