Thank you for standing by, and welcome to the GrainCorp Limited FY23 results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by one on your telephone keypad. I would now like to hand the conference over to Mr. Robert Spurway, Managing Director and CEO. Please go ahead.
Thank you, and good morning, everyone. Welcome back to those that have followed us for some time, and welcome to anyone new joining the call for the first time. Before I start, I'll just acknowledge page three, where GrainCorp would like to acknowledge the traditional owners of the land on which we meet. For those of us here in Sydney, that's the Gadigal people of the Eora Nation. We pay our respects to elders, past and present. This morning, you'll hear from myself and our Chief Financial Officer, Ian Morrison, as we share the GrainCorp results for financial year 2023. Moving to slide four on the pack, I think the numbers speak for themselves. It was excellent all-around performance and an outstanding result from GrainCorp.
EBITDA of AUD 565 million, net profit after tax of AUD 250 million, and a very strong return on invested capital of 18.6%. We again saw strong volumes of grain through our network at over 37 million tons, down only slightly on the year prior. Our oilseed crush volumes came in at just under 500,000 tons. It's the 5th year in a row that we've increased our throughput through crush volumes. Importantly, and a result we're proud of, very strong balance sheet at AUD 349 million, and that's before the receipt of funds associated with the sale of the United Malt holding. Ian Morrison will talk to the financial strength of the business shortly. Just looking at some of the key themes on page five that sit below those headline numbers.
I've talked about our EBITDA and our grain volumes handled, and our record oilseed crush volumes. Earlier in the year, you'll recall that we lifted our through-the-cycle EBITDA to AUD uncertain million. So GrainCorp has delivered outstanding performance in financial year 2023. Alongside that, we continue to execute strongly on our strategy. We'll talk about that in a bit more detail, about, around both delivering on what we call strength in the core and identifying and delivering on growth opportunities. Just yesterday, we announced the acquisition of XF Australia and the benefits that will bring to our wider animal nutrition business. We've made good progress in assessing the additional crush capacity, and I'll talk specifically about that in the coming slides. We've continued to broaden our portfolio of digital and agtech investments, both financial, technology, and capability builds across our business.
We are driving shareholder value. That exceptionally strong balance sheet of AUD 349 million in core cash, plus, as I said, the proceeds of AUD 127 million from the sale of UMG received yesterday, put us in an exceptionally strong position. That's allowed the board to declare a AUD 0.30 final dividend, dividend, bringing total dividends to the year of AUD 0.54 per share. All of those dividends are fully franked. In addition, today, we've announced a buyback of up to AUD 50 million. On page 6, I want to reiterate the comments I made at the half year and convey our condolences to the friends and family of our colleagues fatally injured in a truck accident in April at our Moree site. It's incidents like that that underpin why we will continue to strive for zero harm every day.
The slide itself goes into the detail of the other areas that we're investing in, in safety and the progress we are making. As I said, we will continue to strive for zero harm every day. As well as announcing our results today, on page seven, we talk about our commitment to sustainability, the fact that it's right throughout our business and right through all the strategic themes. I'm also proud to recommend to you our sustainability report for 2023, which is published on our website today. That goes into details across all areas around the progress we're making and the commitments we've made. Some highlights to call out from that, just in this last 12 months, we've decreased emissions across our processing sites by 11% per ton of production.
We've committed to setting science-based targets through the SBTi initiative for Scope one, two, and three emissions reductions. We've completed a pilot study with a key customer on sustainable agricultural practices in Australia, and we continue to make additional commitments, including the elimination of grain tarpaulins from landfill by 2027. Alongside that, strong investments in people and our communities. We're proud of the GrainCorp Community Foundation and the support that that foundation has provided to over 140 community groups in the last 12 months. In addition, we've closed our gender pay gap and are well ahead of the national average and continue to make progress in those areas. Reconciliation Australia have endorsed our Reconciliation Action Plan.
We're continuing to raise awareness and make progress across all areas of our business, and as I said earlier, the sustainability report makes for a great read and something that we're proud of, acknowledging that alongside those commitments, we've got more to do. For those of you that have followed us for some time, on page nine, you'll recognize our strategy slide. It's consistent, and we're delivering against that strategy. It's deliberately split into two parts, what we call strengthening, strengthening the core, delivering on that commitment of return on invested capital, evidenced in our result, not just this year, but over the last several years, and also identifying and delivering targeted growth opportunities. Today, I'm gonna share a little more detail with you around our progress on agri energy, animal nutrition, and digital and ag tech.
