GrainCorp Limited (GNC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the GrainCorp Limited FY '21 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Luke Thrum. Please go ahead.

Thanks very much, and good morning, everybody. Thanks for joining us for GrainCorp's FY '21 results. I'm joined today by Robert Spurway, our Managing Director and Chief Executive Officer; and Ian Morrison, our Chief Financial Officer. You would have seen by now, we've lodged all of our result materials on the ASX, and that includes our 2021 Sustainability Report. Today, we're going through the slide pack, and we'll then go to Q&A. So I'll now hand over to you, Robert.

Thank you, Luke, and good morning, everyone, and thank you for joining us. As we step through the pack, I will refer to the page numbers so that you can follow. And just starting on our front page, you'll see a picture of a barley crop in the Dubbo region of Western New South Wales. And I just want to acknowledge that, that was taken by Tom Koerstz, one of our area managers within GrainCorp. And I think that speaks to both the resilience but also the agility of our business, where through the challenges of COVID and travel restrictions for our people, our team have been using an internal photographic competition. And it's really great to see the pride that our people have in GrainCorp and the photos they're sharing of what they do across GrainCorp, especially as we get into the '22 harvest, really exciting time for us all here. You're all aware of the disclaimer. So we'll move through that. And then looking at the agenda, I'll make some opening comments and talk about the highlights, safety and sustainability and, indeed, our delight that the result is very aligned with the strategy that we've committed to. Ian Morrison will then talk through the financial performance of the segments and the fact that it's been a strong performance across all our reporting segments. We'll update you on the balance sheet, some comments on outlook and conclusions. And of course, we look forward to answering any questions that you might have. We will ensure that the call is wrapped up by 11:00. I do just want to acknowledge that it is Remembrance Day, and finishing by 11 will give you the opportunity to observe the minute of silence. So moving to Slide 4, FY '21 highlights. It is an exceptional result for GrainCorp. The earnings are right at the top end of our earnings guidance, which you might recall with $310 million to $330 million announced in August. So underlying EBITDA at $331 million, importantly, has been achieved through a highly efficient supply chain and excellent operation right across GrainCorp, making the most of the opportunities that the large crop presented to us. We're delighted to share and confirm that the $100 million in operating initiatives that we disclosed in the Demerger Scheme Booklet and have kept you updated on are now fully embedded in the business and evidenced in this year's result. We have announced today, as a result of the performance and the strength of the business, a $0.10 final dividend, and that will be fully franked, meaning that we've announced dividends of $0.18 per share for the full '21 year fully franked. The other important announcement we're making today is the on-market share buyback of up to $50 million. That's been announced and will commence in February after the funding peak of the year as we get into this current harvest. Just coming back to strategy. In my opening comments, I made the point that we're delighted that the business has performed well off the large crop. But also, we are delivering exactly what we said we would. We're driving strength of the core business and lifting our returns. We have committed to an additional $40 million in EBITDA from additional core operating initiatives. We'll talk about some of the detail on that and, indeed, the progress that we're making towards '23/'24. Our strategy, we'll touch on across digital alternative and plant-based proteins, animal nutrition and investments in those areas. And indeed, collaboration and partnerships are underway. We're really exciting -- excited that we're both investing in the business and able to return to shareholders. In terms of value and growth and the strength of the business, we do now have the '22 harvest underway. It will again be a well above-average crop, and that sets us up both for this year and the year beyond that. We have a very strong balance sheet with minimal core debt. And that gives us the opportunity, as I said, to announce that on-market share buyback of up to $50 million. We are well positioned to invest for growth and return capital to shareholders. Moving to Page 5 and our highlights. Outstanding performance across all the metrics and areas of the business. I've talked about the $331 million. But to put that in perspective, it's up from $108 million in the prior year. And it's an even greater delta when you consider that in the prior year, we received $58 million under the Crop Production Contract. And within the $331 million achieved this year, there was a payment of $70 million under that contract. So the business is performing exceptionally well, and that product is working as we'd expect. Our underlying net profit after tax, $139 million, up from a small loss in the prior year. And really delighted to share with you our return on invested capital of 11.1%, delivering on that strategic commitment to lift and strengthen the core of the business. Our total grain handled of 34.4 million tonnes, and that's up from 14.2 million the year before. Ian will make some comments on the comparator with the financial year '17, where you can really see, on relatively similar volumes, the strength of the business and the financial improvements that we've achieved over that period largely as a result of those operating initiatives but also the investment made in the infrastructure and the business, and it's great to see that delivering results. It wasn't just about the big crop. Our oilseed crush volumes were up 8% year-on-year to 459,000 tonnes. That performance and that volume allowed us to access the strong crush margins that prevailed through the year and continue into '22. Our core debt, as I said, down to $1 million, so pretty neutral position and a very strong balance sheet. We're very pleased with the way the business is performing. I move over to Page 6. We do have a commitment to Zero