Graincorp Limited Class A · ASX:GNC
Graincorp Limited Class A — Investor Presentation (May 2024)
45 slides from Graincorp Limited Class A's investor presentation, May 16, 2024
Slide 1: 1H24 Results
1H24 Results For the six months ending 31 March 2024 16 May 2024 This release has been authorised by the Board of GrainCorp Limited
Slide 2: Disclaimer
Disclaimer This presentation includes both information that is historical in character and information that consists of forward looking statements. Forward looking statements are not based on historical facts, but are based on current expectations of future results or events. The forward looking sta
Slide 3: Agenda
Agenda Speakers Contents • 1H24 highlights Robert Spurway Managing Director and CEO • Strategy and growth • 1H24 financial performance Ian Morrison Chief Financial Officer • Balance sheet GrainCorp Silo Art in Thallon, QLD • Outlook and conclusion GrainCorp acknowledges Aboriginal and Torres Strait
Slide 4: Executive summary
Executive summary Continuing to drive shareholder value 1H24 financial performance Continued strategy execution Driving shareholder value • 1H24 Underlying EBITDA1 of $164m • Uplift in through-the-cycle average • Balance sheet remains exceptionally EBITDA to $320 million following strong; $495m core
Slide 5: 1H24 highlights
1H24 highlights Resilient performance as conditions normalise Return on invested capital Underlying net profit after tax 1 Underlying EBITDA (ROIC)3 $57m (1H24: statutory NPAT: $50m) $164m (1H24: EBITDA2: $154m) 7.4% (1H23: 22.7%) (1H23: statutory NPAT: $200m) (1H23: EBITDA: $383m) Total grain handl
Slide 6: Health and safety
Health and safety The safety of our people is our highest priority • Areas of focus during 1H24: – Hazard identification and inspections to reduce injury risks in our working environment – Access / egress of mobile plant, working at heights and management of tarpaulins – Inclusion of psychosocial ha
Slide 7: Commitment to sustainability
Commitment to sustainability ESG is fundamental to GrainCorp’s long-term performance and sustainability GrainCorp Silo Art Lake Boga, Vic Our environment Our people Our integrity • Received ISCC PLUS1 certification at our • Launched our inclusion and Diversity Action • Received full endorsement from
Slide 8: Strategy and growth
| Strategy and growth
Slide 9: Executing on strategy; strengthening our integrated supply chain
Executing on strategy; strengthening our integrated supply chain Strengthen the core Targeted growth opportunities 9
Slide 10: Progress on strategic initiatives in 1H24 continues
Progress on strategic initiatives in 1H24 continues Focus on improving our business and investing for growth Strengthen the Core Targeted Growth Opportunities Record oilseed crush Additional crush capacity assessment • 282kmt oilseed crush volumes largest delivered in a • Feasibility study into addi
Slide 11: Feasibility study ongoing for new oilseed crush plant
Feasibility study ongoing for new oilseed crush plant Agri-energy remains a significant opportunity for Australian agriculture • APAC renewable fuels demand forecast to grow at 19% CAGR Federal Government Commitment to Net Zero through to 2050 to meet decarbonisation commitments Attractive long- Aus
Slide 12: Acquisition of Performance Feeds and Nutrition Service Australia
Acquisition of Performance Feeds and Nutrition Service Australia Enhancing GrainCorp’s capabilities in Animal Nutrition • Closed acquisition of XF Australia1 on 2 April 2024; financial Cattle on feedlot as proportion of total cattle herd size is growing3 contribution from 2H24 5 25% • XF Australia c
Slide 13: GrainCorp Ventures
GrainCorp Ventures Continuing to expand our portfolio of Digital and AgTech investments Our portfolio About Investment in Peptobiotics Developed antimicrobial peptides for livestock, as an alternative to antibiotics. Peptides seek to prevent disease and support growth, providing a humane, sustainabl
Slide 14: 1H24 financial performance
| 1H24 financial performance
Slide 15: 1H24 financial performance
1H24 financial performance Production and margin environment normalising $m 1H24 1H23 Segment restatement4 • Nutrition and Energy (N&E) segment reflects the reallocation of Feeds, Fats and Oils from Agribusiness into the Processing segment • New categories within N&E are Human Nutrition, Animal Nutr
Slide 16: Agribusiness