But first, on strengthening the core, we are driving our existing assets harder. For example, we've seen renewable feedstock exports grow by 6% each year on a compounding basis. In 2023, we achieved the highest volumes we've seen in five years. We're seeing sustained growth in our crush volumes, 8% compound annual growth, growth since financial year 2019. We are doing what we said we would do. Alongside that, it's not an area that we always talk about, but despite the record grain volumes over the last few years, we've continued to grow our bulk materials or non-grain volumes through our ports. That's all part of increasing the quality and the diversification of our earnings. We're leveraging our capabilities. We are commencing a business and systems transformation that will both reduce complexity and improve efficiency.
We've integrated our nutrition and energy business to improve efficiency and deliver on customer experience. We've invested in digital and advanced analytics capabilities, and one of the key examples or proof points of that is the ongoing improvement in crush volumes. It's a successful program, and we expect to continue to drive efficiencies across GrainCorp. Although the overall business is performing exceptionally well, we have called out areas that we would like to see improved. Our Foods New Zealand business and our GrainsConnect Canada business are not performing at levels that we're happy with, and we are continuing to support and invest in those business to determine the strategic options that will deliver on their capability into the future.
Alongside that, we have a continued focus on cost management as we respond to the variable weather that we're faced with and indeed, respond very capably and manage effective results in a higher inflationary environment. GrainCorp is performing well and is committed to continuing to do so into the future, and that's all underpinned by our confidence in our through-the-cycle number of AUD 310 million we shared earlier in the year. Just moving to page 11 in the pack. At the half year, we announced our evaluation of new oilseed crush plant capacity. That is going well. We continue to see it as a compelling case and an attractive growth opportunity for GrainCorp. It builds on our existing leading position as a supplier of renewable fuel feedstocks to export markets.
It creates the opportunity for satisfying the demand we expect to grow in Australia, and the security and sovereign capability that Australia, over time, will have in renewable fuel and reducing emissions. Our progress to date includes an announcement today that Western Australia is our preferred location for a new crush plant. We expect the new crush plant, if it goes ahead, will be in the order of 750-1,000,000 tons capacity. So it is a scale plant that we see the opportunity for, bringing the efficiencies that come with that scale. Just this week, we've announced an initiative with IFM Investors, who are keen to underpin their investment in aviation by developing out the demand for Sustainable Aviation Fuel, and GrainCorp and the agriculture sector can play an important part in that.
We're proud to be part of that partnership as we continue to evaluate and build out the feasibility for a future investment in crush capacity. That work will focus on building the upstream and downstream partnerships on both the supply and the demand side, and further feasibility to build out the financial and economic business case. I touched on in the opening in the detail covered in page 12 around our acquisition of Performance Feeds and Nutrition Service Associates in Australia. That acquisition is a AUD 35 million acquisition. The business produced earnings over the last 12 months of AUD 7.6 million. It's complementary to our existing animal nutrition business. It'll build out the capability that we're able to offer to our customers and the geographic footprint we operate in across Australia.
We look forward to welcoming the capability and expertise that that acquisition will bring to our existing animal nutrition business. That acquisition will be funded out of existing cash reserves, and we would expect it to complete early in 2024, following the completion of customary conditions. Across our GrainCorp Ventures area on page 13, we've continued to make excellent progress this year. You'll be aware of the existing investments that we had in FutureFeed and Hone, businesses that we both expect to return financial benefits in the future, but also a part of improving sustainability in the ag sector and delivering benefits to GrainCorp, the value chain, and importantly, to growers and farmers. In addition, over the last 12 months, we've made investments in ZetiFi, Loam, and Zoom Agri.
They're all very much on strategy to deliver those technology benefits and learning and capability to GrainCorp and growers, whether it be through extended Wi-Fi and connectivity for precision farming, such as ZetiFi, the Loam business, which is involved in sequestration of carbon, and importantly, improving productivity of crops, or Zoom Agri, which brings direct benefits to growers in GrainCorp, through better assessment and quality understanding of the grains we already handle. In summary, on page 14, we are doing what we said we would do. We're delivering on our strategy and building a stronger and more capable business focused on growth opportunities and doing what we do well. We are driving our existing assets harder to deliver maximized returns. We're simplifying and optimizing our business and building in efficiency and importantly, lifting customer experience.
