Leading Australian agricultural company, Graincorp Ltd (ASX: GNC), today reported falling revenues and profit for the first half of financial year 2015 (FY15).
In the six months to 31 March 2015, the diversified soft commodities company said revenues fell 3.9% to $1,975.1 million, whilst profit attributable to owners came in at $30.2 million, down 39.6% over the prior corresponding period. Earnings before interest, tax, depreciation and amortization (EBITDA) were $136 million, down from $166 million a year earlier.
GrainCorp's Storage & Logistics business accounted for a large portion of the fall in earnings, producing a profit of just $2.5 million, down from $38.4 million in the prior corresponding period, before corporate costs, tax and interest.
Marketing profit also fell from $6.5 million to a loss of $3.5 million. CEO and Managing Director Mark Palmquist said: "The smaller crop in eastern Australia last year means it's been a tougher period for Storage & Logistics and Marketing."
However both the Oils and Malt businesses performed well, with recent strategic priorities showing through. "GrainCorp Oils has had a solid first half," Mr Palmquist said.
GrainCorp reaffirmed guidance of full year EBITDA to be in the range of $240 and $250 million, whilst operating net profit after tax would be between $45 and $60 million.
"Good performances by GrainCorp Malt and GrainCorp Oils have helped offset the leaner period for the grains businesses, highlighting the importance of our earnings diversification," Mr Palmquist said.
Pleasingly, GrainCorp said it restructured and expanded its debt facilities, taking advantage of favourable market conditions to extend the liabilities which were due in mid-to-late 2016 to between 4.5 and 7 years. As a result average debt tenure has increased to 5.3 years.
GrainCorp's board also resolved to declare an interim fully franked dividend of 7.5 cents per share, to be paid on 17 July 2015. This is up from 2014's final dividend of five cents per share but down from last year's interim payout of 15 cents.
Is it time to sell your GrainCorp shares?
Following a failed takeover by North American giant Archer Daniels Midland in late 2013, shares of GrainCorp have drifted marginally higher. However investors may be expecting another offer with shares currently changing hands at around 24 times last year's profits per share – not exactly cheap for a company reporting falling profits!
Whilst earnings were expected to be significantly lower in FY15 than FY14, personally, I believe investors choosing to buy today must be intending to hold the stock over the long term (five years or more) to give themselves the best possible chance of extracting value from the shares.
