GrainCorp defies China ban to lift profit outlook

GrainCorp expects full year net profit to be 33 per cent higher than previous forecasts.

GrainCorp CEO Robert Spurway says global demand for Australian grain is strong.

Listed-agribusiness giant GrainCorp has defied China’s ban on barley and other farm products, upgrading its profit forecast on the back of strong global demand for Australian-grown grain.

GrainCorp is now expecting a full-year net profit of up to $140m – an increase of more than 33 per cent from its previous guidance of $80-$105m it gave last November.

Meanwhile, it expects earnings before interest, tax, depreciation and amortisation of up to surge 15 per cent to $285m-$330m, compared with its previous forecast.

This is despite China banning or limiting a range of Australian soft commodity exports – from barley, beef and timber to wine and lobster.

Chief executive Robert Spurway said “current heightened demand for Australian grain has bolstered an outstanding year for the agribusiness segment”.

“Post-harvest winter receivals and higher summer receivals, coupled with a favourable outlook for the upcoming winter crop, have supported strong export volumes, forward contracted sales and supply chain margins,” Mr Spurway said.

“We’re seeing excellent demand for high quality Australian grain, particularly with recent weather related crop production challenges in the northern hemisphere, and July delivered our biggest month of contracted sales on record.”

Mr Spurway said he expects total exports for FY21 at the higher end of previous expectations, between seven and eight million metric tonnes, citing a higher than expected summer crop receivals”.

“Grain carry out at September 30 2021 is also expected to land at the high end of the range, 3.5-4.5 million metric tonnes.

“It is also great to see the benefits of our significant capital investment in prior years, and the full delivery of our operating initiatives, flowing through our network.”

Mr Spurway expected total FY21 capital expenditure to be about $55m. This is higher than the company’s sustaining capex target of $35-45m, given the need for additional storage capacity and other upgrades to handle the large crop expected in FY22.

“We’re hearing reports of good potential in the upcoming crop, based on factors including area planted, sub-soil moisture levels, season-to-date rainfall, and longer-term weather forecasts,” Mr Spurway said.

“We are building one million tonnes of new storage capacity in time for harvest and re-opening ‘flex’ sites to accommodate the anticipated demand.”

GrainCorp is also recruiting more than 3000 harvest casuals to help manage demand across 160 sites and ports.

While GrainCorp is expecting a bumper year, other agribusinesses have not been as fortunate. Commonwealth Bank estimated Beijing’s soft commodity bans had cost Australian exporters $5.5bn in lost sales in the six months to January.