Australia's biggest grains handler, GrainCorp, expects another year of below-normal grain production in eastern Australia as El Nino brings dry weather.
GrainCorp says hot and dry conditions in September and October may put at risk recent grain production estimates for winter crops in eastern Australia, and it is too early to estimate summer crop production.
"Weather wasn't the best in September and October. Some of our areas experienced dry conditions, so we have to see how the forecasts come out," chief executive Mark Palmquist said on Thursday.
"But we're anticipating that there's some downside risk to forecasted estimates that are out there to date.
"We expect receivals and exports to be roughly at similar levels or slightly below fiscal 2015."
Recent forecasts put eastern Australia's winter crop production - wheat, barley, canola and sorghum - at 16.1 million metric tonnes.
Mr Palmquist said GrainCorp had 1.6mmt tonnes of grain in storage (carry-in) at the end of fiscal 2015 compared to 1.9 million tonnes a year earlier.
The very low carry-in and another smaller crop were likely to limit export opportunities from eastern Australia in fiscal 2016, and put pressure on GrainCorp's grain receivals.
GrainCorp has received 2.1mmt of wheat, barley, canola and sorghum into its country storage facilities in the year-to-date.
Mr Palmquist's comments came as GrainCorp reported that its net profit dropped to $32.1 million in the year to September 30, down from $50.3 million in the prior year.
The result was in line with a trading update GrainCorp released on November 3.
GrainCorp's grains business had a tough year in fiscal 2015 on the back of the last harvest's smaller crop in eastern Australia.
The smaller crop restricted the volumes of grain available for Graincorp's storage and logistics business, and the group's marketing operations.
Total receivals at country receival sites in fiscal 2015 were 7.4 million metric tonnes, down from 8.0 mmt in fiscal 2014.
GrainCorp exported 3.5mmt, down from 4.4mmt.
Mr Palmquist said GrainCorp's other operations - including malt, edible oils, and flour - performed solidly, which showed the importance of its commitment to diversification.
GrainCorp's processing businesses generated about 85 per cent of the group's earnings in fiscal 2015.
The malt business was strong and was well positioned as the craft beer sector continues to grow, especially in North America. Other markets are showing emerging signs of growth.
Morningstar analyst Daniel Meuller said GrainCorp was doing it tough at the moment given the dry weather.
"A lower grain harvest has really hurt their profitability, and it looks like it is set to continue into the 2016 financial year," he said.
Shares in GrainCorp were 10 cents lower at $8.00.
GRAINCORP FACES ANOTHER CHALLENGING YEAR
* Full year net profit of $32.1m, down 36.2pc from $50.3m
* Revenue of $4.08b, down 0.2pc from $4.09b
* Final dividend of 2.5 cents, fully franked, down from 5.0 cents
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