‘Bumper crop’: Graincorp (ASX:GNC) share price rockets 13% on guidance update

The company’s shares are starting the week off on a positive note.

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Key points

  • Graincorp shares accelerate 13% on robust performance and favourable outlook for FY22
  • FY22 EBITDA guidance in range of $480 million to $580 million
  • FY22 NPAT expected to be between $235 million and $280 million

The Graincorp Ltd (ASX: GNC) share price is storming higher following the company’s business update to investors this morning.

At the time of writing, the grain exporter’s shares are up a sizeable 12.76% to $8.13. In comparison, the All Ordinaries (ASX: XAO) is down 0.37% to 7,391.6 points.

What did Graincorp announce?

Investors are fighting to get a hold of Graincorp shares after the company provided its FY22 earnings guidance.

According to its release, Graincorp advised that it expects to report a bumper FY22 result subject to several market variables.

As such, the company is forecasting earnings before interest, tax, depreciation and amortization (EBITDA) in the range of $480 million to $540 million. This reflects a potential increase of up to 63.14% based on FY21’s EBITDA result of $331 million.

In addition, FY22 net profit after tax (NPAT) is estimated to come between $235 million and $280 million. When comparing against FY21’s NPAT of $139 million, this represents a potential gain of up to 101%.

Management noted several factors which have led Graincorp to achieve a strong outlook for FY22. This includes its supply chain execution, continued delivery of operating initiatives, and high global demand for Australian grain and oilseeds.

The company faced numerous challenges such as flooding and a wet, interrupted harvest, whilst working under COVID-19 restrictions.

While minimal supply chain issues were experienced, over 1.5 million tonnes of additional storage capacity were provided for growers. This resulted in multiple site receival records across the network for the 21/22 harvest.

Combined grain intake across the harvest period has totalled 13.7mmt year-to-date, supplemented with a high opening grain inventory position of 4.3mmt.

Graincorp expects to see total receivals of 16mmt to 17mmt (FY21: 16.5mmt), and exports of 8.5mmt to 9.5mmt (FY21: 7.9mmt) for FY22.

Management commentary

Graincorp managing director and CEO Robert Spurway touched on the company’s performance, saying:

GrainCorp delivered an excellent result in FY21, and I am pleased to report that we expect this performance to be further improved in FY22.

In addition to a second consecutive bumper crop and the global demand for Australian grain, our strong start to FY22 demonstrates the efficiency of our supply chain and the resilience of our industry.

…The strong harvest, coupled with supply shortages and adverse weather conditions in the northern hemisphere, is driving excellent global demand for Australian grain and oilseeds and strong supply chain margins for grain exports.

Graincorp share price summary

Over the past 12 months, the Graincorp share price has increased 96%. The company’s shares are down 2% year to date but are within reach of their 52-week high of $8.70.

Based on today’s price, Graincorp presides a market capitalisation of around $1.86 billion, with approximately 228.86 million shares outstanding.

Motley Fool contributor Aaron Teboneras 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.

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