By Andy Young, TheShout
GrainCorp is enjoying a boost from the craft beer and distilling boom in Australia and North America, but has also admitted it is facing challenges as a result of the drought gripping Australia.
As a result of the positive performance of the global malt business and GrainCorp’s strong position in the North American craft beer sector, the company has lifted its earnings guidance for the year ending 30 September.
GrainCorp Managing Director & CEO Mark Palmquist said the company is lifting its earnings guidance to $255-$270m underlying EBITDA and $60-$75m underlying NPAT.
“The benefits of our diversified business model are again being demonstrated in the face of the substantial drought challenges in eastern Australia. These conditions have slowed export volumes as farmers and the domestic market move to secure supplies,” Palmquist said.
In detailing the Malt Business Unit’s performance, GrainCorp said: “Malt has had a strong second half FY18, with a full contribution from the new plant in Pocatello, Idaho. The business continues to operate at high utilisation, servicing a broad mix of brewing and distilling customers globally.
“Demand for specialty products in the craft beer and distilling sectors continues to grow and GrainCorp Malt is well positioned to participate in these markets.”
The company also detailed how the drought conditions across New South Wales and parts of Queensland have “deteriorated substantially” since its half-year results in May. Saying that winter crop hectares planted were reduced and yields may continue to decline if the season progresses without decent rainfall in coming weeks.
“We expect a considerable decline in grain production in eastern Australia in FY19 with production again skewed to Victoria and southern New South Wales,” Palmquist said.
“We continue to respond to the deteriorating outlook by adapting the network to better match the size and location of the crop and keeping a strong focus on operating cost control, asset utilisation and disciplined capex allocation.
“It is an extremely challenging time for our grower customers. Many of our own people live and farm in these communities and we keenly feel the difficulties they are going through,” he added.
The company said that it has implemented a series of initiatives to support the communities it operates in to help them navigate the difficult months ahead.