Agribusiness Integrated network continuing to perform efficiently East Coast Australia (ECA) Agribusiness • ECA winter grain production of 23.2mmt in 2023-241 compared to 29.9mmt in 2022-23 $m 1H24 1H23 Revenue – Discernible north/south split with below-average conditions in Queensland and northern
Slide 17: Agribusiness
Agribusiness Positive International contribution despite volume and margin pressure in WA International1 • Decline in International contracted grain sale volumes and margins due to: Key International metrics – Lower Western Australia winter crop production of 14.7mmt 2 in 2023/24: mmt 1H24 1H23 Cont
Slide 18: Nutrition and Energy
Nutrition and Energy Increased crush volumes offset by decline in crush margins Human Nutrition Nutrition and Energy $m 1H24 1H23 • Record half-year oilseed crush volumes with operational improvements being Revenue delivered, including via advanced analytics EBITDA • Crush margins have normalised fr
Slide 19: Nutrition and Energy
Nutrition and Energy Strong demand underpinning resilient performance Animal Nutrition Animal Nutrition sales volumes (kmt) • Completed acquisition of Performance Feeds and Nutrition Service Australia in 500 1H24; financial contribution from 2H24 400 • Increased sales volume driven by demand for sup
Slide 20: Corporate
Corporate Disciplined investment in growth and transformation projects Corporate Corporate • Underlying corporate costs in line with 1H23 $m 1H24 1H23 • Growth projects spend includes costs associated with XF Australia acquisition and crush Underlying Corporate feasibility study Growth projects Busi
Slide 21: Balance sheet
| Balance sheet
Slide 22: Balance sheet strength
Balance sheet strength Strong cash generation contributing to $495m core cash balance Core cash / (debt) ($m) Debt and liquidity profile 495 Components 31 Mar 2024 30 Sep 2023 31 Mar 2023 Term debt 349 Inventory and working capital financing 177 200 Cash 129 Net debt 765 373 1,415 Commodity inventor
Slide 23: Capital allocation discipline
Capital allocation discipline Lower capex deployment in 1H24 due to timing of projects Capex and investments ($m)1,2 Depreciation & Amortisation (D&A) ($m)1,3,4 Sustaining Growth Investments Business transformation D&A AASB-16 depreciation 117 117 86 110 107 92 6 81 90 28 36 36 1 26 28 26 1 44 59 46
Slide 24: Delivering strong returns
Delivering strong returns Consistent dividend profile through-the-cycle; disciplined capital management Dividends (cents per share) 30 30 Ordinary dividend 24 24 24 Special dividend 16 16 12 10 10 • 1H24 ordinary interim dividend of 14cps declared 10 7 8 • Special dividend of 10cps reflecting streng
Slide 25: Outlook and conclusion
| Outlook and conclusion
Slide 26: FY24 outlook
FY24 outlook Challenging margin environment for FY24; positive conditions for 2024/25 winter plant Australian rainfall deciles - 3 months to 30 April 20241 • FY24 guidance updated on 6 May 2024 – Underlying EBITDA of $250-280 million – Underlying NPAT of $60-80 million – Excludes business transforma
Slide 27: Conclusion
Conclusion Confidence in through-the-cycle earnings despite cyclical headwinds Strong operational execution despite normalising conditions Increased through-the-cycle average EBITDA to $320m Continued assessment of new crush plant capacity Balance sheet with significant flexibility Track record of s
Slide 28: Appendices
| Appendices
Slide 29: Our network of assets
Our network of assets GrainCorp is a leading Australian agribusiness and processing company, with integrated operations across four continents and a proud history of delivering for customers for more than 100 years > 29 >
Slide 30: How we operate
How we operate We partner with growers to maximise the value of their crops, connecting them to domestic and global marketplaces through our end-to-end supply chain and infrastructure assets. We develop innovative solutions to create high quality and sustainable products across Human Nutrition, Anim
Slide 31: Long-term ECA winter grain production
Long-term ECA winter grain production Average ECA grain production continues to improve Total ECA Winter Crop Production1,2 2.3% CAGR of 10-year rolling average3 35 25 30 20 25 20 15 15 10 10 5 5 0 0 2000–01 1997–98 2006–07 2003–04 2020–21 2022–23 s 1992–93 1994–95 1990–91 1991–92 2009–10 1995–96 20
Slide 32: Significant operating leverage in large ECA crop years
