The GrainCorp Ltd (ASX: GNC) share price is making hay today, up nearly 15% at the time of writing after the grain and oils business upgraded its FY21 guidance.
This continues the company’s strong run, with the GrainCorp share price jumping almost 50% year-to-date.
GrainCorp share price chart
GrainCorp is a food ingredient and agribusiness company that connects growers to domestic and international consumers. The company has a market-leading presence as the largest grain storage and handling business along the east coast of Australia (ECA) and is the number one edible oil processor and oilseed crusher in Australia and New Zealand.
GrainCorp upgrades guidance
On the back of heightened demand following the bumper 2020/2021 harvest, the ASX agribusiness is upgrading its FY21 earnings guidance.
FY21 underlying EBITDA has been raised from $255-$285 million to $310-$330 million, while FY21 underlying net profit after tax (NPAT) has been lifted from $80-$105 million to $125-$140 million. Taking the midpoint of these ranges, GrainCorp has upgraded EBITDA guidance by 19% and NPAT guidance by a whopping 43%.
“Post-harvest winter receivals and higher summer receivals, coupled with a favourable outlook for the upcoming winter crop, have supported strong export volumes, forward contracted sales and supply chain margins.”
“We’re seeing excellent demand for high quality Australian grain, particularly with recent weather related crop production challenges in the northern hemisphere, and July delivered our biggest month of contracted sales on record,” said CEO Robert Spurway.
The company noted its upgraded earnings guidance remains subject to several market variables, including the timing of grain exports, the strength of the new crop and prevailing weather conditions.
Total exports on the up
There was more good news as GrainCorp provided an update on its expectations for total exports. The company anticipates total exports for FY21 will land at the higher end of previous expectations of between 7 and 8 million metric tonnes.
What’s more, as a result of higher than expected summer corp receivals, grain carry out as 30 September 2021 is also expected to land at the high end of the range of 3.5 – 4.5 million metric tonnes.
Gearing up for the winter harvest
GrainCorp is preparing for the upcoming winter harvest with a strong maintenance and capital investment program. Total FY21 capital expenditure (capex) is expected to be approximately $55 million, including approximately $50 million of sustaining capex.
This is higher than the company’s sustaining capex target of $35-45 million, with the increase due to the additional storage capacity and other upgrades to the ECA network being made in preparation for another large crop in FY22.
“We’re hearing reports of good potential in the upcoming crop, based on factors including area planted, sub-soil moisture levels, season-to-date rainfall, and longer-term weather forecasts,” said Mr Spurway.
The company also confirmed it is recruiting over 3,000 harvest casuals to help manage the demand across 160 up-country sites and ports.
Now what?
GrainCorp operates on a different financial calendar to most, with a financial year ending 30 September. The company is set to release its final FY21 results on 11 November 2021.
In the meantime, to stay up to date with all the companies reporting FY21 results this August, make sure to bookmark Rask Media’s ASX reporting season calendar.
