Defence costs weigh on Graincorp

Takeover target Graincorp has posted sharply lower March half earnings, hurt by the cost of defending itself from a takeover bid.

Graincorp reported $227 million in earnings and a net profit of $88 million for the six months to March 31, a 34 per cent fall from the previous corresponding period.

The Australian agribusiness declared a fully franked interim dividend of 25 cents per share that included a special dividend of 5 cents per share.

Grain receivals fell to 9.3 million tonnes from 11.6 million tonnes a year earlier, with export volumes dropping to 4.3 million tonnes from 5.0 million tonnes. For the full year, grain receivals are expected at 10-10.5 million tonnes, it said.

Graincorp managing director and chief executive Alison Watkins said a return to normal-sized harvests after two years of large volumes, and a diversification strategy had given the firm "another positive first-half performance".

"I’m also pleased to report we continue to make good progress on the strategic initiatives we announced in November," Ms Watkins said in a statement to the ASX this morning.

Graincorp said the profit reflected the return of the grain crop to a more normal size after the drought-breaking rains of recent years.

Graincorp is set to be acquired by US commodities giant Archer Daniels Midland (ADM) if it gets the tick of approval from shareholders and regulators. Graincorp has agreed to the $13.20 a share takeover offer from ADM which is comprised of $12.20 cash and $1 in dividend payments.

The $2.8 billion takeover of Australia’s largest independent grains handler is expected to give ADM control of seven of the eight ports that ship grain in bulk from the east coast of Australia.

Earnings were lower across all divisions with the pretax profit of the storage and logistics division falling to $93.8 million from $122.7 million, marketing to $15.9 million from $26.6 million and malt to $38.9 million from $57.3 million.

Graincorp has continued to defend its move into the malt sector even though the total tonnage sold fell to 3.5 million tonnes from 3.9 million tonnes. Capacity utilitisation remained "above industry averages'' it said.

The recently acquired oils division made a pre-tax contribution of $22 million on revenue of $439 million.

With Glenda Kwek

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