GrainCorp posts dampened FY16 guidance

Grains handler GrainCorp says its near-term outlook has been affected by continued challenging conditions in the Australian agriculture sector.

GrainCorp is facing a challenging year, with smaller crops, dry weather and tough competition. (AAP)

Australia's biggest grains handler, GrainCorp, says the Australian agriculture sector continues to face challenging conditions, affecting the group's near-term outlook.

"The agriculture sector in Australia continues to face the same macro conditions experienced in FY15 (fiscal 2015), including low grain stocks in eastern Australia, increased availability of grain globally and cheap ocean freight reducing Australia's export competitiveness," GrainCorp managing director Mark Palmquist said on Friday.

"These headwinds have dampened the immediate outlook, but not the benefits of the progress we have made across the business on our strategic initiatives."

GrainCorp said on Friday that it expects underlying net profit, which excludes significant items, to come in between $40 million and $55 million for its 2016 fiscal year.

Underlying earnings before interest, tax, depreciation and amortisations (EBITDA) is expected to be in the range of $240 million to $270 million.

The forecast compares with underlying net profit of $45 million, and underlying EBITDA of $235 million in fiscal 2015.

AAP/Graincorp

Mr Palmquist said another below-average winter crop and low levels of grain in storage in eastern Australia from the previous year was affecting GrainCorp's storage and logistics business.

Its market share was still in line with the last harvest, but prevailing global commodity conditions were delaying the export program.

GrainCorp expects to export three million tonnes of grain from eastern Australia, down from 3.5 million in 2015.

Mr Palmquist said the outlook for GrainCorp's malt business was solid, and there had been good progress with growth initiatives in the oils business.

But global commodity conditions were putting pressure on the food (edible oils) business.

"We remain firmly focused on the delivery of our strategy to diversify earnings and improve efficiencies," Mr Palmquist said.

"We are confident our strategy will continue to deliver significant value as cycles return to normal."

GrainCorp will release it half-year financial results on May 11.

Shares in GrainCorp were 42 cents, or 4.98 per cent, lower at $8.01 at 1020 AEDT.