GrainCorp profits from Black Sea turmoil with $310m-plus result tipped

Andrew Marshall
By Andrew Marshall
Updated April 13 2022 - 2:02am, first published April 12 2022 - 11:23am
GrainCorp tips profit may hit $370m as Russian war tightens crop trade

With war in Ukraine sending overseas grain markets running rampant and another promising winter crop on the cards in eastern Australia, GrainCorp has tipped a further $100 million profit jump next month.

Its second forecast revision in as many months has managing director Robert Spurway expecting a 2021-22 net profit after tax of between $310 million and $370m - up from a previous tip of $235m to $280m calculated in February.

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The February forecast was itself a marked leap from the solid $139m posted last financial year.

The grain marketing, logistics and processing company's share price has gone into overdrive, too.

Share price leap

It jumped to peak at $9.77 early after investors absorbed the news this week, dipping to settle about $1.30 above trades of a week ago.

GrainCorp has predicted underlying earnings before tax for 2021-22 will be in the range of $590m to $670m, almost 25 per cent above its February forecast.

Russia's war on Ukraine has effectively blocked supplies of more than a quarter of the world's normal wheat exports as sanctions and shipping insurance risks prevent grain leaving Russian ports and the conflict halts Ukrainian freight.

Global wheat values have subsequently jumped from about $US8 a bushel in mid February to almost $US11/bu this week, having hit peaks near $US13 in early March as the Russian invasion began.

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Mr Spurway said the big eastern grain business had benefited from significant ongoing global demand for Australian grain as traditional Black Sea supplies dried up.

"As outlined at our February annual general meeting, we are seeing high global demand for Australian grain and oilseeds and strong supply chain margins for grain exports," he said.

"Conflict in Ukraine and resulting trade disruptions in the Black Sea region have created uncertainty in global grain markets, with buyers looking for alternate sources of supply.

"This has further increased both the demand for Australian grain and oilseeds and export supply chain margins."

Oilseed demand

The company's oils and foods processing business was performing "extremely well", too, thanks to strong global demand for crude and refined vegetable oils, also exaggerated by Black Sea supply disruptions.

Meanwhile, promising planting conditions for the upcoming winter crop for the third successive year were also bolstering GrainCorp's forward sales and longer term earnings prospects.

"Recent weather patterns and continued La Nina conditions have provided excellent planting conditions for the 2022 winter crop to date," Mr Spurway said.

"This is building confidence in grain supplies from the east coast and further supporting export sales and supply chain margins."

Crop receivals

Total exports for the 2021-22 year were likely to be between 8.5m tonnes and to 9.5mt, compared to 7.9mmt last year.

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Total receivals from the recent winter crop harvest and the northern NSW and southern Queensland sorghum crop would be 16mt to 17mt, or similar to last year's 16.5mt.

"Despite recent weather-related supply chain disruptions across the east coast, we are continuing to operate our ports at close to full capacity, exporting as much grain as possible to international markets," Mr Spurway said.

"Our supply chain resilience demonstrates the value of our infrastructure assets and is testament to the capability of our operations and planning teams.".

The company's earnings guidance was still subject to several ongoing market variables, including current second half receival and export volumes and supply chain and oilseed crush margins, plus the extent of global trade disruptions.

GrainCorp is eastern Australia's largest grain storage and handling business and the leading edible oil processor and oilseed crusher in Australia and New Zealand.

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Andrew Marshall

Andrew Marshall

National agribusiness writer

Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).

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