Harm and a relentless focus on keeping our people safe. For that reason, it is disappointing to report an increase in our recordable injury and lost time injury frequency rates despite the significantly greater workload across our business and the large number of people that came into the business as part of preparing for that harvest through the last year. Pleasingly, we have seen a significant reduction in our critical injury frequency rate, and we've also seen an ongoing improvement in the seriousness of injuries. Now that said, our focus remains on improving all parts of safety and ensuring we keep our people safe through a focus on behavioral safety programs, further injury reduction and ongoing risk management across the business. It has been a challenging year for many people not just in Australia and New Zealand but around the world in terms of COVID restrictions, and our people have shown resilience in that respect. If I move over to Page 7. Really excited to share with you today our refreshed and relaunched Sustainability Report. GrainCorp has been reporting on sustainability separately now since 2012, but it is a transformational change in terms of the way we talk about sustainability and the commitments that we've made in this year's 2021 report. It covers, of course, all areas of ESG and our communications and approach. We've completed through the year a stakeholder engagement exercise to identify those key topics and understand our stakeholders' expectations. We've reiterated our commitment to net 0 by 2050, but very importantly, we've included a road map and 3-year rolling action plan that will focus on much more ambitious targets and commitments that we'll make through the course of the next 12 months to accelerate our performance towards the future. As a management team and a Board, we're committed on making sure that we have targets and actions that deliver in the near term as well as achieving those long-term ambitions. We are now comprehensively reporting against international frameworks, specifically GRI, and also progress against the TCFD framework. As I said, I'm proud to present that report, and I encourage you to read the online version of the commitments that we're making. Slide 8 is a slide that I hope most of you are familiar with now around our strategy and the real focus and very deliberate focus on both strengthening the core of our business and lifting returns, as we're demonstrating in today's announcement, but also making progress against targeted growth areas where we have a right to win. And we were excited about the market opportunities that exist. If we go to Slide 9 and a bit of detail on strengthening the core. Back at our Investment Day in March, we -- Investor Presentation in March, we talked about an uplift of $40 million in EBITDA through the cycle through both our international expansion and our core uplift, specific initiatives where we've identified line of sight actions to lift performance and continue to lift our return on invested capital. That is progressing well. It has been a tough year in our GrainsConnect Canada business. We flagged that earlier in the year with the completion -- delayed completion of the Fraser Grains Terminal, now complete and coming into action. But on top of that, the Northern Hemisphere drought situation, in particular, in Canada has seen some challenges there, but it gives us confidence of the uplift available in that business through to '23. Importantly, the drought in Canada has overall been a benefit to our GrainCorp business and the benefits that we've seen flow from the Australian harvest. In terms of core uplift, we have continued to repurpose some of our port infrastructure to handle a wider range of bulk products. We've implemented cement handling capability at Port Kembla on top of the cement handling capability that we already have at our Brisbane port. We've continued to see growth, particularly in fertilizer and other areas, and continue to expand into wood chips and mineral sands and other areas. On top of that, we've pursued a closure of our Hamburg office as part of making sure that our international business is rightsized and can focus on achieving the opportunities where they exist, as they've done so superbly this year out of Singapore and Kyiv, making the most of demand that is around the world for Australian grain. As I said, all of those things are the way that we're delivering that lift on return on invested capital. We are doing what we said we would, and we're committed to continuing that journey. In terms of growth initiatives on Page 10, I want to share with you 3 case studies in terms of the broader progress that we're making in our investment in the business, our diversification of earnings, and continued reduction in volatility and strength of the business. Our alternative protein areas, we're working closely with CSIRO to develop a range of value-added plant proteins and other options. Importantly, our fats and foods business is already making progress partnering with customers in the alternative protein space to provide fat and food solutions for the products that are meeting strong and growing global demand for plant-based protein solutions. We've recently announced the acquisition of 15% in the Hone business, leading and really exciting development of using data and technology that will benefit growers for giving them real-time cost-effective options to measure the quality of their grain. Not only are we excited about the growth prospects in that business through our work with them over a number of years on the data solutions that we can provide. The growth areas include things like soil carbon and a broader range of applications across agriculture. But importantly, it directly helps our cost base by improving our quality measurement and reducing the cost of that quality measurement in our business. It's a really exciting acquisition that presents opportunities both into the future and right now for GrainCorp. I think most people are aware of the progress we've made in animal nutrition and our FutureFeed partnership with CSIRO and others that looks to commercialize game-changing technology through the addition of Asparagopsis to animal feed, reducing methane emissions and improving productivity. I'm going to hand across to Ian Morrison now, who will talk through see drivers behind the financial performance and the segment reporting. Thanks, Ian.