That's an ongoing commitment that we have to growers. We are identifying and acting opportunities to lift returns right across the portfolio. We're leveraging capabilities to invest in growth and our future. We've demonstrated that through progress in animal nutrition and agri energy, and that gives us absolute confidence in our ability to deliver through the cycle over time. We are demonstrating that in our results. I'm now going to hand to Ian Morrison, that will talk through the segment reporting and the strength that underpins those headline results I've shared. Thank you, Ian.
Thanks, Robert. I'll now move on to slide 16 and summarize the FY 2023 financial performance. It's pleasing to report record earnings this year for our processing segment, and that's alongside another strong result for our agri business segment. I'll cover the various details on this slide as we get into the various segment details in the coming slides. And the only additional item I'll touch on in a bit more detail here is the increase in net interest this year. This just comes from increased interest rates on our commodity inventory funding, and as we've previously highlighted, we're able to pass on these additional interest costs from commodity inventory funding into the prevailing commodities that we sell. And so that's an area that we have a good protection against in a rising interest rate environment.
I'll now move on to slide 17 and the Agribusiness segment. FY 2023 saw another strong year of crop production across the East Coast of Australia, and that saw 29.5 million tons of winter grain production and a further 2.5 million tons of sorghum from the summer crop. The large carry-in of 4.9 million tons from the prior year, along with that large crop, saw us handle total grain of 37.4 million metric tons, so another large volume year. And although we did see a decline in overall supply chain margins from the record highs experienced last year, margins still did remain robust and above historical averages, and that largely comes off the back of that strong surplus of grain across the East Coast. A couple of highlights to point out.
It was really pleasing to see the benefits from the investments we've made in capabilities across our network in recent years, and we saw a 7.5% improvement in truck turnaround times. That's a really important metric for us and our grower customers at harvest. We also saw NPS improve to +22 in FY 2023, which is really pleasing. Just one comment on the East Coast Australia result. This result does include the AUD 70 million payout under the crop production contract, and that's in addition to the AUD 6 million annual premium and also a AUD 6 million fair value loss on that contract. So overall, there's a negative impact of AUD 82 million in the overall results from the CPC.
And last thing, just to touch on for ECA, a really pleasing highlight in the results was the increase in bulk material volumes from 2.5 million tons in the prior year to 3.3 million tons this year. That continues to build on our strategy to improve the utilization of our assets through the cycle. Now moving on to slide 18. Our international business delivered a strong result this year, and that largely was off the back of good margins from WA in delivering that large crop to our customers right across Asia and beyond. We continue to see strong demand for Australian grain, and our international business played a key role in connecting both West Coast and East Coast Australian grain to that global demand.
As Robert touched on before, our GrainsConnect Canada joint venture did have a challenging year in FY 23, with that region still recovering from drought. That saw margins and volumes impacted. We are, however, pleased with the operational performance and capability of that asset base and look forward to seeing improvements in its performance. Now on to our Feeds, Fats and Oils business and what was our record year in FY 23. We saw strong performance across all the parts of that business. Our feeds business benefited from the large herd size and continued strong demand for supplementary feeds. And on the agri-energy side, our Fats and Oils business also delivered a strong result as demand continues for renewable fuel feedstocks. I'll now move on to slide 19 and our processing segment.
As you can see in the graph on the right-hand side of this slide, FY 2023 has seen the 5th year of consecutive growth in our crush volumes, and that's off the back of us driving those continued operational improvements that Robert touched on earlier. This year, we delivered an advanced analytic program across our crush plants, and that saw us achieve nearly 500,000 tons of crush volumes this year. We also saw excellent crush margins continue this year. The H2 did see those margins moderate from the record highs we saw in the H1, but overall, that supply of canola seed in the East Coast of Australia, as well as the increasing demand for vegetable oils, underpins that ongoing positive margin.
Turning to our foods business, we saw softening market conditions across that part of the portfolio, and in New Zealand, in particular, this saw us take an AUD 19 million non-cash impairment charge in the year. Now turning to slide 20 and the corporate segment. So firstly, total corporate costs increased AUD 10 million year-on-year, and the majority of this increase came from growth and transformation projects as we continue to pursue strategic opportunities across the portfolio. This included costs relating to the crush feasibility work we've been doing, and also some early work on looking at systems modernization. On this slide, we've also split out the UMG fair value gain of AUD 46 million, and that sits in the corporate segment in our annual report.
