GrainCorp looks to Canada
BY ANDREW MARSHALL
01 Dec, 2011 03:30 AM
FLUSHED with success after a big Australian harvest last season, GrainCorp is now looking to opportunities in the deregulating Canadian cereal market.
The big grain handling, marketing and processing company, which also opened a European trading office in Hamburg this year, wants to develop a strong international marketing presence to more efficiently service its diverse overseas customer base.
Its own European and North American malt businesses, acquired in 2009, are also key beneficiaries if the company can become a more influential northern hemisphere grain buyer.
GrainCorp has just posted a 114 per cent lift in net profit after tax (NPAT) to $172 million after its eastern States grain harvest receivals from the 2010-11 harvest doubled and grain exports handled through its seven bulk ports jumped 131pc.
Last year's big harvest delivered a total 14.9m tonnes to GrainCorp's country sites and saw 8.1m tonnes pass through its port elevators.
Pre-tax earnings lifted from 212m in 2009-10 to $350m in the year ending September 30, and with carryover stocks still in hand the company expects to reap plenty of value from another large harvest now underway.
It rewarded shareholders with a special 20 cent dividend on top of its 15c final dividend (up from 10c last year), taking the full year payment 55c (up from 30c in 2009-10).
Chief executive officer, Alison Watkins, said after emerging from some particularly tough drought-hit years in the past decade the special dividends were a way of "rewarding shareholders when we have a better than normal year".
She said the new German office had already provided a better insight into the international grain market and offered an opportunity to provide continuity to customers by sourcing selectively outside Australia when the local harvest volumes were low.
At the same time GrainCorp was beefing up its domestic marketing and business strategies to provide a more efficient and tailored service to stockfeed users, particularly in the wake of some major mergers in the intensive livestock sector in recent years.
"These companies can't afford to operate on a hand to mouth purchasing program, so we're providing a lot more of their feed supply management and sourcing requirements," Ms Watkins said.
"We're getting better at working with feedlots and poultry businesses to establish what feed grains are really needed over the long term and working back up the supply chain right to the early accumulation stage."
But while industry analysts tip GrainCorp will take advantage of the Canadian Wheat Board looming dismantling to buy grain businesses in North America, Ms Watkins has played down the company's interest in seizing a chance to expand its Australian grain milling operations to New Zealand.
Goodman Fielder is considering selling its two Champion mills or seeking a joint venture partner, but Ms Watkins did "not necessarily see those assets as an obvious good fit" for GrainCorp.
She has also indicated GrainCorp's malt business aquisitions have probably hit saturation point for the time being after buying the Schill Malz business in Germany and a Western Australian plant this year.
Although GrainCorp Malt is viewed as a significant diversification enterprise capable of handy earnings, particularly when crop production conditions are tough in Australia, it has hit tough world market conditions itself this year - and the outlook is "soft" for 2012.
"It's a cyclical business, but it's about being ready for the upturn," said Ms Watkins who felt the cycle was now near its low point.
The malt business last year suffered a 16pc drop in earnings before interest, tax, depreciation and amortisation (EBITDA) compared to its 10-month result for 2009-10, with second half EBITDA down 30pc to $42.3m.
Ms Watkins said the company was taking advantage of malt business opportunities in Asia and the expanding craft beer market, while also focusing on ensuring the division's costs were competitive as it focused on its long term potential.
GrainCorp malt, which achieved 1.1 million tonne sales last year, has just officially opened its new $80m Barrett Burston Malting facility in Brisbane at Pinkenba - Queensland's first new malting plant in 40 years.
The malt house, adjacent to GrainCorp's Brisbane grain export terminal, has capacity to handle 86,000t a year and will export half its production to major brewers in Japan, South Korea, Thailand, Vietnam and the Philippines.
Meanwhile, in NSW at Newcastle where a new competitor plans to build a $28m grain loading facility near GrainCorp's export terminal, Ms Watkins reported good throughput and no obvious shipping delays or bottlenecks to justify a second bulk grain elevator.
She said there was ample capacity across the eastern seaboard.
While it was natural for potential competitors to "take a look", the proposed new Newcastle Agri Terminal would be an unnecessary and poor-yielding investment if long term grain export volumes were properly examined.
