INVESTORS in GrainCorp have been alerted today to the severity of conditions affecting its grains business in 2019, with the company saying grains in the half-year to 31 March, 2019 would earn it around $40 million less than it had expected.
In a statement to the Australian Stock Exchange, GrainCorp chief executive officer Mark Palmquist cited ongoing drought as the reason for the drop in earnings before interest, taxes, depreciation and amortisation (EBITDA) terms.
The company statement said international trade tensions on grain flows were also to blame, along with drought impacting the sorghum crop.
The brevity of the statement to ASX was notable, perhaps as a curtain-raiser to the company’s half-year audited results scheduled for release early May.
“Clearly this is a disappointing outcome in a challenging period in international grain markets, compounded by the ongoing drought conditions in Australia.
“However, we have strong risk management processes in place and continue to closely monitor market conditions.”
GrainCorp’s 2018 annual general meeting held on 20 February tallied increasing through-the-cycle EDITDA benefits for the group of $55-80m per annum expected to flow after the company in 2017 combined storage, logistics and marketing into its new Grains business unit, as well as delivering initiatives in grain-stocks management and cost reductions.
New rail contracts, supply-chain integration, asset utilisation and expanded footprints in offshore offices and organics were also expected to assist the company in its current reporting period.
Today’s news tells that despite these moves, GrainCorp has suffered a lean start to 2019.