GrainCorp warns of full-year loss

GrainCorp has foreshadowed a bigger-than-expected hit to earnings from trade disruption and drought.

Drought has taken a toll on GrainCorp. Picture: Andy Rogers

GrainCorp has warned of a bigger-than-expected hit to earnings from the ongoing disruption to international grain trading, exacerbating a lengthy drought in eastern Australia.

The Australian grain handler said it now expected to report an underlying loss of between $70 million and $90 for the year through September. That would compare with a profit of $71 million the year before, on a similar basis.

Underlying earnings before interest, depreciation, tax and amortisation are now expected to be in a range of $65 million to $85 million, compared with earnings of $269 million recorded for the prior year.

The company swung to a net loss of $58.9 million in the first half of the financial year and suspended dividend payments.

The company estimated the effect of disrupted grain flows internationally had risen to $60 million-$70 million for the year, compared with an earlier estimate of $40 million, and said that new crop-trading opportunities in the final quarter of the financial year were no longer expected to materialise due to reluctance from international buyers to consider contracts for the new season.

Another below-average production year for crops in Australia is expected, though GrainCorp said conditions in the remainder of its businesses, including its malt operation, were tracking in line with earlier expectations.

“This is an extremely difficult year for GrainCorp due to the significant disruptions we’ve seen in global grain markets, compounded by the drought in eastern Australia,” chief executive Mark Palmquist said, adding the company expected to have to ship 2.3 million tonnes of grain from South Australia and Western Australia to meet east-coast domestic demand.

Dow Jones Newswires