Thanks, Robert, and good morning to all of you on the line today. Now just turning to Slide 12. I'll briefly touch on our pro forma earnings for the last 5 years. This slide really highlights the outstanding financial results in FY '21. The last comparable year in terms of tonnes handled for our East Coast Australia business was back in FY '17. And even after adjusting for the AASB 16 change between these 2 years, the uplift in financial performance is approximately $170 million between these 2 periods. This uplift really demonstrates the hard work right across the business to deliver on the operating initiatives that Robert touched on earlier but also to deliver on the capital investments we've made in both our East Coast business and our processing facilities over recent years. Now turning to the segment summary on Slide 13. It's pleasing to be able to report strong uplift across both our Agribusiness and Processing segments, and I'll touch more on those shortly. In terms of the corporate result, just noting that this includes a one-off expense of approximately $4 million, and this relates to a change of accounting policy for software as a service. Also noting that the corporate result includes a net gain of $1 million for the year, and that's in relation to our investment in United Malt Group. Overall, after adjusting for these 2 items, the corporate cost run rate is between $9 million and $10 million per half, and that's consistent with where we've been recently. Now moving to Slide 14 and the bridge between FY '20 and FY '21. I won't spend too much time on this slide as I'll cover more of the detail on the segments in the next few slides. But the key item I just did want to draw attention to on this bridge is the impact of the Crop Production Contract year-on-year. The receipt under the contract in FY '20 and the payments in FY '21 highlights the benefit of the Crop Production Contract in smoothing earnings. However, it also -- through the FY '21 result, we also were able to demonstrate that the CPC doesn't limit strong upside in large crop years like we've just experienced. Now moving on to our segments, and I'll start on Slide 15 with Agribusiness with our East Coast Australian business performance. This year marked a record East Coast Australia winter production, and that led to a significant increase in grain tonnes handled through our supply chain infrastructure. We had 16.5 million tonnes of receivables, and that's up from just over 4 million tonnes last year. And it was pleasing to really utilize that infrastructure in particular for exports. And we saw nearly 8 million tonnes of exports this year, up from just under 2 million tonnes last year. We also saw good margins for our East Coast business throughout the year with a strong supply from East Coast Australia combined with some of the challenges we've mentioned in the Northern Hemisphere underpinning really strong demand for Australian grain and those margins. However, the most pleasing aspect of this year's result is the supply chain execution and delivery of these benefits from the operating initiatives. A few highlights I just wanted to call out include improved truck turnaround times, a more efficient outload program and improved overall rail performance. All of these improvements have been a key part of our focus on delivering for our grower customers. And it was pleasing to see a 59-point improvement in our Net Promoter Scores with growers since the last large crop in FY '17. Now turning to Slide 16 and other businesses within the Agribusiness segment. Our International business played a key role this year in connecting the East Coast Australian grain supply to global demand. And we've seen really good diversification of destination markets throughout the year. As Robert touched on, our GrainsConnect joint venture was impacted by a delayed completion of the Fraser Grain Terminal, but we're looking forward to that coming online this quarter. GrainsConnect was also impacted by the severe drought in the Northern Hemisphere, and that's part of the driver behind that strong demand we see currently for Australian grain. Now just touching on our Feeds, Fats & Oils business. Our used cooking oil upcycling business, Auscol, had a record year. And that was driven by good execution combined with strong demand for renewable feedstocks. At animal nutrition business, which is countercyclical to our East Coast grains business, did see reduced volumes due to those positive crop and pasture conditions. Now moving on to our Processing segment and starting on Slide 17 with oilseeds. FY '21 was a record year for our crushing operations with an 8% increase in crush volumes, and that's off the back of continued improvements at both our Numurkah and Pinjarra crushing plants. It's particularly pleasing to see Numurkah performing so well and delivering the value from the capital investment program back in 2018 and '19. We also saw excellent crush margins in oilseeds this year, particularly in the second half of the year with strong global oil values supporting those higher crush margins. Now moving to Slide 18 and our Foods business. The successful onboarding of a new major customer during the year has seen our Foods business deliver improved volume year-on-year. We also saw continued innovation in our Foods business with an example being the launch of Pin and Peel, which is a unique plant-based baking blend. So now just turning to our balance sheet and starting on Slide 20 and core debt. As Robert mentioned before, we finished the year in a strong core debt position of $1 million, and that's down from $37 million at the prior year-end. At FY '21, closing net debt of $599 million is higher than normal, and that's due to the higher levels of carry that we're holding at the moment and also higher commodity values. Overall, this is a really positive thing though as it means we have good holdings of commodity inventory to continue that strong export program right throughout FY '22. Looking ahead to FY '22, we'd expect to see that typical increase in net and core debt in the first half, in line with our seasonal funding peaks relating to the harvest before reducing again in the second half. And just another point on FY '21, we did take the opportunity to extend our term debt facility through to March 2025. And now just turning to Slide 21 and CapEx. Our Agribusiness and Processing segments have both seen significant capital investment programs, which largely completed in FY '18. The last 2 to 3 years has really been focused on delivering the returns from those investments. It's really pleasing in today's results to be able to see the benefits of those flowing through. This year, we finished with sustaining CapEx of $50 million, and that's slightly higher than our target range of $35 million to $45 million, which is as a result of the increased investment related to the large crop. Looking ahead to FY '22, we'd expect to see sustaining CapEx again above that stated envelope to maximize the opportunity from another above-average crop. Back in August, we did announce we were adding 1 million tonnes of additional storage capacity to handle the large crop, and that investment has completed through the first quarter of FY '22 in time for harvest. Also in FY '21, we completed the planned equity injection of CAD 22.5 million into our GCC joint venture, and that's ahead of the completion of the Fraser Grain Terminal this quarter. Another highlight I just wanted to touch on here in relation to FY '21 was the strong progress we've made towards our target of $50 million cash generation over the next 3 years from sale of noncore assets. This year, we've realized $26 million of cash from this initiative towards that $50 million target. On the right-hand side here, we've seen a continued reduction in D&A. This decrease in D&A is likely to temper in FY '22 with increased spend on items like tarpaulins for the large harvest. Items like tarpaulins are relatively short-life assets. So we will see a short-term impact on that downward trend in D&A. On that note, I'll now hand back to Robert.

