SYDNEY, AUSTRALIA — GrainCorp said on Feb. 27 that it expects its earnings for 2015 to fall to a five-year low due to drought on the east coast of Australia that has curbed grain production.

The company said it expected earnings before interest, tax, depreciation and amortization of A$240 million to A$270 million ($187 million to $211 million) for the year that ends in June, as much as 18% below last year's A$293 million.

GrainCorp Managing Director & Chief Executive Officer Mark Palmquist said that a smaller crop, lower carry-in and an expected reduction in export volumes for the Storage & Logistics business were significant themes in the current operating environment.

“We continue to make pleasing progress on our strategic initiatives, with some good cost savings embedded into the business. However, the smaller winter crop on top of low levels of carry means the exportable surplus is almost 2 million tonnes below average, reducing anticipated port elevations,” Palmquist said.

“Recent rains in Queensland have improved the outlook for the summer sorghum crop, however grain exports from eastern Australia will be 2.5-3 million tonnes this year versus 4.4 million tonnes last year. This reduces the recoverability of our fixed rail freight costs.

“The outlook for our processing businesses is solid, and I remain very confident that our business is in a strong position, with further opportunities to generate cost savings and efficiency as the eastern Australian production cycle improves.”

GrainCorp’s FY15 guidance remains subject to a number of variables, including:
• Volumes in the second half of the year: sorghum receivals; direct to port receivals; port elevations;
• Drought effect on domestic demand and associated stock movements;
• Processing and transport costs related to low quality barley in North America;
• New season opportunities for GrainCorp Marketing in the fourth quarter;
• Foreign exchange movements; and
• Barley and oilseed procurement.