Meet the Australian oil giant you’ve never heard of

Biofuel is a growing part of GrainCorp’s business, with the company allowing Australians to fill up their cars and have their breakfast cereal.

Australia has a new energy giant – although you won’t find this company near an offshore rig, a coal mine or feeling the breeze from wind turbines.

ASX-listed grains handler, GrainCorp, has upgraded its full-year profit forecast and announced a special dividend after processing the “third bumper crop” on Australia’s east coast.

The company expects to deliver a full year net profit of $220-260m versus its previous estimate of $180-220m, and a key part of the upbeat forecast is its feeds, fats and oil business, which includes biodiesel.

Chief executive Robert Spurway said the company’s burgeoning Agri-Energy or biofuel division was an “often overlooked component of our business” – and one which allows Australians to fill up their car and have their breakfast cereal too.

While biofuel has attracted criticism for swallowing cereal crops, GrainCorp’s business collects oil from fast food restaurants such as McDonald’s and KFC to turn into diesel.

“We are already a leading supplier of used cooking oil in Australia,” Mr Spurway said.

“We purchase and consolidate and move tallow through our logistics network. We also benefit from the demand for feedstocks and renewable fuels through our oilseed crush facilities and processing divisions. So that has been a significant component of our business over several years now.”

GrainCorp’s Auscol division collected more than 10,000 tonnes of used cooking oil in the six months to March 31 – a 4 per cent increase on the previous corresponding period – from over 5000 restaurants.

Its processing business delivered earnings before interest, tax, depreciation and amortisation of $103.3m – almost doubling analyst estimates. Such is the broader demand for oilseeds that GrainCorp is considering building a new crush plant.

“The growth in renewable fuels and the desire globally for sustainable fuels is a real benefit, not just for GrainCorp but for the agricultural sector generally. It drives real demand that’s good for pricing,” Mr Spurway said.

“We’re really excited about the opportunities in the future to increase our capacity to satisfy what we see as growing demand for renewable fuel feedstocks.”

Global demand for Australian grain remains strong.

The profit upgrade sent GrainCorp’s shares soaring 10 per cent to close at $7.81 on Thursday, valuing the company at $1.75bn.

Biofuel has been thrust into the mainstream – even fuelling commercial jet planes, with Qantas and Airbus spending $2m on developing Australia’s first dedicated sustainable aviation fuel refinery in Queensland. It will process sugar cane waste and other agricultural by-products into jet fuel, with the Queensland government contributing $760,000 to the venture.

German-owned logistics titan DHL is also using sustainable aviation fuel to cut greenhouse emissions by 80 per cent.

Across GrainCorp’s broader operations, Mr Spurway said there was solid global demand for Australian grain and expected a “strong export program” in the second half of the year.

He welcomed a thawing of relations between Beijing and Canberra, counting China as still a good export opportunity. But he said the company had also diversified into other growing markets.

“Look, we’re pleased to see both governments talking. We’ve said all along that the high quality produce from Australia across wheat, barley and the other commodities we handle – but more generally across the agricultural sector – are an important part of the products that the Chinese consumers value.

“We don’t disclose the individual markets that we trade with and the volumes we do to each market. Over three or four years now we’ve diversified from around 30 markets to 50 markets that we actively sell to.

“We’re seeing strong ongoing demand, not just from China, but across the whole Southeast Asian region. And that of course brings benefits to Australian farmers and companies alike.”

Overall revenue in the six months to March 31 soared 18.2 per cent to $4.54bn. Net profit, meanwhile, fell 18.6 per cent to $200.3m.

But RBC Capital Markets analyst said the profit result exceeded its estimate of $125m.

“The processing business generated record half-year oilseed crush volumes with continued operational improvements being delivered,” RBC analysts said in a note to investors.

“The business experienced excellent crush margins through elevated domestic supply of canola seed, production challenges overseas with the conflict in Ukraine disrupting supply of oilseeds out of the Black Sea.”

GrainCorp announced a total interim dividend of 24c a share. This includes a fully franked half-year payout of 12c a share and a special dividend of 10c a share, also fully franked. Both will be paid on July 20.