GrainCorp Looks Long-Term to Deliver Growth

Australia | Jun 28 2022

While supportive macro conditions drive a strong near-term outlook for GrainCorp, the company is focused on longer-term growth initiatives.

-Investment in long-term innovation safeguards GrainCorp’s future
-Supportive macro conditions allow the company to set sights on long-term growth opportunities
-Favourable crop conditions and tight global grain supply should support core business near-term

By Danielle Austin

Brokers have highlighted a focus on long-term growth initiatives as a key takeaway from GrainCorp’s ((GNC)) recent investor day, with the company highlighting an investment focus across digital agricultural technology, alternative proteins, grower services, animal nutrition and agricultural energy.

Market analysts are largely in agreement these growth initiatives, alongside current favourable macro conditions, will strengthen GrainCorp’s core business and provide a platform for sizeable long-term growth.

The company has announced its intention to spend up to -$30m in agricultural technology over the next three years through its recently launched GrainCorp Ventures fund, as well as investing in an ag-tech start up that tests grain, social and crop samples.

GrainCorp has also committed -$4.4m to a collaboration with the CSIRO and v2food to investigate alternative plant-based proteins, and has secured a partnership with a plant-based protein producer to support innovation into new products utilising plant-based meat flavoured shortenings.

The company highlighted all areas of strategic growth were underpinned by strong sustainability themes, and with GrainCorp continuing to partner with growers and connecting them to domestic and global marketplaces, analysts have noted the company is well-positioned to provide sustainable solutions across the sector.

Macro conditions leave company well-positioned for inflationary impacts

Macro conditions continue to be supportive for GrainCorp, and brokers anticipate the company will continue to benefit from trends for a number of years, with global grain supply at its tightest level in two decades as the Russian-Ukraine tension constrains the market.

In addition, domestic crop conditions remain favourable, and could be supportive of upgrades to East Coast Australia crop forecasts in 2022 and 2023 according to analysts, which would support earnings in FY23 and FY24. Broadly taken, GrainCorp is seen as well-positioned for the current inflationary economic environment given its ability to pass through supply chain costs to grain prices.

It is also largely assumed by analysts that GrainCorp will be able to continue capital management, with the company so far buying back 2.4m shares under a $50m buyback initiative.

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