GrainCorp’s big cap ex spend starting to pay off

GrainCorp’s big cap ex spend starting to pay off


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GrainCorp has spent up big on its Project Regeneration scheme in recent years.

GrainCorp has spent up big on its Project Regeneration scheme in recent years.

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GrainCorp's capital expenditure spending spree of recent years is drawing to a close and the investments are starting to pay off.

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GRAINCORP is nearing the end of a sustained period of heavy capital investment.

When handing down the company’s half year results last week, GrainCorp managing director Mark Palmquist said the company would spend $59 million on capital expenditure (cap ex) in the half year 18, with a full year spend of between $130-170 million.

This is down markedly on last year, $261 million, or 2016, $281 million and could be the lowest cap ex spend since FY 2013.

GrainCorp has had a number of big ticket new projects to fund of late, including the Project Regeneration work on its bulk handling network, an expansion to its US malt plant in Pocatello, Idaho and upgrades to its Numurkah, Victoria, oil processing facility.

From now, Mr Palmquist said there would be a drop in cap ex in growth projects.

“Given the drop in revenue due to the smaller grain tonnages handled that is not a bad thing, but this has been the plan to ease off spending on cap ex projects for a while now.”

Mr Palmquist said the investments were paying dividends.

On the malt front, he said the Pocatello facility meant GrainCorp was well positioned to meet growth opportunities in areas such as craft beer and distilling.

“Spirits, especially on the premium side, are really taking off, there is higher demand for longer aged single malt whisky which is a positive for us.”

Mr Palmquist said the Numurkah plant would come fully online later this year.

“Customer preferences in the edible oils sector are changing, with the focus on dairy blends and specialty oils, especially for infant formula, so the company is well positioned for those trends.”

He said the company’s West Footscray oil processing facility was also hitting its straps.

“The food sector of the business is performing better in 2018 than 2017, we’ve got through many of the issues we had at West Footscray and there are the newly created efficiencies and better utilisation, all of which is benefiting us.”

The story GrainCorp’s big cap ex spend starting to pay off first appeared on Farm Online.

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