Analysis of Financial Performance and Outlook of GrainCorp Limited

Analysis of Financial performance and outlook of GrainCorp Limited 1
ANALYSIS OF FINANCIAL PERFORMANCE AND OUTLOOK OF GRAINCORP
LIMITED
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Analysis of Financial performance and outlook of GrainCorp Limited 2
Analysis of GrainCorp Limited Performance and Outlook
Introduction
The report present financial analysis of one of the Australian ASX listed agribusiness firm
financial performance and outlook over the past two years. The report starts with
identification of the company as well as its brief overview. It is followed by presentation of
its financial outlook. Finally, the report concludes with a detailed financial analysis of the
company based on some of the major financial ratios to test its strength and weaknesses over
the last two years. In other words, the report presents both a current financial assessment as
well as financial outlook of the firm over the next one to two years. This is to assist in giving
recommendation on whether whether the company is potentially worth investing.
GrainCorp Overview
GrainCorp Limited is the public listed form on ASX within Australia. Its core operations
include storage and receivable of grains as well as related commodities. The company also
offers logistics as well as markets such commodities. GrainCorp Limited was mostly
established as New South Wales agribusiness company agency in 1917 (GrainCorp Limited
2017). Initially, the company used to transport grains from the local collection areas located
within railways all through grain-producing areas across New South Wales. The company
later changed to Grain Handling Authority and in 1992 it was privatised with most of its
shared transferred to the grain growers (Clark 2018). Nonetheless, in 1998, GrainCorp
Limited was listed on the ASX. Its operations have significantly extended to other Australian
region through amalgamations with the other grain handling firms (GrainCorp Limited 2017).
The company mainly focuses its main events on essential grains of barley, sorghum, wheat
and canola where the firm has relative benefits through technical expertise, nearness to the
growth markets as well as grain origination. The company has main operation in Europe,
North America and Australia, with such regions jointly demonstrating more than 50% of the

Analysis of Financial performance and outlook of GrainCorp Limited 3
universal export trade in canola, barley and wheat. The company has three main operating
segments, oils, grains and malt (GrainCorp Limited 2016). Under the malt segment, the
company provides deep grain expertise as well as tailored relationships with the distilling and
brewing clients across the globe. The oil segment is the leading producer of the edible oils
across Australia. On the other hand, GrainCorp operates and own one of the largest grain
logistic network and storage in the Eastern Australia.
Outlook of GrainCorp Financial Performance
GrainCorp is expected to experience challenging times in 2018 for its grains segment with
significantly lower crop on the Eastern Australia resulting from prolonged dry weather in
2017 winter Clark 2018). This is expected to challenge its Australian competitiveness
especially in the international market by the persistent low grain prices across the world,
global oversupply of the grains as well as cheap ocean freight charges (Investing.com 2018).
Nonetheless, GrainCorp expect constant strong financial performance from the Malt segment,
with full year contribution from expanded malt plant across Pocatello, Idaho.
GrainCorp with its total market capitalization of around A$1.87 billion is considered popular
for its explosive growth. Therefore investors need to be very careful which judging the
company based on the balance sheet on whether the firm could survive the downturn.
Therefore, understanding the organization’s financial performance is very crucial as poor
capital management might mean bankruptcies that take place at relatively higher rate for such
company as GrainCorp. As such, the company debt level is said to have decreased over the
years from A$1,194.5 million in 2016 to A$1,090 million this comprised of both long and
short-term debts. Besides, with this decrease in the total liabilities, cash and the short-run
investment were at A$388.9 million (Clark 2018). Furthermore, over the years, Graincorp is
found to have produced operating cash flows of approximate A$300.5 million which is said
to have resulted in operating cash to the debt ratio of around 27.57%. This implies that

Analysis of Financial performance and outlook of GrainCorp Limited 4
GrainCorp debt was roughly covered by its operating cash. In addition, the ratio could be
used in measuring efficiency as alternative to the ROA. Therefore, the figures means that the
company could generate 0.28 times cash from the debt capital.
It sales over the last three years has been experiencing an increasing trend moving from 4,086
million in 2015 to 4,576 million in 2017 (GrainCorp Limited 2017). Such increase is
projected in the next three years till 2020. Its operating profit before interest and tax also
increased over the same period moving from 99.1 million in 2015 to 244 million in 2017.
This trend is projected to remain in the next three years till 2020. For instance, the operating
profit is projected to be 96.2 million in 2018 which is estimated to increase to 191 million by
2020. Its net income over the years increased from 32.1 million in 2015 to 125 million by
2017. Similar trend is projected in future where by the net income is projected to move from
58.3 million by 2018 to around 115 million by 2017 (GrainCorp Limited 2017).
Financial Ratio analysis of GrainCorp
Revenue Sources
Profitability Ratios
Table 1: Profitability Ratios
Profitability Ratios 2015 2016 2017
Gross Margin % 19.2 17.9 19.7
Earnings Per Share AUD 0.14 0.14 0.55
Return on Equity % 1.8 1.73 6.95
Return on Assets % 0.92 0.85 3.49
Source: Morningstar (2018)
Profit margin ratios
Based on Table 1 above, it is evident that GrainCorp gross profit margin increased from
19.2% in 2015 to 19.7%. This is evident despite the decrease that was recorded in 2016.