The GrainCorp Ltd (ASX: GNC) share price has been a very strong performer on Thursday morning.
In early trade, the integrated grain and edible oils company’s shares are up 12% to a multi-year high of $6.12.
Why is the GrainCorp share price rising today?
Investors have been bidding the GrainCorp share price higher following the release of an update on its guidance for FY 2021.
As you might have guessed from the positive reaction, this update has seen the company upgrade its profit expectations for the year.
According to the release, GrainCorp now expects its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $310 million to $330 million.
This is up from its previous guidance of $255 million to $285 million and is a material increase on FY 2020’s underlying EBITDA of $108 million.
Positively for shareholders and the GrainCorp share price, it is a similarly positive story on the bottom line. Management now expects its underlying net profit after tax to be in the range of $125 million to $140 million.
This is up from its previous guidance range of $80 million to $105 million. It also compares very favourably to a $16 million loss in FY 2020.
Though, management has warned that this upgraded earnings guidance remains subject to several market variables. These include the timing of grain exports, the strength of the new crop, and prevailing weather conditions.
What is driving this outperformance?
The company revealed that this strong performance is being driven by heightened demand for Australian grain. This has bolstered an already outstanding year for the agribusiness segment.
GrainCorp’s Managing Director & CEO, Robert Spurway, commented: “We are pleased to upgrade our FY21 earnings guidance, which reflects the strong performance of our east coast Australian (ECA) grains business, following the bumper 2020/21 harvest.”
“Post-harvest winter receivals and higher summer receivals, coupled with a favourable outlook for the upcoming winter crop, have supported strong export volumes, forward contracted sales and supply chain margins.”
“We’re seeing excellent demand for high quality Australian grain, particularly with recent weather related crop production challenges in the northern hemisphere, and July delivered our biggest month of contracted sales on record,” he added.
Mr Spurway also confirmed that GrainCorp is preparing for the upcoming winter harvest with a strong maintenance and capital investment program. He advised that the total FY 2021 capex was expected to be approximately $55 million. This includes approximately $50 million of sustaining capex.
While the latter is ahead of its target, it is due to the additional storage capacity and other upgrades to the ECA network being made in preparation for another large crop in FY 2022.
The GrainCorp share price is now up 45% since the start of the year.