Thanks, Ian. I'll just make some comments on outlook and then some conclusion remarks before we answer any questions. So moving to Slide 23. We are very confident in the outlook. We're now well into harvest for the East Coast crop in Australia. And you'll note that the ABARES September update was for a crop forecast of 26.5 million tonnes, so well above average. To date, we've received 2.3 million tonnes. In fact, as of this morning, it's about 2.5 million tonnes. There's been a few delays over the last few days with a bit of rain, but we would expect to see crop receivables accelerate quickly over the next number of weeks as we really get into that harvest through into New South Wales and Victoria, with Queensland largely complete already. We've continued to export grain through the start of this financial year given the very significant carryout of inventory from last year. And to date, just under 1 million tonnes exported in FY '22. We are seeing excellent soil moisture conditions across East Coast Australia, and that bodes very well for a summer or sorghum crop planting and the opportunities that, that provides through the current financial year. We are seeing continued strong demand for Australian grain and, indeed, high vegetable oil values driving positive crush margins. So conditions remain positive as we continue into FY '22. And I think the scale of the '21/'22 crop now being harvested together with the carryout of '21 not only supports confidence for '22 but, indeed, momentum into financial year '23. We will provide full year -- sorry, financial year guidance for '22 at our AGM in February. Just moving to Slide 24 on the capital management framework. We have demonstrated over time our consistency in dividend and lifting that dividend. The payout ratio of 50% to 70% of NPAT through the cycle is demonstrated in the announcements we've made today on capital management. Indeed, the strength of our balance sheet, the current performance and our confidence in the future provides the opportunity for $0.18 per share in total dividends, fully franked, for the FY '21 year and the announcement of the on-market $50 million share buyback. Just interestingly, if you combine the impact of the buyback and the dividend, that takes us to about 65% of net profit after tax payout. So very consistent with the dividend policy and the return to shareholder policy in an efficient way given the dividends are fully franked. Just in terms of conclusion, I want to reiterate my pride and the team effort at GrainCorp. Right across the business, we've performed well, achieving outstanding financial results from both business segments. Importantly, it's our operating initiatives to strengthen the core that are showing through in the results that we've announced today. We are making investments and making good progress on the collaborations in our strategic growth areas. And it's great to see the progress coming together in that part of our future ambitions. Sustainability is at the center of everything we do at GrainCorp. It's nice to be able to celebrate the things we're already doing and, importantly, commit to greater action over the next 12 months in our refreshed Sustainability Report. We have a positive outlook for financial year '22 with that high carryout of inventory from the bumper crop last year, the very favorable ongoing conditions that we're seeing and, indeed, the margins that are available and the demand for Australian grain. We are well placed for investment in growth and capital returns for shareholders. It's been a great year for GrainCorp. Thank you for all joining us this morning. We do look forward to answering any questions that you might have. And you'll note that as part of our ongoing commitment to provide transparent and ongoing disclosure about the way the business operates, we have a number of slides in the appendix that go into more detail in terms of what sits behind today's results. Luke, I'll hand back to you and the moderator for any questions.

