GrainCorp's drought-withered trading year has ended with the big grain logistics, processing and marketing company sliding to a $113 million after-tax net loss.
Last year it posted a $71m statutory net profit, which had also been whacked by the onset of the big dry.
GrainCorp has not declared any dividends for the 2018-19 year.
Back in 2017-18 it paid 16 cents a share, and 54c the year before that.
Chief executive officer, Mark Palmquist, said one of the worst droughts on record in eastern Australia had hit earnings hard, but the profit dive was compounded by significant global grain market disruption which caught the company with expensive feed grain stocks when global markets slumped unexpectedly.
Underlying earnings before interest, tax, depreciation and amortisation crashed from $269m a year ago to just $69m, taking the underlying net loss after tax to $82m.
"We're certainly disappointed with the financial result, but also very pleased with the tremendous effort put in by our employees during a really difficult time," Mr Palmquist said.
"All of us have also have family and friends impacted badly by this drought and the bushfire crisis - we want to call out our concerns and support for these people."
Good malt result
However, GrainCorp's ledger was partly drought-proofed by another robust performance from its malt division, with revenue rising from $1.1b to $1.3b on the back of solid demand for malt and brewing ingredients from distillers and the thirsty northern hemisphere beer market.
Trans-shipments of this size are rare, and this emphasises the severity of the drought
As an indicator of just how much the drought has impacted the grain handling business's activities, its export port terminals reversed their operations to import more than two million tonnes of cereals and oilseeds from other states, particularly Western Australia in 2018-19.
The imports were to feed east coast livestock demands and oilseed processing needs.
"Trans-shipments of this size are rare, and this emphasises the severity of the drought and demonstrates our ability to adapt to manage these extreme factors," Mr Palmquist said.
- GrainCorp pays $10m/year for drought insurance
- ACCC warns GrainCorp on bulk liquid terminal sale plans
- Drought cuts Elders' profit 4pc
The big dry slashed total harvest receivals at its country Victorian, NSW and Queensland silos by more than 50pc on 2017-18 figures, to 3.1m tonnes, while exports totalled just 300,000 tonnes - down from 2.7m.
Oilseed crush margins were also hurt as prices jumped and GrainCorp was forced to freight in supplies from South Australia and WA after the east coast canola crop shrank by 75pc.
However, the oilseed foods business in Melbourne, a slow performer in recent years, enjoyed production efficiencies, stable volumes and focused on product innovation opportunities.
Bulk liquid terminals
Strong domestic demand for livestock feeds also helped GrainCorp's figures, while its Bulk Liquid Terminals business, which is up for sale, reported high utilisation.
The Australian Competition and Consumer Commission is set to make a call on the $350m sale of GrainCorp's Australian liquid storage sites to rival ANZ Terminals tomorrow.
We're still full steam ahead with our plans for the demerger
GrainCorp Malt had "a good year" with Mr Palmquist noting increased sales in the second half and continued solid demand from its craft beer and distilling customers.
He said while big-name mainstream US lager and pilsner brewers overseas were reporting significant sales setbacks, craft beers and microbrewery sales were still bullish and big malt consumers.
That worked well for GrainCorp's North American ingredients distribution business.
In the wake of GrainCorp's asset portfolio review during 2018-19, the company will split its malt division from the grain handling and oilseed business in the next six months.
Malt demerger delay
Although shareholders were initially told the scheme of arrangement details for the new MaltCo company's share market listing would be public by December, Mr Palmquist said the delayed ACCC decision on its liquid terminal sale had slowed the demerger process until early in 2020.
"But, we're still full steam ahead with our plans for the demerger," he said.
While any credible buyer offers for the malt division would still be looked at, the company was "well on its way" to floating the division as a stand alone operation, to be led by Mr Palmquist.
He told market analysts there was no fresh information on how the board's search for a new GrainCorp managing director was progressing, although he had no concerns about trying to attract the right talent to fill the role.
However, the big job will be challenging.
Despite GrainCorp's groundbreaking deal with global risk manager, White Rock Insurance to provide 10 years of crop production cover, with payments of up to $80m due to GrainCorp if the harvest is hurt by drought, the year ahead is not looking easy for the company.
Mr Palmquist warned that the current harvest, now underway in the eastern states would be significantly below average and there would be less grain to draw on from SA and WA to fill the supply void in NSW and Queensland.
However, much of the Victorian winter crop harvest promised to be more productive than last season, which meant it could be a valuable source of grain for the northern states.
The logistics involved in sourcing and shifting grain via GrainCorp's Victorian and NSW rail and road network, rather than by sea from WA, would also save costs and cut freight times from as much as 120 days down to 30 or 40 days.
- Start the day with all the big news in agriculture! Click here to sign up to receive our daily Farmonline.
The story Drought burns $113m hole in GrainCorp trading result first appeared on Farm Online.