Note that this, fair value gain is based on a closing share price of 30 September of AUD 4.94, and compared to the final sale value of AUD 5. We've received gross proceeds of AUD 127 million this week from the sale of UMG, with net proceeds after tax of AUD 104 million. And one item just to note is the guidance we provided back in May had already assumed a fair value gain of AUD 39 million from that UMG holding, so we've seen an additional AUD 15 million since then in the fair value gain in the year. I'll now move on to slide 22 and talk about the balance sheet. We finished the year in a very strong position with a core cash balance of AUD 349 million.
FY 2023 saw really strong operating cash flows, with some of that working capital unwind we've talked about previously, and that's coming off the peak we saw last year. We've also seen a decrease in net debt year-on-year, with closing net debt of AUD 373 million. Note that, that reported core cash position of AUD 349 million, that doesn't include the cash proceeds received from the UMG sale, as that is only completed this month in FY 2024. So overall, in summary, our balance sheet is in a very strong position, and that provides us really good flexibility to continue to deliver strong returns and also invest in our strategy. Moving on to slide 23 and capital expenditure. Similar to FY 2022, 2021 and 2020, we've seen slightly higher CapEx against our through-the-cycle range.
That's largely been to support additional capability and capacity across the East Coast network, in particular, to handle the large harvest we've seen in recent years. We're really pleased with the benefits coming through from those investments and the quick paybacks we've been able to see. Investment capital in the year of AUD 26 million includes two main items: AUD 14 million of equity into our GrainsConnect joint venture as part of a recapitalization of that business, and it also includes AUD 12 million across our portfolio of digital and agtech investments that Robert covered earlier. I'll now move to slide 24 and touch on our dividends and capital management. The board today declared a final dividend of AUD 0.30 per share, fully franked. That's made up of a fourteen cents per share ordinary dividend and a sixteen cents per share special dividend.
This brings total dividends for the year to AUD 0.54 per share. In total, this sees dividends of nearly AUD 3 million having been paid and declared since the merger. In addition to those dividends, the board also announced a share buyback of up to AUD 50 million today. Those announcements today demonstrate our ongoing commitment to continuing to deliver strong returns back to shareholders. On that note, I'll now hand back to Robert.
Thank you, Ian. As well as a look back on financial year 2023, I would also like to provide an update on the outlook and where we're placed for financial year 2024. We are extremely well placed for the season ahead. ABARES, despite the dry conditions in the north, continue to forecast an average crop, and we're now seeing harvest well underway in Queensland and northern New South Wales, with southern New South Wales and Victoria getting underway as we speak. We wish growers all the very best for that harvest period, and we're seeing strong volumes come through, particularly in those southern regions. Harvest is running earlier this year, and I'm not sure there's any such thing as an average harvest. You may recall 12 months ago, we talked about the fact that harvest was running later than average.
Perhaps a more normal timing this year with year-to-date receivables of three million tons. So the business is busy as our growers are right across the southern regions of Australia. Year-to-date, exports are just under 500,000 tons, and as Ian touched on earlier, we are demonstrating strong processing volumes throughout the year, despite margins moderating. We will provide further guidance at the AGM in February, as we've done over the last three years. And again, I reiterate our wishes and support to growers as they move through the busy harvest period. Look, finally, before we open for questions, on page 27, I wanna make some concluding remarks, and indeed, a bit of a recap on the material we've covered this morning. It is an outstanding result for financial year 2023, underpinned by strong performance across all the business segments.
Our balance sheet is in an incredibly strong position with significant flexibility for ongoing returns to shareholders and further investment in the business. We have made an acquisition and announced the animal nutrition growth strategy today, and as I said, we look forward to welcoming that capability into our business. We're continuing to make good progress on our assessment of new crush plant capacity. We've got confidence in our through-the-cycle earnings guidance and out back in May of AUD 310 million. We are demonstrating a strong track record of strong returns to shareholders, and I thank you for your time, interest, and support this morning, and I'll hand back to the moderator to manage any questions.
Thank you, sir. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Apoorv Sehgal with UBS. Please go ahead.