BY ANDREW MARSHALL
01 Dec, 2011 03:30 AM
FLUSHED with success after a big Australian harvest last season, GrainCorp is now looking to opportunities in the deregulating Canadian cereal market.
The big grain handling, marketing and processing company, which also opened a European trading office in Hamburg this year, wants to develop a strong international marketing presence to more efficiently service its diverse overseas customer base.
Its own European and North American malt businesses, acquired in 2009, are also key beneficiaries if the company can become a more influential northern hemisphere grain buyer.
GrainCorp has just posted a 114 per cent lift in net profit after tax (NPAT) to $172 million after its eastern States grain harvest receivals from the 2010-11 harvest doubled and grain exports handled through its seven bulk ports jumped 131pc.
Last year's big harvest delivered a total 14.9m tonnes to GrainCorp's country sites and saw 8.1m tonnes pass through its port elevators.
Pre-tax earnings lifted from 212m in 2009-10 to $350m in the year ending September 30, and with carryover stocks still in hand the company expects to reap plenty of value from another large harvest now underway.
It rewarded shareholders with a special 20 cent dividend on top of its 15c final dividend (up from 10c last year), taking the full year payment 55c (up from 30c in 2009-10).
Chief executive officer, Alison Watkins, said after emerging from some particularly tough drought-hit years in the past decade the special dividends were a way of "rewarding shareholders when we have a better than normal year".
She said the new German office had already provided a better insight into the international grain market and offered an opportunity to provide continuity to customers by sourcing selectively outside Australia when the local harvest volumes were low.
At the same time GrainCorp was beefing up its domestic marketing and business strategies to provide a more efficient and tailored service to stockfeed users, particularly in the wake of some major mergers in the intensive livestock sector in recent years.
"These companies can't afford to operate on a hand to mouth purchasing program, so we're providing a lot more of their feed supply management and sourcing requirements," Ms Watkins said.
"We're getting better at working with feedlots and poultry businesses to establish what feed grains are really needed over the long term and working back up the supply chain right to the early accumulation stage."
But while industry analysts tip GrainCorp will take advantage of the Canadian Wheat Board looming dismantling to buy grain businesses in North America, Ms Watkins has played down the company's interest in seizing a chance to expand its Australian grain milling operations to New Zealand.
Goodman Fielder is considering selling its two Champion mills or seeking a joint venture partner, but Ms Watkins did "not necessarily see those assets as an obvious good fit" for GrainCorp.
She has also indicated GrainCorp's malt business aquisitions have probably hit saturation point for the time being after buying the Schill Malz business in Germany and a Western Australian plant this year.
Although GrainCorp Malt is viewed as a significant diversification enterprise capable of handy earnings, particularly when crop production conditions are tough in Australia, it has hit tough world market conditions itself this year - and the outlook is "soft" for 2012.
"It's a cyclical business, but it's about being ready for the upturn," said Ms Watkins who felt the cycle was now near its low point.
The malt business last year suffered a 16pc drop in earnings before interest, tax, depreciation and amortisation (EBITDA) compared to its 10-month result for 2009-10, with second half EBITDA down 30pc to $42.3m.
Ms Watkins said the company was taking advantage of malt business opportunities in Asia and the expanding craft beer market, while also focusing on ensuring the division's costs were competitive as it focused on its long term potential.
GrainCorp malt, which achieved 1.1 million tonne sales last year, has just officially opened its new $80m Barrett Burston Malting facility in Brisbane at Pinkenba - Queensland's first new malting plant in 40 years.
The malt house, adjacent to GrainCorp's Brisbane grain export terminal, has capacity to handle 86,000t a year and will export half its production to major brewers in Japan, South Korea, Thailand, Vietnam and the Philippines.
Meanwhile, in NSW at Newcastle where a new competitor plans to build a $28m grain loading facility near GrainCorp's export terminal, Ms Watkins reported good throughput and no obvious shipping delays or bottlenecks to justify a second bulk grain elevator.
She said there was ample capacity across the eastern seaboard.
While it was natural for potential competitors to "take a look", the proposed new Newcastle Agri Terminal would be an unnecessary and poor-yielding investment if long term grain export volumes were properly examined.
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