Why the GrainCorp (ASX:GNC) share price has climbed today

The Graincorp (ASX:GNC) share price stabilises after providing its FY21 earnings guidance today. We look at the takeaways and the big 113%.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published February 11, 2021 4:52 pm AEDT

The Graincorp Ltd (ASX: GNC) share price zoomed up today after the company provided earnings guidance for its 2021 financial year in an update to the market.

Shares in the Australian grain company opened 5.8% higher at $4.93 this morning. Since then, the Graincorp share price has trended downwards, trading at $4.75 at the time of writing.

asx rural real estate shares represented by green up trending arrow sitting in a field of green crops — Image source: Getty Images

Details from the guidance

In today's guidance, Graincorp advised it expects to report FY21 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $230 million to $270 million. This would suggest an increase of 113% from FY20's EBITDA of $108 million on the low range estimate.

The company also expects net profit after tax (NPAT) for FY21 will come in at $60 million to $85 million. In comparison, Graincorp reported a net loss of $16 million on its FY20 results.

The company added that this would include the $70 million maximum payment threshold, payable by Graincorp, under the crop production contract.

Graincorp CEO commentary

Commenting on the guidance, Graincorp CEO Robert Spurway said:

We experienced near optimal conditions across much of eastern Australia during the recent winter cropping season and this has translated into one of the largest crops in recent history.

The business reportedly has recorded its largest grain receivals in recent history, hitting 13.9 million tonnes. This figure is even greater than Graincorp's last season of bumper crops in 2016-17, which amounted to 12.9 million tonnes.

Keeping with the times

In its AGM presentation also released today, Graincorp noted that the company has remained resilient to COVID-19 impacts by accelerating contactless deliveries via its digital offerings CropConnect and FastWeigh.

The presentation said 10,000 grain growers were now registered on the CropConnect platform.

Graincorp share price snapshot

The Graincorp share price has gained 10% over the past 12 months. For comparison, the S&P/ASX 200 Index (ASX: XJO) is down 3.3% in the same period.

In late March of 2020, the company experienced its 52-week low, clocking in at $2.90. That means the Graincorp share price has appreciated 63.4% since March last year.

Based on the current Graincorp share price, the company has a market capitalisation of $1.07 billion.

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