A leading Australian agribusiness has made a relatively small net profit in the first-half of its financial year, down 92% from a year ago.
A global oversupply of grain has compressed margins for a leading Australian agribusiness and food processor, putting a dent in its interim earnings.
GrainCorp on Thursday reported a $5 million net profit for the six months to March 31, down from $58 million a year ago.
Excluding the impact of its GrainsConnect Canada business, the underlying profit was $33 million, down from $69 million.
The company's earnings before interest, tax, depreciation and amortisation fell to $136 million, compared to $202 million previously.
GrainCorp chief executive Robert Spurway said all of the world's grain production areas had performed well over the past 12 months, with no global droughts, creating an oversupply of grain.
"What that means is that customers of grain are not particularly concerned or acting with urgency to acquire grain, because they know there's plenty of it there," he said.
This also means prices are lower than their long-term averages, and Australian grain is having to compete with grain from all over the world, Mr Spurway said.
Australian growers are not particularly excited about the prevailing prices and have been holding onto their grain in the hopes prices might improve, he added.
GrainCorp's core business is receiving and storing grain for east coast growers, and its total grain handled was down 11% to 26.5 million metric tonnes in the first half, the company said.
On the positive side, diesel shortages impacting growers in late March and early April due to the Middle East war have abated, with farmers saying they have sufficient fertiliser to cover planting.
"Certainly, the farmers I've spoken to directly in the last couple of weeks have been well-underway in southern regions with a full plant and a typical rotation of the sort of crops that they put in," Mr Spurway said.
"So we're encouraged by the resilience of the sector."
GrainCorp on Thursday also reaffirmed its guidance for full-year underlying earnings of $200 million to $240 million, and an underlying full-year profit of $20 million to $50 million.
However, weather conditions will be a key factor in the final result.
Favourable planting conditions exist in Victoria and southern NSW, but more rain is needed in northern NSW and Queensland, Mr Spurway said.
"We are encouraged by the short-term forecast, and along with growers, we'll be looking for more follow-up rain in those regions in the coming weeks and months," he said.
RBC Capital Markets analyst Owen Birrell said the earnings result was broadly in line with expectations, but GrainCorp's core net cash position was lower than expected at $163 million.
After midday, GrainCorp shares were down by more than 15% to $5.27.