GrainCorp will shut down the underperforming grain storage sites among its network of 280 sites, in the wake of a 43 per cent profit drop.
Grains marketer GrainCorp will shut down its less efficient grain storage sites as it seeks to recover from a 43 per cent drop in half year net profit.
GrainCorp’s profit tumbled to $50 million after it collected less grain because of drought and experienced intense competition for grain from bigger, global grains marketers.
Executive chairman and interim chief executive Don Taylor said plans were under way to close some of GrainCorp’s storage sites because it couldn’t afford to keep running inefficient ones.
About 100 of GrainCorp’s 280 grain storage sites received less than 10 per cent of the grain collected by the company.
“Those sites are not particularly well supported by the growers,” Mr Taylor told reporters on Thursday.
During the first half of GrainCorp’s financial year, grain receivals fell by just over two million tonnes to 7.6 million tonnes.
Mr Taylor said growers preferred sending their grain to larger sites because buyers wanting large volumes of grain preferred to fill orders at one site rather than several smaller ones.
Growers also get better prices for their grain at the bigger sites.
GrainCorp had not decided how many sites would be closed or when because it was still consulting grower representative groups.
“Certainly well before next harvest, we will announce the sites that will no longer operate,” Mr Taylor said.
He said moving the grain from smaller to bigger sites would bring down handling costs and make the management of sites less complex.
GrainCorp also needed to improve its rail links to storage facilities and could only do that at the bigger sites that growers wanted to support.
Mr Taylor said GrainCorp was feeling intense competition in the port terminals exporting grain in southern Australia.
Different sets of rules governing new and existing players were of the most concern to GrainCorp and were hindering its capacity to compete.
“The competition is by and large coming from the international grain players who are way bigger than us, have much bigger cheque books and much bigger balance sheets,” Mr Taylor said.
“It needs to be recognised that we need to be able to compete on a level playing field.”
GrainCorp’s profit fall, combined with increased demand from domestic customers, resulted in there being a limited amount of grain for export.
It maintained its guidance from February that it expects its underlying net profit to drop to between $80 million and $100 million.
GrainCorp shares were steady at $8.93 at 1320 AEST.