GrainCorp urges big picture view

19 Nov, 2012 07:05 AM
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GrainCorp's Alison Watkins.
GrainCorp's Alison Watkins.

GRAINCORP chief Alison Watkins has urged shareholders to take a long-term view, saying the company is ­ideally positioned to take advantage of the rising global demand for food, reports The Australian Financial Review.

Eastern Australia's largest grains handler rebuffed a $2.7 billion take­over approach from US agribusiness giant Archer Daniels Midland (ADM) last Thursday, using a third consecutive record profit to mount a strong defence that centred on significant earnings potential for the group.

Speaking on the ABC's Inside Business program yesterday on Sunday, Ms Watkins said GrainCorp's storage, ports and processing assets would be around for decades to come, positioning the company to benefit from rising global demand for food.

It was important for shareholders to view agriculture as a long-term investment, she said.

About 30 per cent of GrainCorp's register has changed hands since ADM's $11.75 a share offer became public.

Ms Watkins met shareholders on Friday and will meet more this week.

The board is understood to think the company is worth more than $13 a share as it benefits from its vertical integration, including improving the earnings potential of new acquisitions. Agricultural forecasters predict global agricultural output needs to rise by 60 per cent by 2050 to meet demand from population increases and changing diets, particularly in Asia.

Expanding crop production benefits GrainCorp, which charges farmers to store, handle and export grain.

Drought years can hurt its earnings but GrainCorp insists its earnings will be less volatile as it makes more money from downstream processing and benefits from an increasing global footprint.

GrainCorp's strong result last Thursday triggered a number of analysts to increase fiscal 2013 earnings and price targets. UBS lifted its price target from $13 to $13.40. "In our view, GrainCorp looks set to deliver another strong result in FY13, with the focus on operational efficiency gains an attractive story," UBS analyst Lachlan Parker told ­clients.

Australian Financial ReviewSource: http://www.afr.com
Date: Newest first | Oldest first

READER COMMENTS

Percy
19/11/2012 10:25:09 PM

Good on Graincorp for not accepting an overseas takeover. There is more to a company than dollar signs for shares held. Many farmers want to keep doing business with an Australian owned company and there are very few left. The ten years of drought must be overlooked when considering the profitability of this company as the future is rosy with mining on the decline and Graincorp is well placed to capitalise on that future.
Jock Munro
20/11/2012 8:42:37 PM

Graincorp is still for sale and negotiations would be ongoing. Be prepared for a sale and to see some Graincorp directors on the new entity.
not
21/11/2012 1:01:27 AM

SELL IT!

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