Good morning, Rob and Ian. First question-
Morning, Apoorv.
Good morning. My first question, just on the working capital, referencing slide 38. Good to see that working capital unwind sort of take shape in the H2. I'm just sort of curious on your thoughts into FY 2024. If assuming the 2024 crop does normalize, to what degree can we get, can that working capital position unwind further in FY 2024? And what would be the appropriate sort of time period to look at in that chart as a reference point? Like, is that 2020 sort of net working capital position, kind of maybe an appropriate reference point when we're starting to think about 2024?
I'll let Ian answer that, Apoorv. You're right, and good to see you dive straight into the appendices. It is all part of our commitment to make sure we've got very transparent and complete disclosures. And there is certainly opportunity for further unwind in working capital, and as you point out, that does, to some extent, depend on the prevailing conditions. But Ian will talk about how we see that and, and qualitatively, the sort of level we expect it might end up at over time.
Yeah, I'm happy just to add some additional comments. So on slide 38, you can see the graph of working capital over the last number of years. Probably my comments Apoorv would be FY 20 was more drought-like conditions, so that's probably below average. And FY 21 was coming out of drought into a larger crop year. So I would say it's probably our average working capital is closer to that 21 year, or certainly the early part of that 21 year, than maybe seeing an unwind back to 2020 levels. So hopefully that gives you a bit of a flavor, but definitely still some more working capital to unwind as we return to more average values and volumes.
Yeah. Okay, that makes sense. Is there a certain level of net core cash you'd like to maintain at a minimum through the cycle? Like, if a large acquisition opportunity presents itself, would the business be willing to go into a core debt position if it made sense?
Look, we haven't provided specific guidance on that, but we will reiterate what we've said, that our capital management framework calls for minimal core debt. So you know, that suggests that we're certainly not expecting to carry core cash in every year. All of that depends, of course, as to where we think we are in the cycle, our continued investment in diversification and growth of earnings. But you know, whilst we haven't defined minimal core debt, you can look at the sort of structures that we had in place at the time of demerger, and feel comfortable that in the order of AUD 100 million in core debt we'd regard as minimal.
I think the balance sheet has plenty of capacity to fund the ambitions we've got, the investment in the business, potential growth opportunities, and also deliver ongoing strong returns to shareholders.
All right, and just my final question, just on that, incremental crush capacity, of up to 1 million tons, which is-
... a large number. Can you give us any details on what the financial cost of that might be, or anything we can consider when trying to think about that?
I'll make two comments on that. We're not in a position to disclose exactly what we think that might cost, but if you look to signals overseas, you can pretty quickly deduce that it could be several hundred million AUD. If we were to go ahead with an investment case, there are a number of different funding options and partnerships that make it difficult to provide guidance on, you know, what we think that might be, and that there's plenty of work going on to build out that business case and investment case.
The second thing I would say, and it follows from your last question on the balance sheet, that irrespective of the cost, the balance sheet has absolutely got the capacity for the sort of ambitions we have, not just in crush, but in the broader growth ambitions for the business. So we feel we're very comfortably placed toward delivering on the strategic intent that we've shared, today and previously.
Fantastic. Thanks, Ian.
Thank you. The next question comes from James Ferrier with Wilsons. Please go ahead.
Good morning, Rob and Ian. Thanks for your time, and congratulations on the result. Could I, could I firstly ask you about the feeds, fats, and oils business? I think back at the half year result, you described it as, as probably tracking close to two times - in terms of its earnings contribution, close to two times its historical level. And I'm just wondering whether there's been further improvement in FY 2023 versus FY 2022, or is the strength of the result more about holding, those elevated performance levels from FY 2022?
Thank you, James, and good morning. I'll leave Ian to talk to that one in a bit more detail for you.
Yeah, happy to. James, it's probably... It is an improvement on FY 2022, but a moderate improvement. We did see pretty strong performance in the prior year as well, and it's also got a number of different elements to it. So we've seen really strong performance, especially in the H2 from the animal nutrition side. We did see, you know, really strong performance across elements of the fats and oils portfolio last year, particularly with the elevated values we saw in commodities and the vegetable oil complex. We've seen some of those values in the veg oil complex come off this year, and that impacts margins to some extent. But overall, across the portfolio, we have seen an uplift year-on-year.
