GRAINCORP is bracing for a significant drop in earnings for the half year ending March 31, citing a normalisation of the grain crop size after three above-average seasons.

Eastern Australia’s largest bulk handler has also cut its earnings guidance for FY24 due to a reduction in last month’s grain volumes and margins.

In a release to the ASX, GrainCorp said it is predicting HY24 earnings before interest, taxes, depreciation, and amortisation of $164 million, a 57 percent decline on the HY23 result of $383M.

The company’s net profit after tax is expected to reach $57M, down 71.5pc on HY23.

These results are subject to finalisation of the HY24 financial report and completion of the auditor’s review, and will be published on May 16.

GrainCorp managing director and CEO Robert Spurway said these results were no surprise to the company, and reflected changes to crop size.

“GrainCorp’s preliminary [HY24] result displays resilience as grain and oilseed markets normalise following three outstanding years for the industry,” Mr Spurway said in a statement to the ASX.

“As expected, we have experienced a decline in overall volumes handled across East Coast Australia (ECA) and lower end-to-end supply chain and crush margins relative to 1H23.

“Strong volumes in southern NSW and Victoria have been offset by below-average conditions in Queensland and northern NSW.”

Cuts to FY24 forecasts

Despite HY24 results being largely in line with expectations, operating conditions and outlook leading into the second half have softened, evidenced by weaker-than-expected margins and volumes in April 2024.

As a result, GrainCorp expects to report FY24 EBITDA in the range of $250M-280M and NPAT of $60M-80M.

This is a drop on earnings guidance released in February which predicted GrainCorp’s EBITDA at $270M-310M and NPAT of $65M-95M.

Both figures are a significant decline on FY23, with EBITDA of $565M and NPAT of $250M recorded for the previous financial year.

Mr Spurway said GrainCorp was well adapted to handling changes in industry conditions.

He said these conditions are influenced by local and global factors.

These include drier-than-expected conditions in Western Australia reducing grain production and continued softness in end-to-end grain handling margins driven by stronger global supply, lower commodity prices and normalisation in global supply chains impacting grower selling and customer purchasing behaviour.

Mr Spurway said the company would also need to factor in costs associated with operational downtime at GrainCorp’s food manufacturing site at West Footscray due to unplanned equipment maintenance.

“Our team has maintained strong discipline despite the shift in industry conditions.

“We are focused on driving value from our integrated supply chain and continue to diversify the business through initiatives such as bulk materials handling and growth in our animal nutrition and agri-energy platforms, supported by our strong balance sheet.”

He said the change of Australia’s weather pattern out of El Niño was a “positive for growers”.

“Recent rainfall across key growing regions, although impacting summer-crop volumes and quality, has improved soil-moisture profiles, and therefore the prospects for the FY25 winter crop.”

GrainCorp’s FY24 guidance remains subject to a range of variables, including: second-half grain volumes, including sorghum receivals; timing and volume of grain exports; supply chain and oilseed crush margins; and new-season opportunities in the fourth quarter.

Source: GrainCorp