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GrainCorp declares total fully-franked interim dividend of 24cps following record half-year

Wed 11 May 22, 11:02am (AEST)
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Key Points

  • Earnings of $427m for the half-year ended March 31, up from $140m in the previous period
  • Management confirmed FY22 guidance
  • Consensus on Graincorp is Hold

To reflect excellent performance across all business areas and resilience within its supply chain, GrainCorp (ASX: GNC) has within its record half-year result this morning declared an interim fully franked special dividend of 12cps in addition to increasing its interim fully franked ordinary dividend to 12cps from 10cps.

Management attributed reported earnings (EBITDA) of $427m for the half-year ended March 31, up from $140m in the previous period to elevated global demand for Australian grain, oilseeds, and vegetable oils, after two consecutive bumper crops in east coast Australia (ECA) amid a period of tight global supply.

Management also notes war in Ukraine, resulting in Black Sea trade disruptions – which prompted buyers to seek alternative sources of supply – has also had a material impact on demand for Australian commodities.

Highlights with today’s half-year result were:

  • Net profit $246m (HY21: $51m)

  • Agribusiness earnings up 200% to $376m

  • Processing earnings up 192% to $70m

  • Core cash balance of $129m at 31 March 2022

  • Net debt on 31 March 2022 was $2.0bn (HY21: $1.4bn)

Management also confirmed FY22 guidance of underlying earnings $590-$670m, and underlying net profit of $310-$370m.

Perfect storm

Commenting on today’s record result, CEO Robert Spurway highlighted the confluence of highly favourable conditions right across the business.

“GrainCorp is in a strong position to maximise opportunities through the current cycle, while also progressing our strategic initiatives in our core, growth and ESG areas, Spurway noted.

"Planning is well underway for additional investment in the lead-up to the 2022-23 harvest to efficiently manage the volumes to be delivered by growers.”

Looking forward

In short, management sees no letup in significant ongoing global demand for Australian grain and oilseeds and highlighted favourable planting conditions.

“Recent weather patterns and continued La Niña conditions have provided excellent planting conditions for the 2022-23 winter crop to date, building confidence in grain supplies from ECA and further supporting export sales and supply chain margins,” Spurway said.

The group has also launched GrainCorp Ventures, a $30m corporate venture capital fund to invest in AgTech start-ups, to build long term sustainable growth in the Australian agriculture industry.

GrainCorp's shares were down -2.94% an hour out from the open to $10.25 having opened at $10.71.

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Graincorp share price: A 12-month snapshot.

What brokers think

Consensus on Graincorp is Hold.

Based on Morningstar’s fair value of $9.09, the stock is overvalued.

Based on the brokers that cover Graincorp (as reported on by FN Arena), the stock is currently trading with -11.4% downside to the target price of $9.35.

UBS, which has the lowest price target on Graincorp of $7.54, retains a Neutral rating based on conclusions that earnings upgrades have been attributed to elevated export margins rather than export volumes, with persisting tightness into FY23 likely see more of the export margin upside passed through to growers.

Macquarie has updated forecasts to $639m in earnings and $352m in profit, retains an Outperform rating with the target price increasing to $10.28 from $9.48 in the expectation of momentum continuing into the next financial year.

Morgan Stanley’s FY23 earnings forecasts outpace consensus by 17%, and the broker retains an Overweight rating with the target price rising to $10.70 from $10.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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