Yep, and just one thing-
I'd further add, James, I think it's a good example of a diversified area of our business, where the long-term demand signals and momentum in that sector are very strong, and we're in a leading position to be a part of those growth opportunities into the future. And it's nice to see it being a significant feature in the recent sentiment we've shared around our results.
Yep, absolutely. That makes sense. Thanks, Rob. Second question: In the outlook statement, you talked about an expectation for processing margins to moderate. Is the reference point to that, FY 2023 or H2 2023?
Yeah, I'm happy to take that one, James. We've seen relatively consistent performance across processing and crush in particular, other than probably H1 this year, where the margins were quite a bit elevated. So when we're talking moderation, it's more from H1 than H2. We think H2 is where we see margins probably traveling into the early part of next year. The other thing just to call out, though, is it's pretty typical to see H1 margins stronger than H2 margins, and that's off the back of ability to deliver seeds at a lower cost, generally speaking, in the H1, just because of proximity to harvest, cutting costs, et cetera. So that is a typical profile as well, to see H1 stronger than H2.
Yep, that's, that makes sense, Ian. Can you give us some guidance on D&A and CapEx for the year ahead, please?
Yeah, happy to. So on D&A, we'd probably expect to see that relatively similar year-on-year, potentially very moderate decrease. And you'll recall the comments we've made at recent updates, that we have invested in more short-life assets in recent years. And so those are typically two-three years. And, you know, a key one, for example, is tarpaulins. So as the volumes across the East Coast business in particular go back to more typical levels, then some of the investment in those short-life assets will come off. But we'd expect in the year ahead that it will be relatively flat.
And on CapEx, we've been calling out in the last couple of years, in particular on sustaining CapEx, that we've seen that at higher levels off the back of the higher volumes on the East Coast. As we return more to a typical end type of harvest activity, we'd expect to trend back our sustaining CapEx closer to those through-the-cycle levels of AUD 40 million-AUD 50 million. Of course, any additional investment in growth projects or acquisitions and those type of investments would be over and above that sustaining CapEx type envelope.
Yeah, I certainly want to reiterate that commitment to the AUD 40 million-AUD 50 million, and the fact that we've made very deliberate choices to invest above that as the conditions have provided an opportunity over the last couple of years. And, those projects or programs of work have typically delivered better than a one-year payback. There's without doubt that's evidenced in the results we've delivered this year and in the last couple of years.
... Yep, that's great. Thanks, Robert, and thanks for your time.
Thank you.
Thank you. The next question comes from Ben Wedd with Macquarie. Please go ahead.
Hi, Robin, and thanks for taking my question. Congrats on the result. Maybe just the first question, circling back to the additional processing capacity which you've indicated here. Do you wanna just talk us through some of your thinking, re: Western Australia as the preferred, as a preferred location there? And also maybe as to why, you know, they elected to look at the route of a greenfield rather than brownfield expansion. Thank you.
First thing, or two areas we look at is both supply and availability of surplus oilseed, and there's certainly a greater exportable surplus of oilseed on an ongoing basis in Western Australia, which supports the sort of scale that we envisage there'll be the demand for. The second piece, of course, is where we see the demand both domestically but also potentially for export on a scale plant like that. And in that respect, Western Australia is a compelling place to look at that additional crush capacity. The second part of your question, if you look at the existing site we have in NSW, it's a relatively small scale site by comparison.
And the opportunity to build greenfield is just a much more efficient modern opportunity rather than extending the plant we've got, which is at a completely different scale and, you know, frankly, for a different purpose in terms of the market that it currently satisfies fairly niche customers across Southeast Asia in the oil business and the meal and poultry sectors in WA. So this would be quite a different proposition whereby a greenfield makes sense on top of the logistics factors and the location to both scale supply and offtake demand.
Fantastic. Thank, thank you for that. And then maybe just one more re: wheat basis. We've seen, you know, a fairly adverse move in wheat basis over FY 2023 and into 2024. Do you mind just sort of commenting around that and what impacts, if any, you expect to see from that in the export program into FY 2024?
Clearly the drier conditions in the north will mean that a lot of the export program comes from southern Australia. I think the market is responding to that as domestic customers look to cover their needs. We're not gonna make predictions on the forward curve in terms of we're pricing at, is at, other than to say, you know, I think the market response has been reasonable and understandable associated with the conditions. We expect, you know, obviously, you know, prices will respond to the harvest as it progresses. Ian, did you want to make any further comment on that in terms of the impact? Yeah, and it's something we've talked about quite a bit at recent calls as well.
