April 11, 2022

Graincorp increases profit view as it expects to benefit from Ukraine war

Australia-based agribusiness firm Graincrop expects its underlying profit for fiscal year 2022 to increase 2.5 times higher compared to 2021 as it expects to benefit from supply constraints caused by Russia's invasion into Ukraine, which pushed its share prices to a record high, Reuters reported.

Australia is expected to export record volumes of wheat as buyers seek for replacement suppliers to replace Russian and Ukrainian cargos. Australia is the sixth biggest wheat exporter in the world.

Graincrop share increased 8.9% to a record AUD 9.46 (US$7.04; AUD 1 = US$0.74).

Robert Spurway, chief executive officer of Graincrop, said Black Sea region trade disruptions have resulted in uncertainty in global grain markets, as buyers seek alternate supply sources.

Graincorp said its ports were running at near capacity despite disruptions caused by flooding on the east coast of the country.

The company said shipping slots have been fully booked up since March on the eastern and western coasts of Australia. This follows a second straight year of a record wheat crop, which has dampened wheat prices in Australia.

RBC Capital Markets analysts said the firm can control prices because their logistical assets act as a bottleneck to exports, which is beneficial when other supply chains are tight.

Graincorp projects its annual underlying net profit after tax between AUD 310 million (~US$231.82 million) and AUD 370 million (~US$276.72 million). This is higher than the AUD 139 million (~US$103 million) the firm reported in 2021.

The company also said its processing business was also performing strongly, pointing towards higher export supply-chain margins and a good crop season.

-      Reuters