CONTINUED "challenging conditions" in the grain industry have prompted GrainCorp to cautiously suggest its net profit after tax will be as low as $40 million for 2015-16, but it could also be better than last year's result.
"The agriculture sector in Australia continues to face the same macro conditions experienced in FY15, including low grain stocks in eastern Australia," said managing director Mark Palmquist.
Increased competition from a lot of grain on global markets and cheap ocean freight reducing Australia's export competitiveness were also eroding the big eastern States grain company’s earning capabilities.
Last year GrainCorp recorded an underlying after-tax net profit of $45m, but guidance released today suggests the 2015-16 trading year result will be between $40m and $55m, with earnings before interest tax depreciation and amortisation (EBITDA) ranging between $240m to $270m.
Last year's EBITDA was only $235m.
GrainCorp's results for the first half of the 2016 financial year will be released May 11.
"The headwinds have dampened the immediate outlook, but not the benefits of the progress we have made across the business on our strategic initiatives," Mr Palmquist said.
"The storage and logistics business is being affected by another below average winter crop and low levels of grain carried over in eastern Australia.
"While our market share has remained in line with last harvest, the prevailing global commodity conditions are resulting in a delayed export program and this year we expect grain exports from eastern Australia to be only 3m tonnes compared with 3.5m last year."
However, the outlook for GrainCorp Malt remained solid.
Good progress with the growth initiatives in GrainCorp Oils were also being achieved, however GrainCorp Foods and oilseed crush margins continued to be pressured, in line with global commodity conditions.
"We remain firmly focused on the delivery of our strategy to diversify earnings and improve efficiencies," Mr Palmquist said.
"We are confident our strategy will continue to deliver significant value as cycles return to normal," .
GrainCorp guidance for its 2015-16 year also remained subject to a number of variables, including sorghum receivals from the current crop; direct to port receivals, and port bookings.
Global crush margins could also impact on Australian edible oil returns while overseas barley and local oilseed procurement costs and foreign exchange movements would also be important factors this year.
Andrew Marshall
National agribusiness writer for Fairfax Agricultural Media.
National agribusiness writer for Fairfax Agricultural Media.
