Why the Graincorp Ltd share price is springing back today 

Credit: Keith Weller

Graincorp Ltd (ASX: GNC) share price hit a 52-week low of $7.17 today, after the company posted a decline in profits, but the share price is now up 34% to $7.63, as investors buy the dip and lie in wait.

The recent poor harvest in eastern Australia affected the company’s grain handling business, limiting export opportunities. Since October 2017, Graincorp’s received only 5.8 million tonnes of grain into its network, compared to a 15 million tonnes input over 2017. 

The earnings guidance released today predicts an underlying EBITDA for FY 2018 of between $240 million and $265 million, a 32% to 38% decline from 2017. The guidance for underlying NPAT is in the range of $50 million to $70 million, 51% to 65% less than last year, despite the $18 million tax benefit on Graincorp’s American malt operations, stemming from recent changes in US corporate taxation. 

These results may not seem uplifting, but they’ve been largely anticipated, causing the Graincorp share price to drop 17% in the last three months, before today’s rebound.  

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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