GRAINCORP has announced a profit downgrade the week before its half year results come out.
The bulk handler and grain marketer is set to earn less than half it did last year, as investors reacted to the news of the downgrade by sending GrainCorp shares down 3.57 per cent to $8.11.
Full year earnings estimates before interest, tax, depreciation and amortisation (EBITDA) have been revised down to between $250-$280 million, compared to $270-$310 million estimated in February.
This figure compares to last year when the company was riding high on the back of soaring soft commodity values and a massive harvest down the east coast where it operates its bulk handling facilities and posted full year EBITDA of $565 million.
For the half year EBITDA is expected to be $164 million, compared to $383 million last year, while net profit is expected to be just over a quarter of last year's figure, at $57 million, compared to $200 million.
GrainCorp managing director Robert Spurway put a positive spin on the news, saying the company had demonstrated 'resilience' as the grain market returned to more normal conditions.
"Our preliminary first half result displays resilience as grain and oilseed markets normalise following three outstanding years for the industry," he said.
"As expected, we have experienced a decline in overall volumes handled across east coast Australia (ECA) and lower end-to-end supply chain and crush margins relative to the first half of 2023."
He said drought in northern NSW and Queensland last year had not helped.
"Strong volumes in Southern NSW and Victoria have been offset by below average conditions in Queensland and northern NSW."
He also said the dry season last year in WA had hit grain accumulation and exports earnings.
Mr Spurway will front investors at next week's half year results presentation and will face the music on a number of topics, not least GrainCorps' crop protection agreement with insurance business White Rock.
The derivatives-based agreement with the insurer sees GrainCorp pay premiums in above average years but get payments in poor years, with the aim to smooth out some of the notorious peaks and troughs in bulk handling earnings.
However with early Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimates forecasting yet another above average season for east coast Australia GrainCorp may be forced to pay White Rock for a fourth consecutive year.