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GrainCorp share price falls despite soaring earnings and dividend


Agricultural ASX share price on watch represented by farmer in field looking at tablet computer.

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The GrainCorp Ltd (ASX: GNC) share price is having a difficult morning.

At the time of writing, the grain exporter’s shares are down 4% to $7.65.

Why is the GrainCorp share price falling?

Investors have been hitting the sell button today after the company released its full year results.

Here’s a summary of how it performed in FY 2022:

  • EBITDA up 112% to $703 million
  • Net profit after tax up 174% to $380 million
  • Fully franked final dividend of 14 cents per share
  • Special dividend of 16 cents per share
  • Total dividends of 54 cents per share, up from 18 cents per share

What drove this strong growth?

GrainCorp’s earnings growth was driven by strong performances from across the business.

The Agribusiness segment reported a 127% increase in EBITDA to $624 million. This reflects an increase in total grain handled (41.1mmt vs 34.4mmt) and strong supply chain margins for grain exports. GrainCorp CEO Robert Spurway advised that the company operated its “ports at close to full capacity in FY22, exporting 9.2mmt of grain and oilseeds to international markets.”

This was supported by the Processing segment, which reported a 63% increase in EBITDA to $127 million. This was driven by strong oilseed crush margins and higher volumes driven by efficiency improvements at GrainCorp’s Numurkah crush plant.

Crush margins were supported by strong demand for vegetable oils, arising from global production challenges in canola and soybean, disruption of supply out of the Black Sea region, and growing markets in renewable fuel feedstocks.

Outlook

GrainCorp has warned that inclement weather has been impacting operations. Spurway commented:

Recent heavy rainfall across large parts of ECA has delayed the harvest by several weeks and continues to present challenges for growers, their communities and local businesses.

While flooding will impact both yield and quality in parts of ECA, we have a high level of grain inventory in our network, and we expect a large export program to continue throughout FY23.

Spurway also confirmed that, as expected, margins softened in the second half of FY 2022. He explained:

The exceptional margins achieved in the first half of FY22 moderated in the second half as expected, as supply from the northern hemisphere improved. Pleasingly, domestic and global demand for feed and milling grades remains strong. Oilseed crush margins are expected to remain favourable, and we are well positioned to continue operating our crushing facilities at high utilisation.

Nevertheless, Spurway remains positive about the company’s prospects in FY 2023. He concludes:

GrainCorp is well positioned for the new financial year, with our businesses performing well, a strong balance sheet and pipeline of growth opportunities.



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