Thanks, Robert. Yes, I'll hand back to the moderator. And happy to take questions, just keeping in mind we're just observing that 11:00 deadline. So thank you.

[Operator Instructions] Your first question comes from Richard Barwick from CLSA.

Sorry. I just had an issue with the headset. First question, just talking about -- thinking about the current rainfall. It's been pretty widespread. Obviously, harvest is underway. How worried are you or how worried should we be that it may end up having a negative impact on the current harvest in terms of the tonnes coming in?

Thanks, Richard. I think we've expressed our confidence in the outlook and the current crop, very cognizant of the rain that's occurring at the moment. I'll just make a couple of comments on that. It's really too early to be concerned about rain in any case. But on balance, it's not something that we see as being a negative driver. The crop harvest in Queensland is largely complete. So the rain in that part of the country is not really a material issue. In Northern New South Wales, there will be a few growers a little nervous about the impact it has on their wheat crop. However, things can change very quickly, and we expect that we'll dry out and they'll accelerate the harvest at that point. Below Northern New South Wales, across the vast areas of New South Wales, and I was up there only last week, you can see that crops are still at least a week or more away from being ready for harvest. There's a lot of green crops around. So in that respect, the rain currently is unlikely to affect those crops. So there's plenty of opportunity across New South Wales and Victoria. On top of that, the forecast and the outlook is for rain. The silver lining in all of that is it provides strong soil moisture conditions for another crop following that and especially for those that plant summer crops. And that creates upside opportunity for those growers and certainly for GrainCorp. The final comment that I would make is that it typically doesn't affect the volume. And even if you look at the news, you'll see that prices on commodity platforms are moving around as markets consider that maybe there'll be a greater demand versus supply for some grades of milling wheat. And there remains plenty of demand for all grades of wheat and barley, including feed grains. So I think a fairly comprehensive answer, but I think you're probably seeing our strong confidence in the outlook irrespective of the rain. And certainly, like growers, we're keen to get on with harvest. And there's been a couple of days where it's been a bit slow, but that's not unusual. And we're certainly geared up and ready to kick off again as soon as it stops raining in each individual area.

