A drought-ravaged east coast cropping landscape and higher energy costs have shrivelled GrainCorp’s balance sheet, with the bulk grain shipper and handler’s full-year profit dropping 43.7 per cent to $70.5 million.
Revenue was down $322 million, or 7.1 per cent, to $4.253 billion, in the year to September 30, with a rise in malt and oil revenue failing to offset a $380 million drop in grain earnings, the company announced on Thursday.
Earlier this month, GrainCorp cut about 50 jobs in middle management and administration on forecasts of a severely reduced summer harvest, with further cuts expected as a bleak 2019 looms.
‘The 2019 financial year will be extremely challenging for GrainCorp with expectations of a substantially smaller (East Coast) crop due to the current drought,’ chief executive Mark Palmquist said in a release.
‘In response to the constrained grain availability, the grains business is focusing on network rationalisation, cost reduction and domestic trans shipments.’
The fortunes of GrainCorp are in stark contrast to other rural players Elders and RuralCo, which earlier this week credited their diversified businesses for protecting their profits from the worst of the drought so far.
Total GrainCorp grain sales were down 1.4 million tonnes, or 16.9 per cent, to 6.9 million tonnes, with grains revenue dropping $380 million to $2.24 billion.
There were 15 less silos operating the 2018 summer harvest, down from 160 last year.
GrainCorp said recent rain across the northern cropping regions was positive news for summer plantings, but added it was early in the cycle and further rain would be needed while the planting window was open.
The company expects a negligible exportable grain surplus in the current year, with just under half of the 0.5 million tonnes of grain received into its network so far coming from Western Australia and South Australia to meet domestic demand.
There was, however, a craft beer-driven rise in GrainCorp malt revenue, which was up $47 million to $1.15 billion.
‘Malt’s performance included a full second half contribution from our expanded plant in Pocatello, Idaho, and we recently announced a substantial expansion to our malting capacity in Scotland to support growth in distilling demand,’ Mr Palmquist said.
Edible oils revenue was also higher, rising $24 million to $969 million, but this too is set to be hit by drought.
Tight canola supplies are placing pressure on crush margins, though oils are benefiting from strong demand for liquid animal feeds and dairy blends.
However, GrainCorp said both the malt and oils processing businesses continue to be impacted by high energy prices.
GrainCorp shares fell sharply at Thursday’s open before bouncing to sit 0.95 per cent higher at $7.985 at 1100 AEDT.
DROUGHT DRIES UP GRAINCORP FY PROFIT
* Net profit down 43.7pct to $70.5m
* Total revenue down 7.1pct to $4.253 billion
* Final dividend unchanged at 8 cents, 30 per cent franked.