GrainCorp reaps riches

DEMAND for Australian wheat is expected to remain strong, with grain handler GrainCorp saying it will take years for Black Sea exports to normalise amid Russia’s invasion of Ukraine.

Russia and Ukraine supply about a third of the world’s wheat, but damage to infrastructure on Ukraine’s Black Sea coast has sparked fears of global food shortages and prompted a shift to alternative grain markets, with Australia a big beneficiary.

GrainCorp’s half-year net profit has surged from $50.5m to $246m, prompting the group to lift its interim dividend by 4c as well as pay shareholders a special fully franked 12c-a-share dividend.

GrainCorp chief executive Robert Spurway said while the war had bolstered demand for Australian grain, the higher profit reflected more favourable weather conditions.

“If you look at these results, it’s important to remember the disruption and Ukraine was actually only very, very late in the half,” Mr Spurway said.

“Really, the results (are) benefiting from a second consecutive year of bumper crops, very strong demand for Australian crop grain off the back of drought in the northern hemisphere, and US and Canada in particular. That created the opportunities for margins given that demand.”

But Mr Spurway said it would take years for the Black Sea region to recover.

“If we look more specifically at the disruption in Ukraine and the Black Sea, it’s very difficult to get accurate reports of exactly what’s going on,” he said. “It’s our view that that is likely to be disrupted for several years based on the fact that fighting is still under way, there’s been damage to infrastructure, and rail and roads in particular. So even despite the prospect of the farmers in Ukraine being able to produce a crop, it will be some time before they’re able to resume a normal export program, given the infrastructure damage.”

GrainCorp is now investing across its terminals ahead of the 2022-23 harvest to “efficiently manage” high volumes from growers. It also launched a $30m venture capital fund on Wednesday to invest in agtech start-ups across Australia’s farming sector.

While pandemic isolation rules have created chaos across Australia’s food supply chains, putting pressure on inflation, Mr Spurway said GrainCorp had so far “shown incredible resilience”.

“We’ve overcome the sorts of challenges that many participants in global supply chains have seen,” he said. “And some of that is the fact that we’re predominantly a bulk exporter, relying on vessels that we charter and manage.”

The company’s revenues jumped 49.9 per cent to $3.84bn in the six months to March 31, while earnings before interest, tax, depreciation and amortisation surged to $427m, from $140m the previous year.

GrainCorp is now expecting to deliver a full-year net profit of up to $370m and EBITDA of up to $670m.

The group lifted its halfyear dividend from 8c to 12c a share, fully franked. This will be paid on top of the special dividend of 12c a share.