Bumper crop elevates GrainCorp to ASX’s best performer

GrainCorp is expecting its profits to soar as much as 100 per cent this year, defying Covid-fuelled supply chain disruption and labour shortages.

Australian grain has attracted higher prices due to drought in the northern US and Canada.

GrainCorp says it expects its full year net profit to soar by as much as 100 per cent following a bumper crop, defying pandemic-fuelled labour shortages and supply chain disruptions that have plagued Australia’s food bowl.

The profit upgrade made it the best performer on the ASX on Monday, its shares surging by 13 per cent to $8.50 before easing to close at $8.10.

Chief executive Robert Spurway said the company overcame labour shortages and supply chain disruptions from Covid-19 and floods to process the harvest, which “broke multiple site receival records across our network”.

“The biggest challenge in the end for growers was the wet weather and the interrupted harvest from that point of view. Labour supply was certainly a challenge. But from our perspective, we planned for that very early and we were able to get the complement of workers that we needed,” Mr Spurway said.

The company now expects its full-year earnings before interest, tax, depreciation and amortisation to be $480m to $540m. This compares with $331m in 2021.

Meanwhile it has forecast underlying net profit of $235m to $280m versus $139m last year.

Not even VB maker, Asahi, bypassing GrainCorp to secure grain directly from farmers could dull Mr Spurway’s enthusiasm.

“I certainly wouldn’t like to comment but I still enjoy a drink when I can get one, in moderation,” he said.

“Generally, we continue to build a strong relationship with a number of global brewers and maltsters around the world and we’re seeing good demand for high quality malting barley both in Australia and globally.”

Key to the strong earnings forecast are the higher prices Australian grain has attracted, following drought across the northern US and Canada, combined with the threat of a Russian invasion in Ukraine, which threatens the nation’s harvest.

GrainCorp chief executive Robert Spurway says the company is in a strong position.

Mr Spurway would not be drawn on the Russia-Ukraine tensions, only saying that GrainCorp had no fixed assets in the eastern European country. “We’ve got a small team of people (in Ukraine) that are all Ukrainian nationals.

“They’ve been very resilient in the face of this.

“It‘s probably also worth noting that the drought across the northern hemisphere generally means that our clear priority at the moment is getting grain from Australia to the world.

“Ukraine is not a particularly big feature of our current operations at the moment.”

Ukraine harvested 32.4 million tonnes of wheat last year. Meanwhile, Australia’s wheat production is set to hit a record of 34.4 million tonnes this season, 3 per cent higher than the previous record set in the 2020-21 season.

Total winter crop production is forecast to reach a record of just over 58 million tonnes in 2021-22, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.

If forecast production and prices are realised, this will be Australia’s most valuable winter crop ever at over $22bn.

Despite the sudden changes in the weather potentially upending forecasts, Mr Spurway said GrainCorp was well insulated.

“What we call carry, the inventory that we’re holding, will certainly flow into next year and benefit next year, irrespective of weather conditions. So we’re in a very strong position that will extend into 2023,” he said.

“Our combined grain intake across the harvest period has totalled 13.7 million tonnes, year to date, supplemented with a high opening grain inventory position of 4.3 million tonnes. We also expect good summer crop receivals in FY22, which are benefiting from optimal weather conditions.”

The company expects total receivals of 16-17 million tonnes this year, versus 16.5 million tonnes last year. Meanwhile it has forecast exports of 8.5-9.5 million ­tonnes, compared with 7.9 million tonnes last year.

“In addition to a second ­consecutive bumper crop and the global demand for Australian grain, our strong start to FY22 demonstrates the efficiency of our supply chain and the resilience of our industry.”