Significant operating leverage in large ECA crop years EBITDA ($m)1 703 Average Underlying EBITDA FY20-24e 565 • GrainCorp has significant operating leverage in (since UMG demerger): ~$392m large ECA crop years, as demonstrated in FY21-23 • Operating initiatives and the Crop Production Average EBITD
Slide 33: ECA tonnes handled
ECA tonnes handled Total grain handled has a high correlation to ECA contribution margin mmt FY19 FY20 FY21 FY22 FY232 FY243 ABARES – total ECA winter + sorghum production1 9.7 12.6 34.3 33.9 32.5 25.2 Carry-in 2.3 1.5 0.7 4.3 4.9 3.9 Receivals4 3.1 4.2 16.5 16.3 13.9 10.0 – 11.0 Imports (trans-ship
Slide 34: Crop Production Contract
Crop Production Contract Smoothing GrainCorp’s cash flows through-the-cycle About the Crop Production Contract (CPC) About the Crop Production Contract (CPC)3 $70m gross payment based • CPC was critical in facilitating demerger of GrainCorp and United Malt on 29.5mmt 100 FY23 • 10-year contract (sta
Slide 35: Crop Production Contract
Crop Production Contract Recent strong production years sees cumulative payments near payment cap Crop Production Contract – cumulative payments2 • Aggregate net limit of $270m over the length of the contract Counterparty payment cap: $270m • Cumulative net payments of $210m made by GrainCorp to dat
Slide 36: Underlying EBITDA bridge: 1H23 to 1H24
Underlying EBITDA bridge: 1H23 to 1H24 1H23 Lower ECA CPC Impact1 Lower GrainsConnect Lower crush UMG impact2 1H24 EBITDA volumes and International Canada margins Underlying margins margins earnings EBITDA Agribusiness Nutrition & Energy Corporate ($125m) ($55m) ($39m) 1. CPC: 1H24 impact comprises
Slide 37: Cash flow
Cash flow ($m) 31 March 2024 31 March 2023 Statutory EBITDA 154 383 Net Interest (27) (33) Income taxes paid (85) (142) Changes in working capital and other related items 76 (59) Net operating cash flow excl inventory funding & commodity inventory 119 149 Proceeds for bank loans – inventory funding
Slide 38: Working capital movements
Working capital movements Working capital unwind has continued as volumes and commodity prices normalise Net Working Capital (NWC)1 (AUD millions) 800 700 • Year-on-year decline reflects lower 600 production volume and commodity values 500 • Net working capital started to unwind in FY23 due to lower
Slide 39: Core cash / (debt) bridge: FY23 – 1H24
Core cash / (debt) bridge: FY23 – 1H24 ▪ Core cash position increased from $349 million at 30 Sep 2023 to $495m at 31 Mar 2024 ▪ Mark-to-market assets and margin deposits are reflective of open positions relative to FY23 year end ▪ Working capital continues to unwind due to lower funding requirement
Slide 40: Reconciliation of Underlying Earnings
Reconciliation of Underlying Earnings Reconciliation of Statutory NPAT to Underlying NPAT $m 1H24 1H23 Statutory NPAT 49.6 200.3 Business transformation costs 9.8 - Less tax on business transformation costs (2.9) - Underlying NPAT 56.5 200.3 Reconciliation of EBITDA to Underlying EBITDA $m 1H24 1H23
Slide 41: Segment restatement
Segment restatement Realigning our reporting segments to better reflect our integrated operating model Reported Restated Full year, $m FY21 FY22 FY23 Full year, $m FY21 FY22 FY23 Total reportable segment revenue Total reportable segment revenue Agribusiness 5,193.6 7,559.2 7,802.6 Agribusiness 4,465
Slide 42: Segment restatement
Segment restatement Realigning our reporting segments to better reflect our integrated operating model Reported Restated Half-year, $m 1H21 1H22 1H23 Half-year, $m 1H21 1H22 1H23 1H24 Total reportable segment revenue Total reportable segment revenue Agribusiness 2,560.1 3,879.3 4,321.9 Agribusiness
Slide 43: Capital management framework
Capital management framework • Target minimal core debt Service debt obligations • Debt finance commodity inventory and working capital Sustaining capital expenditure • $40–50m p.a. Dividends • Payout ratio = 50-70% of NPAT through-the-cycle • Capital investment in growth Surplus cash flow projects
Slide 44: Glossary
Glossary Term Definition Term Definition AASB Australian Accounting Standards Board JV Joint Venture ABARES Australian Bureau of Agricultural and Resource Economics LTIFR Lost Time Injury Frequency Rate CAGR Compound Annual Growth Rate MD and CEO Managing Director & Chief Executive Officer Carry-in
Slide 45: GrainCorp Limited
GrainCorp Limited Level 20, Tower 2, International Towers 200 Barangaroo Avenue Barangaroo NSW 2000 t: +61 2 9325 9100 f: +61 2 9325 9180 w: graincorp.com.au 45