That profit upgrade is a bigger surprise coming from graincorp, than it is as a product in the current economic climate. I’m too used to their downgrades and was extremely surprised by the doubling of their profit guidance 09.
This new guidance is pretty exciting, it’s probably a record for graincorp (certainly in recent history), and must reflect new business/revenue generated post-deregulation because its not underpinned by any leap in tonnage received.
Historically, tonnage received has always underpinned EBIT. As you rightly point out, this is a volume driven business ! In feb 09, GNC advised the market of an approx NPAT 09 of $23-$28 million based on receivals of approx. 8 million (from memory). I remember being disappointed with the tonnage received and had a rough profit estimate of my own of $20-25 million. I had written off graincorp for another year, and was incredulous as the SP rose to $7 because it could not have been underpinned by the fundamentals.
This +$20 million leap of NPAT must be (predominantly) borne of deregulation. So will this be a permanent shift in the profitability of GNC ? Thoughts appreciated !
MS I hold ABB, NUF and GNC. I am considering participating in the SPP, but will wait to see if southeastern NSW receives rain in the next three weeks. If we get +50 mls of rain across SA, Vic, NSW, i'll be in GNC donkey deep !
GNC Price at posting:
$6.17 Sentiment: Buy Disclosure: Held
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