Okay. And can I just ask a quick one on what was the traditional marketing business as it used to be broken out? Can you offer a view of a few insights as to the pricing environment? My read is that, I guess, the opportunity to make a margin on these -- on the commodities traded is probably as good as it's been for a very long time. And so that must look good also leading into FY '22.

Yes. Look, I'll make some comments, Richard. Then I'd like Ian to make some additional comments. As we said before, it's just not possible to pull those out specifically, but I think your question is a very fair one. We are seeing very good demand for Australian grain across the board. Australian grain in nearly all markets around the world is competitive at the moment. So that creates great opportunities. And indeed, the margins have been pretty good. I think what we're seeing, really, if I can put it this way, is the value of our infrastructure assets from up-country storage through to port exports where because of another, let's say, bumper crop coming, certainly well above-average crop coming and in harvest at the moment, the premium for being able to store and move that grain is pretty significant. So the integrated operating nature of our business is really delivering the benefits in terms of dragging grain and volume through our network, leveraging the benefit of that and accessing the very strong demand and pricing available for Australian grain and numerous markets around the world. Ian, did you want to add to that?

Just to add to that, we've previously talked, Richard, about the structural margins relative to margins coming off risk positions. Really, the big driver from this year's result is those structural margins, and that's particularly off the back of the strong supply out of Australia combined with some of these strong demand points globally with -- particularly with some of the challenges over the Northern Hemisphere. So it really is about that utilization of the supply chain to access those end-to-end margins.

Your next question comes from David Pobucky from Macquarie Group.

Congratulations on the very strong results. Just in terms of the processing result and incredible results there, can you talk us through that in a bit more detail? I'm curious to know your thoughts around how you think about a more normal earnings profile for that segment.

Yes, sure. Look, you're right. Across the board, we've seen strong performance. Ian touched on the performance of our plants, increasing our crush volume by 8% and therefore making the most of the margins available and crush and, indeed, driven by the high demand for food and edible oils around the globe. We also -- and Ian touched on this, we've also seen increases in volumes and efficiency in our foods plant, as we've again delivered on what we said we would in terms of driving those efficiencies and accessing and winning demand from customers of that important asset. In terms of profile, we expect those strong margins to continue through into '22. We're certainly seeing that currently. And that could continue well into '22. But Ian, do you want to make some comments on how we're looking at the outlook for oil margins?

Yes, sure. On the crush, certainly, the uplift in operational performance is really pleasing, that 8% uplift total crush volumes, and we certainly expect that to be sustainable. We're really pleased with the focus on the efficiencies we've been able to drive out of the plan. In terms of the crush margins, we did see these at quite elevated levels in the second half. And as Rob touched on, we expect to see that continue into the first half of FY '22, in particular, as we start to crush new season canola certainly at higher seed value. So that will compress crush margins over time to some extent compared to what we saw in the second half, but we still expect to retain some of these real benefits from the operational performance of the plant.

Just a high-level kind of perspective question here. What are some of the key risks that you're seeing at the moment going forward? Any supply chain or input cost pressures that you're seeing there?

