Nimble GrainCorp approach

16 May, 2018 04:00 AM
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GrainCorp managing director Mark Palmquist said the company was looking to minimise the impact of climate volatility on earnings.
GrainCorp managing director Mark Palmquist said the company was looking to minimise the impact of climate volatility on earnings.

A GREATER focus on large sites capable of receiving and outloading large volumes of grain, combined with more mobile grain handling equipment that can be swiftly moved to areas of need, will be central to GrainCorp getting the most out of its grain handling network.

That is the view of GrainCorp managing director Mark Palmquist, who said a 64 per cent year-on-year drop in net profit to $36 million could primarily be blamed on a 40pc decline in crop production down the east coast.

Although GrainCorp has only recently completed its Project Regeneration, which saw a rationalisation of sites in its storage and handling network, Mr Palmquist said it was likely that there would be less sites operating in the future.

This was borne out in operational statistics from the 17-18 season which saw 145 sites opening for harvest compared to 160 the year before.

“For the grain handling side it is really about taking down that fixed-cost load, that means less sites with higher volumes,” Mr Palmquist said.

As part of that strategy he confirmed GrainCorp would be doing further work in the on-farm storage space.

Last year the company launched its FarmDirect program, which allowed farmers to deliver grain stored on-farm into the GrainCorp system after harvest.

However Mr Palmquist said the company would retain a presence in all of its traditional areas in spite of fluctuating receivals.

While acknowledging it was frustrating to see the wild swings in production in areas such as north-west New South Wales, which had a dream 2016-17 season but barely saw silos opening last year, Mr Palmquist said GrainCorp would retain its presence in these areas.

“Over the long term these areas have been good areas generating good volumes and we have very loyal customers there so we intend to stay,” he said.

Mr Palmquist said the company’s diversification strategy over the past decade, which had included the purchase of its malt and oil businesses, had made the company more resilient to cope with poor years on the east coast.

“Considering the size of the crop, I think we’re doing very well – if you look at the last time we had a crop this size it was 11 years ago and I believe the company made a loss,” he said.

Mr Palmquist said the industry needed to realise the inherent volatility in GrainCorp receivals, with big years like 2016-17 to be considered the exception rather than the rule.

“I’ve been here four years now and I still couldn’t tell you what a normal year looks like,” he said.

GrainCorp has retained its profit outlook for a full year profit between $50 and $70m.

FarmWeekly

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