Graincorp share price lifts off as dividend is maintained and debts plunge

ASX 200 investors are bidding up the Graincorp share price today. But why?

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The Graincorp Ltd (ASX: GNC) share price is charging higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) agribusiness and processing company closed yesterday trading for $8.07. In morning trade on Thursday, shares are swapping hands for $8.27 apiece, up 2.5%.

For some context, the ASX 200 is up 1.3% at this same time.

This comes following the release of Graincorp's half year results for the six months ending 31 March (1H FY 2024).

Here's what ASX 200 investors are mulling over today.

Graincorp share price lifts amid falling debt and swelling cash

  • Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $164 million, down 57% from $383 million in 1H 2023
  • Net profit after tax (NPAT) of $50 million, down 75% from $200 million in 1H FY 2023
  • Underlying NPAT: $57 million, down 72.5% year on year
  • Core cash of $495 million, up from $349 million year on year
  • Fully franked interim dividend of 24 cents per share, in line with last year

What else happened during the half year?

The big earnings hit that's failing to dampen the Graincorp share price rally today was driven in part by a $125 million dollar half year EBITDA decline in the company's Agribusiness, which came in at $101 million for the six months.

The company said global grain market conditions hit its Agribusiness segment amid increasing global production, commodity prices decline and moderating global trade flow risks.

Graincorp's Nutrition and Energy segment reported EBITDA of $76 million, down from $131 million in 1H 2023. The fall in earnings came as improved volumes were offset by moderated crush margins, with the company citing a lower supply of canola seed and weaker vegetable oil prices year on year.

The ASX 200 stock's strong core cash position of $495 million was up $146 million year on year. That's partly thanks to the company's $104 million post tax take from the sale of its stake in United Malt Group in November.

Net debt at 31 March was $765 million, down from $1.42 billion a year earlier.

Eligible investors can expect to receive the interim dividend payout on 18 July.

What did management say?

Commenting on the results boosting the Graincorp share price today, CEO Robert Spurway said:

Graincorp delivered a resilient result in 1H 2024, as grain and oilseed markets normalise following three extraordinary years for the industry.

As expected, we have experienced a decline in overall production across East Coast Australia  and lower supply chain and crush margins relative to 1H 2023. Strong volumes in Southern New South Wales and Victoria have been offset by below average conditions in Queensland and Northern NSW.

Now what?

Looking to what could impact the Graincorp share price in the months ahead, the company maintained its FY 2024 guidance provided earlier this month, stressing this "remains subject to a range of variables". The company forecasts underlying EBITDA of $25 million to $280 million and underlying NPAT of $60 million to $80 million.

"Despite the moderation in industry conditions in FY24, the long-term fundamentals of the agriculture sector remain strong," Spurway said.

He added:

The industry plays a pivotal role in human and animal nutrition, and as a feedstock source for global decarbonisation efforts.

We remain confident in our average earnings through-the-cycle EBITDA, which we have increased by $10 million to $320 million, following the acquisition of XF Australia

Graincorp share price snapshot

With today's intraday gains factored in, the Graincorp share price is up 14% so far in 2024.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

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