I think we've demonstrated, David, a real commitment to continue to manage costs. So we're very comfortable with that and reiterating that commitment to the $40 million improvement in the core. If anything, supply chain challenges globally have benefited us. It's principally associated with container supply, and our business is predominantly more than 95% in bulk. Notwithstanding that, our teams have done an outstanding job making sure that our supply chains run well, both land side and in terms of ocean logistics. Just to give you a statistic of the more than 115 vessels that sailed carrying grain for us this year, there was only 2 had very minor detention and demurrage charges associated with them. In my experience over the years in global shipping, that's almost unheard of and I think a testament to the planning and decision-making in our operational teams. And certainly, I think you'd find that unusual in the current environment. And it gives me huge confidence as to our resilience in terms of the model we operate and the decisions we make. Just on container supply, we've had no interruptions to ingredients, packaging or imports or exports associated with our Processing business, which, again, is largely in bulk. But certainly, some aspects of that come and go by containers. But again, that's not just through good luck. It's through very close management, working with our suppliers and our partners to make sure that we're planning ahead. And in fact, we've increased our planning windows and about doubled them to make sure that we've got line of sight so that we can plan ahead and avoid any disruption. So I think -- really what I'm demonstrating is the disciplines we've driven through the business are not just making for a more efficient business, but they're making for sustainably reliable results through the cycle, and that's really pleasing.

Okay. Great. Congratulations again. I'll turn it over.

Thank you.

Your next question comes from Apoorv Sehgal from UBS.

Congrats on the result. Maybe my first question is a bit of a follow-up on the Processing business. If you back sell for the second half of '21, it's a pretty big number, $54 million of EBITDA. It sounds like -- do you think that number can sort of repeat in the first half of '22? Is that -- am I reading your previous response correctly that volumes are probably going to hold and margins are still going to be pretty strong?

Certainly, for the first half of '22, we're seeing the same sort of trends coming out of the second half of '21. So in that respect, market conditions remain pretty favorable and relatively stable.

Okay. That's pretty clear. And then maybe just one question on the dividend. Just the thinking behind paying a lower dividend payout at around 30% for '21 versus your policy of 50% to 70%. But obviously, as you said, you've added a buyback in there as well. But just the thinking around doing that rather than just paying out 50% to 70% of profits in dividends with no buyback. And then if I look into FY '22 as well, if I could attach another question onto that, '22 being another sort of above-average year, should we be expecting a payout sort of again below that 50% to 70% range?

Look, I think it would be premature for us to comment on the dividend for '22. What I will reference though is our ongoing commitment to that capital management framework and the 50% to 70% over time through the cycle. To be clear, in FY '20, we did resume dividends. And arguably, that was ahead of the current performance and based on the strength of the business and our confidence in the outlook. I would hope that today's dividend announcement is on the upside given that it's fully franked. We've been able to achieve that through the profitability of the business and the outlook for profitability in terms of being able to attach franking credits to today's dividend. So reiterating what I said, the $50 million buyback on top of that puts us well in the range given the strength of the business and the balance sheet and the confidence we have in the outlook and, in our view, is an efficient way of providing returns to shareholders given that we've, for the moment, exhausted the franking credits to achieve that $0.18 fully franked dividend for the '21 year.

Your next question comes from Grant Saligari from Credit Suisse.

Congrats on the result. Just 2 questions, if I could, just one on the logistics storage fees this year. You seem to have been able to achieve reasonably sizable fee increases, sort of 3.5%, 4% across a lot of variables. Just interested to understand what enabled that, what was driving that and where you might be sitting from a cost position as well in terms of labor costs and availability.

