GrainCorp shares jump on improved forecast

22 May 2012, 4:27 pm   -   Source: AAP

Looking beyond the current fiscal year, GrainCorp is upgrading its equipment in anticipation of another potentially large harvest.

GrainCorp expects another large national harvest after a bumper crop helped lift first half profit by more than 50 per cent and upgraded its full year profit forecast.

The better news pushed up shares in the grains marketer and malt producer by around seven per cent.

GrainCorp said on Tuesday that looking beyond the current fiscal year, it was upgrading its equipment in anticipation of another potentially large harvest.

"While the crop forecasts are generally positive and planting is underway in many areas, most growers in eastern Australia would like good rains in the next few weeks to ensure their crops have a positive start so as to make use of the good subsoil moisture already present," GrainCorp chief executive Alison Watkins said.

GrainCorp expects that going into the 2012/13 fiscal year, it will have around 4.5 million tonnes of grain in storage at the start of the period ("carry-in"), compared to 6.0 million tonnes of carry-in at the start of 2011/12.

Carry-in for 2012/13 is expected to be lower, reflecting GrainCorp's expectation to export more grain and the carry-in in 2011/12 was at a record due to the large crop in 2011.

GrainCorp shares were up 76 cents to $9.65 at the close of trade on Tuesday.

GrainCorp reported a $133.7 million net profit for the six months to March 31, up 52.5 per cent on its prior corresponding period figure of $87.7 million.

Ms Watkins said the company now expected to make a full year net profit of between $185 million and $205 million - excluding significant items - up from its previous forecast of $165 million to $185 million.

Annual net profit including $17 million in significant items was expected to be in the range of $200 million to $220 million.

Strong forward bookings for exports through GrainCorp's ports, improving sales of malt, and improving earnings were behind the upgrade.

GrainCorp expects to export about 10 million tonnes of grain in the fiscal year to the end of September.

"In addition, we are anticipating slightly stronger malt sales of 1.35 million tonnes," Ms Watkins said.

Ms Watkins said that softer demand for beer and excess global malting capacity were expected to persist and the business would remain quite challenging.

City Index chief market analyst Peter Esho said GrainCorp's revised underlying full year guidance was above market estimates of around $176 million.

"GrainCorp continues to show that there are many strong Australian companies with solid strategic importance generating healthy profits outside of the materials and energy sectors," Mr Esho said.

"As global grain producers consolidate, GrainCorp finds itself in a very attractive position."

GrainCorp said its first half result was driven by the record six million tonne carry-in, grain receivals of 11.6 million tonnes (down from 14.4 million tonnes in the prior corresponding period), a record five million tonnes in grain exports, and lower harvest-related operating costs.

GrainCorp declared a fully franked interim dividend of 15 cents per share, plus a fully-franked special dividend of 15 cents.

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