GrainCorp (ASX:GNC) has outperformed expectations in FY21, driven by a record east coast grain crop, strong demand, stellar Processing results, and strategic initiatives. The outlook for FY22 remains optimistic with another anticipated above-average crop.
FY21 Financial Results
In FY21, EBITDA soared to A$330.8m, surpassing the guidance range of A$310-330m. NPAT stood at A$139.3m, within the A$125-140m guidance range. The company declared a final dividend of 10cps ff and initiated a A$50m on-market share buyback.
GrainCorp's success is attributed to a record east coast grain crop, robust global demand, and the outstanding performance of strategic initiatives, notably in Processing (EBITDA A$77.7m, up 71%). The company improved market share, enhanced grower engagement, and optimized its supply chain.
Despite net debt rising to A$599.2m, core debt remained minimal at A$1.2m. Investments continued in areas like animal nutrition, alternative protein, and AgTech.
FY22 Outlook
Anticipating an above-average 2021/22 crop, GrainCorp expects significant benefits from the 4.3mt carry-over grain from FY21. This positions the company to commence high-margin grain exports immediately in FY22. Fee increases and sustained strong margins are forecasted, supported by robust demand and elevated crush margins due to high vegetable oil prices.
Investment View
Earnings forecasts for FY22 have been upgraded by 15.9% for EBITDA and 24.3% for NPAT. The positive crop outlook may also contribute to stronger FY23 earnings.
With the SOTP valuation rising, reflecting earnings upgrades, and a favourable operating environment, an Add rating is maintained. The upcoming ABARES Crop report on November 30 is expected to be a pivotal event for the stock.