Yes. Sure, Greg. Good questions. And we note you've observed that. That is an important part of our business in terms of maintaining our competitiveness. And I think you've observed that we remain very competitive across East Coast Australia in a competitive environment. Anecdotally, the feedback that we've had through the year from growers is that GrainCorp continues to show competitive proposition at all of our sites. And I think that really is a reflection of the efficiency that we've built into our system. And the things that are important to growers really in terms of their overall cost of working with us and the value they get from working with us is the transparency that we're able to provide on pricing through our CropConnect product and the optionality that it gives them. But importantly, things like turnaround time and efficiency on site means that we represent good value for them. And that's evidenced in the ongoing increases that we're seeing in Net Promoter Score from the surveys that we do with growers. So we're very comfortable with the way that competitive side of the business is working. But just to be really clear, our real focus is on that integrated operation of the business and the end-to-end margins that we can achieve through handling grain and dragging it through our infrastructure assets and supporting growers in that respect. Just in terms of inflationary pressure and costs, as I said, I'll reiterate again, we're very comfortable with the programs that we have in place to manage costs closely. And we've done that very effectively through the year, and I think that's pretty well evidenced in the result. And in terms of labor, again, we plan to head very early. And arguably, this year's task is easier than last year because last year, we had to scale up from significant drought areas in terms of the labor we brought on to manage the harvest. This year, we've started from a higher base. We had roughly 70% of harvest casuals that we worked with last year indicated they would return, and we've seen that play out. We've also been very careful to plan and make sure that labor is available within state borders and within the regions that we need them so that we haven't been disrupted by some of the state boundaries and challenges of COVID restrictions. So we've got a pretty close to a full complement of casuals in the areas where we need them across harvest, roughly 3,000 people taken on or lined up and ready to start in Victoria and already well in place in Queensland and New South Wales. So that's not causing us any concerns or indeed risks in the outlook. And I think we've got a very good employer brand in terms of the things we're doing. And we'll continue to enhance that through examples like our community foundation, where we work with local communities, support local communities, and that helps encourage the opportunity for jobs for local people through harvest.

Your next question comes from James Ferrier from Wilsons.

Congratulations on the results. First question, with relation to the receivables, 16.5 million tonnes, can you give us some color on how much of that was received direct to port?

Yes, we can. If you go to the appendix slide, just for anyone following, Slide 30 is the ECA tonnes handled. Ian, you might just be able to talk to that and comparisons to prior years.

Yes. So we don't specifically break out the components of total receivables, but we've seen a typical level of direct to port to what we've seen historically overall, James.

Okay. That's helpful, Ian. And then the second question, also on volumes there, 6.7 million tonnes contracted grain sales. I look back in FY '17, and that number was about 2.8 million tonnes, I think, and similar sort of crop size, as you alluded to at the start of the briefing. I'm just interested in your views around whether that is a reflection of a conscientious effort of GrainCorp to originate more aggressively. Or is that more a reflection of just that very strong demand profile in export markets and the competitive pricing of Australian grain?

Yes. Thanks, James. I can take that one. So a couple of things, James. Since FY '17, our overall focus as a business is quite different in the way we think about the end-to-end operating model. So what that has meant is that we are more aggressive in terms of competing and owning and dragging grain through the infrastructure. So I think that is definitely a part of the change where we are actually the owner of more of the task than maybe historically. We think that really drives the value of utilizing the supply chain and getting the overall efficiency out of the assets as well. And then the second point, as you mentioned, is about that strong demand. What's different this year to back in FY '17 is, as we saw in the second half of this year and particularly into Q4, the strength of the upcoming crop into FY '22 combined with the challenges in Northern Hemisphere has seen that strong demand for the next quarter or 2 for Australian grain.

Okay. That's helpful. And well done on the Net Promoter Score improvement, too. That's remarkable.

Thanks, James.

[Operator Instructions] Your next question is a follow-up from Richard Barwick from CLSA.

I wasn't expecting another chance. So I was going to ask around the noncore assets that you're talking about bringing -- selling through. Can you give a little bit of color, Ian, on what they are? And I guess what I'm interested in, does any of those -- would any of those include sale and leaseback? So if you're selling them off, would we expect to see a tick up in lease expense?

Yes. Thanks, Richard. So on the noncore assets, the majority are related to our nonoperational sites from the East Coast. This year, we did sell our closed Murarrie plant that was part of our Foods business a number of years ago, and that was a key contributor to this year's piece. In terms of looking forward though, we wouldn't be looking at any sale and leaseback. It's all in relation to sites that no longer operate as part of the core network. If you look back many years, we would own a lot of sites that no longer operate even in a large yard. So it is about those sites that aren't really part of our network, and it's about taking them out and having them utilized for other purposes.

There are no further questions at this time. I'll now hand back to Mr. Spurway for closing remarks.

Thank you. And just again, thank you, everyone, for joining us this morning. We are delighted with the results and look forward to joining you over the next few days for any further questions and, indeed, providing a further update on our confidence in the outlook at the AGM in February. Thank you, everyone. Have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.