GrainCorp Limited

Thank you for standing by and welcome to the Grand Corps Limited first half 26 result. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would like to hand the conference over to Robert Spurway, Managing Director and Chief Executive Officer. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us. We're presenting to you today from Sydney and I wish to acknowledge the Gadigal people of the Eora Nation and pay our respects to elders and leaders past and present. This morning you'll hear from me with just some brief opening remarks including our half year performance and the operating context. I'll then hand to Ian Morrison, our Chief Financial Officer, who will talk through the detail of the first half financial performance and drivers, an update on our balance sheet and capital management and then I'll round out the conversation with an update on strategy and the progress we're making and some comments on the outlook. As I work through the presentation, I will update you on the pages we're on for those of you following online. So starting with the summary of the results on page six. It's been a disciplined half of execution and effective risk management and resilience in the current environment. A half-year underlying EBITDA of $136 million was reported today, delivered through strong operational performance across multiple areas of the business. We have a remaining strong balance sheet and importantly today we're reaffirming our guidance. As we've said before, we have seen a global oversupply of grains which have constrained margins in the first half of 26. We've also seen the evolution of the Middle East conflict. And today we want to share with you that there is sufficient fuel and fertiliser available for planting, despite input pricing remaining elevated. We'll make some comments on that shortly. But importantly, grain corp supply chain is operating as normal despite these geopolitical events. Well, I'll update you today on our strategy to deliver and drive long-term value creation. We continue to grow and diversify our earnings capabilities in bulk materials and animal nutrition. We're progressing release one of our business transformation program, and we'll provide some updates on that. And we're seeing positive momentum in the Agri-Energy Growth Initiative. So these and many other examples are areas that we capitalise on the attractive long-term fundamentals to create through the cycle value for shareholders. As I said at the start of this slide, today we are reaffirming our financial year 26 earnings guidance of between $200 and $240 million. Moving to slide seven, the numbers slide, which you can all read faster than I can keep up with you on. So I'll just call out some of the highlights on that. We've talked about the $136 million in underlying EBITDA for the half. We've also today, the board has declared an ordinary interim dividend of $0.14 per share fully franked. The operating highlights are important in terms of the metrics because they are, in many cases, the areas that we can control, particularly if you look at our oilseed crush volumes at 277,000, so continued strong performance in terms of the volume and inputs in that part of our business. with increased bulk materials handled from 1.2 to 1.5 million tonnes, and animal nutrition sales continue to grow up to 390,000 tonnes from 370 in the previous corresponding period. On page 8, I want to take a moment to talk to you about how we're responding to the evolving markets and controlling what we can control to manage risks and, importantly, to capitalise on opportunities. As we've previously communicated, the global grain markets have seen a cyclical oversupply of grain and resultant lower prices that have reduced grower selling activity and compressed margins across the value chains. The Middle East conflict saw some short-term disruptions of diesel and fertiliser, which have now stabilised, and as I said earlier, we're pleased to see good volumes available for the planting season now well underway. Grain Corp's supply chain, as I said earlier, continues to operate normally and will continue to work with government, industry and other stakeholders to monitor developments emanating from that conflict. In terms of the outlook, which I'll come back to at the end of the presentation, weather, of course, remains a key driver of growing planting decisions. Planting is now well underway for the 26 and 27 East Coast winter crop, with good soil moisture levels in southern New South Wales and Victoria, but rainfall required in northern New South Wales and South Queensland. How are we responding to the current environment? Reiterating what we said at the full year and indeed at the AGM, we are continuing to focus and accelerate cost reduction programs. We're driving operational efficiency to lower cost and improve performance across the business. We remain very focused on capital discipline, ensuring that capital is deployed in the areas where it can return the greatest results. We do continue to target investments and growth opportunities and diversify earnings. In terms of our portfolio optimisation, we announced at the full year the sale of our Grains Connect Canada joint venture, and we expect that to complete and close in the second half of financial year 26. We continue to review opportunities to improve returns across our portfolio. In summary, I'd say Grain Corp absolutely has a track record of demonstrating resilience and navigating disruptions, including the current disruption that we see in the Middle East. We've demonstrated that over the years, and both continue to manage the downside and identify and capitalise