EAST COAST grains giant GrainCorp has continued its run as a market darling – this week announcing a second profit upgrade, which spurred on a 6.7pc jump in its share price.
The company is now expecting a 2009 full-year profit of up to $63 million, a sharp rebound after the company posted a drought-driven $20 million loss in 2008.
The profit range of between $53 and 63 million is close to triple the company’s February estimates.
Shares have risen 7.5pc this week, to be at $8.06 on Tuesday.
GrainCorp’s good news, attributed to better than expected grain receivals, comes following less positive news from other large agribusinesses, including an AWB profit downgrade and a further fire sale of Elders assets in recent weeks.
A combination of better than expected grain receivals, in excess of 9.5 million tonnes, and port throughput of between 4.5 and 5 million tonnes was the crucial driver in the company’s second profit upgrade in three months.
In May, GrainCorp raised its profit expectations to $37-42 million, up from the February forecast of $23-28 million.
The changing nature of the wheat export market in the deregulated environment has meant that more grain is entering the bulk system later, rather than being delivered directly off the header.
Farmers are instead increasingly storing grain on-farm before marketing it post-harvest, meaning the grain enters GrainCorp’s system later.
GrainCorp confirmed that there were post-harvest deliveries of more than one million tonnes across its network, a vast increase on the traditional pattern.
This extra throughput is a key driver in the profit upgrade.
A solid northern summer crop has also provided a handy late-year earnings boost for GrainCorp.
Earnings from the provision of port terminal services have been boosted by significantly higher than average sorghum export volumes through GrainCorp terminals at Mackay, Gladstone, Fisherman Islands and Carrington, following 2 sorghum crops that were significantly above average.
While the market had anticipated a profit forecast near the top of the previous range, the size of the profit increase has been more than some analysts expected.
The business is touting deregulation, rather than improved seasonal conditions, which created extra tonnage through GrainCorp’s northern catchment area, as the major fundamental factor behind the positive numbers.
GrainCorp managing director Mark Irwin said the removal of the single desk encouraged competition and a more robust export program.
"GrainCorp provides port terminal services to more than 10 bulk grain exporters, most of whom are exporting wheat," Mr Irwin said.
"The number of customers we service shows the effectiveness of our long standing policy of providing open access to all exporters."
The market’s focus will now switch to new season prospects, which again look good for a good grain production year in northern NSW, and have potential through Victoria and southern NSW, although spring rain will be needed.
The forecast El Nino event and a drier than average spring associated with such an event, would cut crop estimates back through southern areas.
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