Margin Pressures Loom Despite GrainCorp’s Robust 1H25 Results and Buy-Back Boost

Robust First Half Performance

GrainCorp Limited has delivered a strong start to FY25, reporting an underlying EBITDA of $202 million for the six months ending 31 March 2025, up from $164 million in the prior corresponding period. This performance was underpinned by a substantial East Coast Australia (ECA) crop of 33.8 million metric tonnes, significantly higher than the previous year, and solid operational execution across its integrated supply chain.

The company handled a total of 29.5 million metric tonnes of grain, capitalizing on favorable production volumes and export opportunities, particularly in chickpeas and canola seed. The Animal Nutrition segment benefited from the acquisition of XFA (Performance Feeds and Nutrition Service Australia), which contributed $14 million EBITDA, exceeding initial expectations.

Upgraded Guidance and Capital Management

Reflecting the strong first-half results and positive market conditions, GrainCorp upgraded its FY25 underlying EBITDA guidance to a range of $285 million to $325 million, with underlying net profit after tax (NPAT) expected between $65 million and $95 million. This upgrade signals confidence in the company’s ability to navigate a challenging global margin environment while leveraging its strategic assets.

In line with its disciplined capital management framework, GrainCorp increased its on-market share buy-back program from $50 million to $75 million, having completed $15 million to date. The company also declared a total interim dividend of 24 cents per share, comprising a fully franked ordinary dividend of 14 cents and a special dividend of 10 cents, continuing its track record of returning value to shareholders.

Strategic Investments and Sustainability Initiatives

GrainCorp is actively investing in supply chain efficiencies, including a $7 million rail upgrade at Condobolin, New South Wales, aimed at improving freight capacity and reducing truck movements. The company’s business transformation program is progressing, targeting an EBITDA uplift of $20 to $30 million through enhanced operational efficiencies and modernized systems.

On the sustainability front, GrainCorp is advancing its GrainCorp Next initiative to develop a low-emission, nature-positive supply chain, initially focusing on the canola value chain. The company is also collaborating with partners Ampol and IFM Investors on renewable fuels development, aligning with government policies and the growing demand for sustainable aviation fuel and renewable diesel.

Balance Sheet Strength and Risk Management

GrainCorp maintains a strong balance sheet with $296 million in core cash as of 31 March 2025, despite increased working capital requirements due to the larger crop. The Crop Production Contract, designed to smooth earnings volatility, reached its $270 million cap following the FY25 payment, providing a degree of earnings stability through the cycle.

While global grain and oilseed supply remains robust, the company acknowledges margin pressures, particularly in international markets and oilseed crush margins. Nevertheless, GrainCorp’s diversified portfolio, strategic infrastructure, and focus on innovation position it well to adapt to evolving market dynamics.