on opportunities as they arise. Returning to health and safety on page nine, Whilst, of course, it's frustrating to see our lost time injury rate up slightly and the overall injury rate broadly flat, we do remain absolutely committed to zero harm and it's something we manage not just on the half but daily, weekly and monthly as we crack out performance and focus on some of the lead areas and inputs. including reinforcing the fundamentals of pre-start site inspections and hazard identification and reduction. Sustainability on slide 10 for those of you following. It's been a half of good progress. We announced our commitment to the science-based target initiative and in the half we've released our first annual progress report demonstrating a 4.3% reduction in scope one and two emissions from the 22 baseline year. This year, of course, we will report at the end of the year against the ASRS standards, and we're well equipped and prepared for that. We've also joined the Climate Leaders Coalition, demonstrating, I think, the opportunities that exist for agriculture alongside the obligations that we have. And Grain Corp Next is a really good example of that where we align commercial and sustainability outcomes together. We're in year three of that program. We continue to expand the number of farmers engaged in it. We'll look to do so in the year ahead. And in a nice intersection of one of the venture investments we've made, we've launched BioScout units into that program. Just to remind you, BioScout is one of those initiatives that identifies disease early on farm, improving crop outcomes and therefore sustainability. We're delighted to see in the social areas the recognition of 10 years of silo art, especially across the communities we live and work in in regional Australia. and we continue to support those communities through our Grain Cork Community Foundation. I'm now going to hand to Ian Morrison to talk through the details of our financial performance in the first half and some of the drivers behind that. Over to you, Ian.

Thanks, Robert, and good morning all. I'll now move on to slide 12 with our summary of our financial performance for the first half. At a headline level, our agribusiness segment result was lower year on year, and that's mainly as a result of lower tons handled and margins in our East Coast Australia business. That was partially offset by an improved result in our international business. In nutrition and energy, a lower reported result year on year, Part of that reflects mark-to-market timing impacts on derivatives in the first half, and I'll come back to that more later. And also, we did see lower edible oil sales volumes and a lower agri-energy contribution. I'll come back to a more detailed update on the two-segment results shortly. Pleasingly, our underlying corporate costs were in line with the prior period as we look to maintain a strong focus on costs in general. There are two items highlighted here that we've excluded from underlying EBITDA as we'd highlighted in our earnings guidance back in February. The first one being the business transformation OPEX costs of 17 million and broadly consistent with the prior year half. And also in this half, we've recognized an estimated 16 million loss on the exit of our stake in Brains Connect Canada, which we expect to complete in the second half. And just other call-outs on this summary, our interest expense was lower in the first half, and that's as a result of lower commodity volumes, but also a commodity mix that on balance had lower values. I'll now move on to slide 13 and our agribusiness segment, starting off with East Coast Australia. We saw total grain production of 34.9 million metric tonnes reported by ABERJ for 2025-26, and that's in line with the 34.7 from the prior year. Carry-in of 2.3 million tons in our network was slightly lower than the prior year, and overall total grain handled was 26.5 million tons. A key feature of this year's volumes and overall performance has been the strong global grain production and associated low pricing for grain. This had an impact on grain being brought to market and being delivered to our network, seeing lower receivables year on year, and it also had an impact on margins in our ECA business. Despite these headwinds from market impact, our ECA business operational performance has been really strong in the half. And in particular, I'd like to call out our ports that executed 3.3 million tons of exports in the half, and that's actually ahead of the prior year half of 3.2 million tons. Also to call out in the ECA results, it includes an impact, a P&L impact of $8 million from the crop production contract, and $6 million of that being the annual premium, and $2 million being a fair value movement. And just as a reminder, there was no cash payout against the contract over and above the premium as we've reached the cumulative cap under that last year. Finally, in line with our strategy, we continue to focus on diversifying our revenue streams through the utilization of our ports for bulk material handling. And it's pleasing to see in the first half another strong performance from that part of our business with an increase in volumes from 1.2 million tons up to 1.5 million tons this year. I'll now move over the page to slide 14, and our international business. A record West Australian crop resulted in an improved financial contribution from our international business. In particular, we capitalized on a good opportunity off the back of strong demand for barley at a WA in the half. Moving on to Grains Connect Canada, and as I touched on earlier, back in December, we signed a sale agreement