May 13, 2020 / 11:43 PM / 13 days ago

UPDATE 2-Australia's GrainCorp flags higher exports, swings to first-half profit

* Flags higher grain exports in second-half

* Says well placed after business repositioning

* GrainCorp among top pct gainers on benchmark (Adds share movement, United Malt capital raise, results and outlook)

May 14 (Reuters) - Australia’s GrainCorp pointed to higher grain exports in the second half of the year on Thursday as restructuring efforts helped the bulk grain handler return to a first-half profit, sending shares up 18%.

After battling a three-year drought that ravaged farms across eastern Australia and wilted output, GrainCorp said it was now well placed after the sale of its Australian bulk liquid terminals business and the demerger of its malting division.

The spin-off resulted in United Malt Group listing last month and was part of GrainCorp’s push to focus on its core grain processing division.

Statutory net profit after tax was A$388 million ($249.45 million) for the six months ended March 31, compared to a loss of A$59 million last year. On a underlying basis, GrainCorp swung to a profit of A$55 million.

While the coronavirus pandemic and the lockdowns wreaked havoc on economic activity, food and agriculture were deemed essential services and helped the Sydney-based firm weather the downturn.

“Market conditions have improved considerably, with widespread rainfall across much of eastern Australia providing optimism for a much larger crop later this year,” Chief Executive Robert Spurway said in a statement.

“We are well progressed with our harvest readiness.”

Spurway, who took over in December, also attributed the turnaround to steps taken to manage crop volatility, along with a repositioning of the group’s business.

To reduce cash flow volatility, GrainCorp locked in a 10-year derivatives contract with insurance broker Aon Plc last year that would see it receive extra payments in times of drought and lower grain production.

GrainCorp shares climbed as much as 17.9% to A$3.88, the biggest increase since March 24. The stock was among the top gainers on the benchmark index.

Revenue in the half rose 3.4% to A$1.96 billion.

The company did not declare an interim dividend.


The newly spun off United Malt on Thursday announced plans to raise about A$165 million through a placement and share purchase plan to shore up its balance sheet and guard against coronavirus-induced uncertainty.

United Malt, which reported underlying profit of A$28.5 million in its first-half results, said demand for beer had fallen as restaurants and pubs have closed.

“We maintain flexibility to curtail some production capacity if required and reduce costs to meet lower demand in the near-term,” it said in a separate statement.

Trading in shares of United Malt was halted. ($1 = 1.5555 Australian dollars) (Reporting by Shriya Ramakrishnan in Bengaluru; Editing by Arun Koyyur and Christian Schmollinger)

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