I mean, Basis is certainly one factor that comes into margins, and of course, with a lower and surplus pressure of grain, then that does see margins moderate to some extent. But overall, you know, volume is by far the biggest driver for our earnings and historically has been.
Great. Thank you very much. That's all I had.
Thanks, Ben.
Thank you. The next question is from Richard Barwick with CLSA. Please go ahead.
Good morning, guys. If I can hear you back, I've got a bit of an echo on the line. Yep. No, we can hear you pretty well, Richard. Very good. I've also got a question about the new crush plant. Is it too early to even talk timing here or to give a rough guide? And then the other question, just to clarify, if I look at the, you know, through the cycle earnings guides at AUD 310 million, you included a increased sort of AUD 30 million from oilseeds business there around volumes and crush margins. I'm assuming what we're talking about here with this WA new plant is over and above.
So if we're thinking how this might fit into our modeling long term, then it's in addition to the AUD 310 million.
Richard, yeah, that's correct. First thing I'd comment is when the results are so strong, maybe it's good you get an echo, and you hear them twice. So hopefully you can hear us clearly. Yeah. I'll answer your last question first. Yes, any growth initiatives, including a potential crush plant, are not included in the AUD 310 million.
And any investment and associated delivery of returns would be incremental on top of that, obviously, you know, the time to provide those disclosures and updates is in the future, when those decisions or investments are made, and we feel there's a materiality and an update. The first part of your question around timing, look, we're signaling that, you know, over the next... through the course of financial year 2024, and I don't expect it will take the full year, but we don't want to time-bound ourselves on ensuring that we've formed the right partnerships, understood the offtake and the demand. Indeed, the developing policy positions in Australia all play into the investment case, and we would expect that would occur over at least the coming months.
Once an investment decision were made, if we did go ahead, it is likely that a build of that scale would take, in the order of one and up to two years to complete. And, bearing in mind that we're investing reasonably significantly in the feasibility and the design work, so that when we got to that point, we'd be ready to go. But it's certainly not something that you would look to project in financial year 2024 or even 2025 in terms of returns from that style of growth initiative.... Does that answer your question?
Yeah, okay.
Richard?
It does. That's good, very clear. And a much more near-term question, just the latest rainfall outlook, so November to January from the BOM, was a slightly more optimistic than it had been in terms of average rainfall expected through most of your sort of East Coast cropping area. Is that too late to make an impact for your for the summer crops? Or is that a, you know, is this the sort of incremental piece of good news and enough to make a difference to tonnage, do you think?
I wanna be a little careful because it sounds like you're trying to trick me into forecasting the weather, and I'm good, but I'm not necessarily that good, Richard.
You can reference everything in the context of the BOM forecast.
But look, I was out and about in central New South Wales last week, and there was very good widespread rainfall of in the order of 25 mils, and even more in northern New South Wales and Queensland. Objectively, if I look at the eight-day Bureau forecast in terms of the chance of rain, there is widespread rain forecast across central northern New South Wales and throughout Queensland. That rain is very timely for summer crops. So in answer to your question, I think farmers will be absolutely delighted about rainfall for those that do have a summer cropping program.
Pleasingly, the rain that we've seen in southern regions hasn't been particularly disruptive to harvest, and certainly is not at a level where we've got any concerns about quality or the ability of growers to get the crop off the ground. Just in summary, I think the rainfall we're seeing now will not have an impact up or down on the current crop that's in the ground. The winter crop, we'll be wishing growers all the best for a successful harvest, which does rely on good weather over the coming weeks or, you know, a month or more in Victoria. Then any rain beyond that is good for both the summer crop in the northern regions and indeed, it builds soil moisture levels for our winter crop across the whole of the East Coast.
But I wouldn't wanna get ahead of ourselves around what conditions are required for that. In reality, most planting for the next winter crop doesn't occur until April, and in some cases, you know, April, May and beyond. So, plenty of time for the Bureau to work out what it's gonna do and for farmers to respond to that.
Yep, indeed. All right, thanks. That's helpful.
Thank you. Question is from Jonathan Snape with Bell Potter. Please go ahead.