to sell our 50% share of Grains Connect Canada to following the completion of a strategic review of that business, and the transaction is now nearing completion, which we expect to cut in the second half of 26. I'll now move on to our nutrition and energy segment on slide 15. We've continued to see strong crush volumes in the half, with 277,000 tons of canola crushed, and that's in line with the prior half year In terms of margins, underlying crush margins are relatively flat year on year. However, the timing of mark-to-market and movements on derivatives has impacted the reported results in this half. You may recall me last year referencing timing impacts in the opposite direction. So I'll just briefly explain what's driving that. At this point in the year, we will have bought the seed for crushing for the full year, and we'll also have largely sold the meal for the year. But we would still have a portion of oil to sell. So to hedge that risk against unsold oil, we would enter into derivatives to, in essence, hedge that price risk. But under accounting rules, we mark to market the derivatives at the point in time based on the values. But the unsold seed and oil, we hold at cost. So with the rise in values we've seen over the last couple of months, that's led to a mark to market loss being recorded on the derivatives. But we would expect that to unwind in the second half as we effectively realize a higher margin on the sale of oil in the second half. And overall, we'd expect our reported FY26 crush margins to be broadly in line with 25. Also, in human nutrition, though, we did see edible oil sales volumes lower than the prior period. and that's off the back of some softer customer demand, in particular for bulk oils. Now, moving over the page onto agri-energy and animal nutrition. Agri-energy sales volumes were lower in this half, and that's off the back of demand into renewable fuel sector amidst U.S. biofuel policy uncertainty, and that's also had an impact on margins in the period. However, the Middle East conflict has seen oil refining margins globally rise, and the U.S. has also announced its biofuels policy, and both of those factors have seen sentiment improve for the second half in the agri-energy segment. Now, moving on to animal nutrition. It's pleasing to report record sales volume in the half, which have increased 5% year on year. And that's off the back of larger herd size in Australia, boosting demand for liquid feed supplements. We're also continuing to see strong demand from the dairy sector in New Zealand with the continued strong milk price. I'll now move on to balance sheet and capital management. starting off on slide 18. We finished the half with a core cash position of 163 million, and that's down on the balance at prior year end, but remains in a strong position overall. Year on year, our core cash is lower as a result of investment in the business and noting the strong ongoing capital returns we've delivered to shareholders over the past 12 months. On the right-hand side, you can see a graph of net working capital. And as is typical at this time of the year, you can see that we're at the peak of the working capital cycle at the half-year point. And that's partially reflecting the strong export program I talked about earlier that we've seen in recent months. We'd anticipate this net working capital balance to unwind in the second half of FY26. similar to what we saw last year. Overall, our balance sheet remains in a strong position and gives us the flexibility to continue investing for growth and providing returns to shareholders. Now moving on to CapEx and DNA. So firstly, with CapEx, $30 million in the first half of 2025, and that includes sustaining CapEx of $15 million slightly lower relative to the prior half in ECA, and that's off the back of lower receivables partly. For the full year, we're expecting total capex across the group to be in the range of 85 to 90 million off the back of various investments across the business. That 85 to 90 million includes the upgrade underway at West Footscray that we provided an update on back at our year-end results in November. On the right-hand side in relation to DNA, the first half of 26 is slightly below what we saw at the first half last year with some assets rolling off their useful life and things like tarpaulins, which have shorter useful lives. And then in terms of looking ahead to the second half, we'd expect DNA to be modestly up from the first half. Now, moving on to slide 20 and shareholder returns. As Robert noted earlier, the board has declared an ordinary dividend of 14 cents per share fully franked for the half. In line with our capital management framework, that ordinary dividend is based on through the cycle earnings. And the declaration of that $0.14 per share continues our strong track record of capital management and returns to shareholders. We'll continue to assess capital management against growth opportunities in line with our capital management framework. And just moving on to slide 21 and a summary of the half-year results and updates. Our teams delivered a strong operational performance in a challenging margin environment and that's allowed us to report the $136 million of underlying EBITDA for the half. Our balance sheet remains strong with $163 million of core cash at the half. We continue our strong track record of shareholder returns by declaring a $0.14 ordinary dividend for the half. And finally, we are reaffirming our FY26 earnings guidance for underlying EBITDA of $200 to $240 million and underlying NPAT of $20 to $50 million. With that, I'll now hand back to Robert to give an update on strategy.