Graincorp (ASX:GNC) share price slides as earnings swing to $139 million profit

A bumper profit is failing to bolster the Graincorp share price today…

| More on:
Man sits on a chair in field of grain with head in hands.

Image source: Getty Images

The Graincorp Ltd (ASX: GNC) share price is finding momentum today following the release of its full-year results for FY21.

Currently, shares in the grain handler are fetching $6.47, down 3.29%. Although, the Graincorp share price had been as high as $7.03 shortly after trading commenced.

Here’s a look at the results that have contributed to today’s moves.

A slam-dunk year of profits not enough for Graincorp share price

The Graincorp share price is not quite sure what direction to take today following the company’s FY21 results, bobbing and weaving between green and red. One thing is for sure though, the company’s bottom-line for the financial year was far from red.

According to the release, Graincorp experienced an exceptional year backed by a favourable season for grain crops. In turn, the company has been able to deliver towards the top end of its previous guidance range supplied back in August of this year.

In specific terms, $331 million in underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) was recorded during the full-year period. For comparison, FY20 did $108 million in EBITDA, indicating a more than threefold increase year on year.

Likewise, underlying net profit after tax swung from a $16 million loss to a mighty $139 million profit. As management pointed out, this improved result was partly due to a substantial increase in grain receivals across Graincorp’s sites, allowing it to demonstrate improved operational efficiencies of its various assets. Yet, this has failed to boost the Graincorp share price today.

Notably, the company plans on implementing further enhancements to its asset utilisation. That is in addition to investments in key growth areas such as animal nutrition, alternative protein, and AgTech.

The strong result also accommodated a final fully franked dividend of 10 cents per share, taking total dividends for FY21 to 18 cents. Further rewarding shareholders, Graincorp announced an on-market share buyback of up to $50 million. This is set to commence sometime early in the next calendar year.

What does Graincorp’s outlook look like?

While it was a bumper season in FY21, Graincorp’s management highlighted that current harvests are also well above average.

Commenting on this, Graincorp CEO Robert Spurway stated:

We expect the 2021-22 ECA winter crop currently being harvested to be well above average. This will support grain and oilseed receivals into GrainCorp’s country storage facilities and a continuation of the strong export program in FY22.

The anticipated strength of the 2021/22 crop and positive seasonal conditions will also have a positive flow-on effect for FY23, with high levels of carry-over grain expected to continue.

Despite the optimistic outlook ahead, the Graincorp share price is succumbing to selling pressure today.

Should you invest $1,000 in Graincorp right now?

Before you consider Graincorp, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Graincorp wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results