Midway in grain bid
WOODCHIP exporter Midway is looking to move into grain export as it explores options to diversify its Geelong operations.
The company is aiming to erect two 10,000-tonne grain storage silos at its Geelong port facility later this year in time for the next year’s grain harvest.
It is seeking expressions of interest in the project which will offset the declining volume of woodchip set to be processed through Geelong during the next few years.
The Australian grain export market is dominated by GrainCorp which has major processing facilities at Geelong and Melbourne.
In announcing disappointing first-half results affected by unusually tough global trading conditions, Midway CEO Tony Price said the company was exploring a range of options to increase exports from Geelong, including softwood chips and other commodities such as grain.
Midway recorded underlying earnings of $4.2 million for the six months to December 31, down from $12.2 million in the corresponding half of last financial year.
After a writedown in the value of Plantation Management Partners of $4.8 million and the write-off of
$1.5 million in the equity investment in ADDCO Fibre, Midway had a $1.2 million loss in underlying net profit after tax for the half.
As a result, the Midway board will not declare an interim dividend.
Mr Price said that during the last half of 2019, Midway had weathered the worst global wood fibre market downturn in the past decade and it was looking forward to a better second half on the back of improved trading conditions.
He said global stocks of pulp were trending towards normal levels, there were more stable global pulp prices and there was the successful negotiation of a trade agreement between the US and China.
“Midway is comfortable that it will meet current consensus forecasts for EBITDA in FY20 based on current market conditions and the group’s sales outlook,” he said.
He said Midway’s Geelong site had already shipped as much wood fibre in the first two months of 2020 as it had for the previous six months.
Several uncertainties remain that may affect the timing and strength of the market recovery, including the annual Japanese price negotiations, several uncommitted hardwood export shipments for lower quality wood fibre and the impact of the COVID-19 outbreak in China, which at this stage has not affected the company.
Mr Price said the timber plantations that supplied Midway in southwest Victoria had also so far been unaffected by the bushfires that have impacted forests in southeast Victoria and South Australia.
“Midway has been in contact with timber companies in the bushfire-affected regions and is in discussions with them about ways that we can help them in the recovery process,” he said.
Mr Price said favourable foreign exchange rates and additional sales from new businesses had partially offset the weak demand in volume for wood fibre exports.
As a result, sales revenue, at
$123 million, was only down 1 per cent compared with $124.2 million in the previous corresponding period.
The biggest impact on sales and earnings had been reduced demand in China for high-quality wood fibre from Geelong.
Shares in Midway on Friday were trading at $1.54, down from a September high of $3.50 when it announced that the tough global conditions were impacting pulp prices.