The Graincorp Ltd (ASX: GNC) share price climbed 10% today after the agriculture ASX share announced its HY23 result.
This $1.6 billion business is an integrated grain and edible oils business with a “market-leading” presence in the east coast of Australia where it’s the largest grain storage and handling business.
HY23 result
Here are some of the highlights from the company’s result:
- EBITDA (EBITDA explained) of $383 million, down 10%
- Net profit after tax (NPAT) of $200 million, down 18.7%
- Total interim dividend declared of 24 cents, the same as last year
- FY23 guidance was strongly increased
Management said that both its agribusiness and processing segments contributed to the strong performance. It boasted of outstanding operational execution and solid supply chain margins.
The company’s export program ran at close to “full capacity” with 4.4mmt of grain and oilseeds exported during the half.
Graincorp noted that it continues to strengthen its core business and, during the half, increased output and asset utilisation across several of its businesses. This included oilseed crush volumes, which were up 10% on the first half of FY22, and bulk material volumes (including woodchips and cottonseed), which were up 15% on the FY22 first half. That’s helpful for the Graincorp share price, in my opinion.
The business also revealed that it’s conducting preliminary assessments for the creation of new oilseed crush capacity. Any increase in capacity will give the business an opportunity to improve its position as a supplier of renewable fuel feedstocks – this is an area that’s expected to see growing demand.
Graincorp upgraded its average EBITDA through-the-cycle to $310 million, up from $240 million. This is an estimate based on a multi-year crop cycle incorporating both below-average and above-average crop years.
FY23 guidance and thoughts on the Graincorp share price
An important part of the investor excitement today may have been due to the upgrade of the company’s profit expectations.
FY23 EBITDA is expected to now be between $500 million and $560 million, up from the previous estimate of $470 million to $530 million.
FY23 net profit is expected to be between $220 million and $260 million, up from the previous estimate of $180 million to $220 million.
It may be obvious to say, but a 20% jump in the profit forecast is an exciting development. The business is benefiting from good trading conditions, it’s in good financial shape and FY24 could be another good year.
However, when it comes to agricultural ASX shares, I think investors should wait for the commodity price to be at a weak point, not a strong point, to invest. Therefore I think investors should be patient and wait for a better price.
