GrianCorp (GNC) Earnings Update
Date: 17/11/2023
*** GENERAL AVICE ONLY***
Current holding 3.5% – Balanced Portfolio
The positive update from GrainCrop and increase of dividend means the Balanced portfolio will continue to HOLD the position until further notice
Financial Statement Performance
GrainCorp’s FY23 financial performance, while showcasing a decline compared to the previous year, remained robust and in line with market expectations. The company reported an EBITDA of $565 million, a decrease from FY22’s $703 million, yet consistent with anticipated trends and market consensus for the period. This demonstrated the company’s ability to maintain strong performance despite market fluctuations. The net profit after tax (NPAT) also reflected this trend, standing at $250 million, down from FY22’s $380 million.
In terms of earnings per share (EPS), GrainCorp recorded 111.7 cents in FY23, which was slightly lower than the market consensus forecast of 112.5 cents. Despite this minor shortfall, the company’s performance was considered strong, highlighting its operational efficiency and effective strategic execution. Notably, the dividend per share (DPS) for FY23 was 54 cents, significantly exceeding the expected 47.6 cents. This outperformance in DPS indicates a robust return to shareholders and underlines the company’s confidence in its financial health and future prospects.
the market’s positive reaction.
Business Segment
Agribusiness: GrainCorp’s agribusiness segment witnessed strong international performance and a record result in the Feeds, Fats & Oils (FFO) sub-segment. The global demand for Australian grain, especially from Western Australia, drove earnings. However, Canadian operations faced challenges in volume and margin. The FFO sub-segment thrived due to high demand for animal feed and renewable fuel feedstocks, reflecting a successful year for the segment.
Processing: The processing segment had an exceptional year with record oilseed crush volumes. This performance was driven by a 5.3% year-over-year growth and a 7.5% compound annual growth rate (CAGR) since FY19. Strong crush margins were supported by high domestic canola seed supply, efficiency improvements in processing plants, sustained demand for renewable fuel feedstocks, and supply constraints in other key regions.
Corporate: The corporate segment continued its strategic growth focus, investing in capabilities to support earnings growth, major productivity programs, and mergers and acquisitions (M&A). The segment also pursued modernizing systems for increased agility and exploring new oilseed crush plant opportunities.
UMG: GrainCorp’s stake in United Malt Group (UMG) was liquidated, resulting in gross proceeds of $127 million. This divestiture was part of the Malteries Soufflet Scheme of Arrangement, contributing significantly to the company’s financial gains for the year.
The grain production in FY23 was characterized by high-quality harvests, despite drier conditions in the northern half of ECA. The quality of commodities across all types was excellent, with good progress in key southern growing regions. The ECA winter crop harvest began earlier than the previous year and was nearing completion in Queensland, while harvests in New South Wales and Victoria were underway.
FY24 Outlook
Looking forward to FY24, GrainCorp anticipates high crush volumes to continue, although margins are expected to moderate from FY23 levels. The company’s strong balance sheet, with a core cash balance of $349 million and reduced net debt, provides the flexibility to explore both organic and inorganic growth opportunities. GrainCorp aims to invest in its core business to drive better returns on assets and continue optimizing total shareholder returns. This forward-looking approach indicates a strategic focus on sustained growth and shareholder value.
Market Reaction
Market to Open.
Disclaimer: The recommendation given is general advice only. It does not take into account your personal objectives, financial situation, or specific needs. This information should not be your sole resource when making such decisions. We strongly recommend you to seek the advice of financial, taxation, and legal professionals before finalising any investment decisions.