Grain logistics, marketing and malt producer GrainCorp (ASX: GNC) has today reported solid results for the financial year ending 30 September 2013.
Despite a significant rise in revenue from $3.3 billion to $4.5 billion thanks largely to the inclusion of the oils division, earnings before interest, tax, depreciation and amortisation (EBITDA) fell slightly from $414 million to $395 million. While the oils division added $75 million in EBITDA, it was not enough to make up for the highly profitable storage and logistics division, which suffered a $71 million fall in EBITDA due to a decline in grain volumes received. Grain volumes fell from 12.2 million tonnes to 10.4 million tonnes, a decline of nearly 15%.
Excluding significant items of costs related to acquisitions, integration of the oils division and Archer Daniels Midland's takeover offer, GrainCorp reported a net profit after tax of $175 million, which was down 15% on the prior year's $205 million.
The board declared a final dividend of 20 cents per share (cps) which brings the full year dividends to 45 cps.
The outlook
With the current season's harvest well underway, CEO Alison Watkins commented that, "Drought conditions in Queensland and Northern NSW have negatively impacted yields in those regions, while recent frosts have affected many areas further south."
For GrainCorp's storage and logistics division, this crop outlook does not bode particularly well, with the outlook comments including the following: "In relation to the outlook for FY14, GrainCorp expects a below average carry-in of 2.3 million tonnes and the potential for Storage & Logistics' margins to be further impacted by the crop profile, with grain production for the current harvest concentrated in southern NSW and Victoria, where margins are lower and competitive intensity is greater."
The takeover
There was little in the way on new information to report with regards to the takeover offer for GrainCorp by ADM. However management restated that the Treasurer's decision was expected by 17 December and that the Chinese Ministry of Commerce is also required to provide regulatory approval. ADM's offer remains open until 28 February 2014 with the potential to extend.
Foolish takeaway
Many investors are looking for ways to access the world's burgeoning demand for food. Listed companies such as GrainCorp, Australian Agricultural Co (ASX: AAC) and Select Harvests (ASX: SHV), amongst others, offer investors different exposures to agriculture. However as Graincorp's results and outlook highlight, the weather is an ever-present input that has a significant effect on the earnings of most agriculture-exposed businesses.
