Grains storage and transport company Graincorp Ltd (ASX: GNC) released its FY18 interim result on Friday, reporting a severe contraction in earnings caused by the adverse weather conditions that plagued Australian crops. At the time of writing, the stock was trading flat at $7.82.
Graincorp's downgrade comes only a few days after that of agricultural chemical company Nufarm Limited (ASX: NUF), as the unusually dry season resulted in poor crop production in eastern Australia – about 40% lower than last year.
Graincorp posted underlying EBITDA of $119 million, halved from the previous corresponding period, while underlying NPAT declined 64% to $36 million. The company cut its interim dividend from 15 cents to 8 cents per share.
Graincorp issued a prudent earnings guidance mid-February, with FY18 underlying EBITDA between $240 million and $265 million and underlying NPAT of $50 million to $70 million. At that point, the stock hit its 52-week low at $7.17, but price gains made since then have been largely cancelled by a 12% decline in the two weeks leading up to today's release, which confirmed that guidance.
"The current production outlook emphasises the importance of the steps we are taking to diversify Graincorp's grain origination footprint while keeping a strong focus on managing our cost base," commented CEO Mark Palmquist.