Yeah, hey, guys. Look, just a couple of questions. Maybe first on this, on this oilseed crush bit. I know you're kind of not committal on, on numbers at this point, but you know, if I look at Cargill, I think they pulled the trigger on a 100,000-ton expansion, and it cost them somewhere around about kind of $70 million-$75 million to do it just recently, which would kind of imply a scale of the investment you're looking at is quite material. Would that be a reasonable basis if you were kind of looking at potential kind of costs to look at some of these recent announcements from some of your competitors to kind of what they would be thinking?
Then, if I was trying to think about it logically, I mean, I think someone referenced before, you have AUD 30 million you put in the 310. I think from memory, that was off a 40,000-ton volume lift, but there was also some margin stuff in there. Should I be going back to the original business case for the Numurkah expansions as possibly a better kind of guide to what you would think these things would drop through to the bottom line, in theory?
Look, I'll, I'll get in to make some comments. A couple of things though, in opening, I'm not gonna be drawn on making specific comments about Cargill or others specifically, other than I understand, their investment case included working capital and other sorts of things. But, you know, I think that comparison is probably not the best one. I'll go back to some comments I made before in answer to a similar question. I think the best way to look at the sort of scale of investment that might be required for the scale of plant we're talking about, is to look at some of the offshore, brownfield and greenfield investments. And, you know, to go a little further and suggest that, you know, yes, the scale we're looking at, you know, could be to the tune of several hundred million AUD.
Bear in mind, though, there is plenty of work to do on what the best partnership funding models, de-risking models are around that investment. And I think it would be premature to get ahead and make too much speculation around what that might look like. The second thing I'd comment on is, we have significantly lifted our throughput and crush volumes with close to nil CapEx over the last five years. So we've done a really good job at optimizing our existing assets and driving them harder. And, you know, that is the way we operate in terms of looking at, you know, how we look for returns and maximize the return on invested capital.
Ian, you might like to make some comments just as to how you should look at our Processing business as it continues to deliver strongly in terms of the progress we've made.
Yeah, just to go back to your point around the original Numurkah expansion case, I think a lot is different since then. You know, costs of builds are very different, but also the demand for the outputs from this space are so different now with that added demand into the renewable fuels and SAF space. So that's really what underpins investment today, and I think that's seen you know, a lift in crush margins really globally, and that's what's led to investment not just here in Australia by ourselves and others, but more broadly across other jurisdictions as well. So I think the drivers are quite different and it's quite some time ago now. But I think Robert's points are really good one as well.
We continue to look at ways that we can optimize current capacity without CapEx as well, just through efficiency and operating at high utilization as possible, because that's the best way to drive positive returns without you know the commitment of capital. So we look to do both, I guess.
Okay, can I just follow up, though, on another question around basis? I think there's one earlier around ... Obviously, it's compressed, but it's quite different when I look at all the markets at the moment. Like down south, it's, there's a big discount on grain relative to up north. Which I think the last time it was like that was back in 2020, you actually did good returns. But look, at a high level, I think your throughput this year wasn't too far different from what it was back in 2021, and the EBITDA is probably, what? About AUD 130 million better in agribusiness. Should I be thinking of that over an or a degree of it being a sustainable basis backdrop we had at the start of this year, at the start of the year?
And then when I look into next year, that's kind of probably come out. But there's this, I suppose there's opportunities to do interstate trade that maybe weren't there before. I mean, how are you guys thinking about how it was to drop? Because it's the biggest unknown, I think, from the outside, is the last two years have obviously been this big beneficiary of, of basis that's kind of disappeared. And people are trying to figure out, you know, where that baseline is gonna come back to.
Yeah, thanks, John. I'll reiterate what Ian said, that you know, really you should think about it as volume. And yes, basis is a part of the construct and margin, but it is only a part. We do have some inherent benefits to optimize across the business, given the scale of where we operate geographically across Australia. But also, the fact that we're seeing quite significant volatility both in the short term and the longer term across global markets, and GrainCorp's extraordinarily well placed to you know, optimize the benefits that volatility brings in that respect. So you know, it is difficult to just look at prevailing grain prices or basis and draw conclusions around that, what that means for GrainCorp's margins.
I think you really do need to look at the volume drivers, but then also the point you make around comparison with prior years. It points to the improved efficiencies we have in the business, the better and optimized structures we've got, and the fact that we're doing a better job making the most of the opportunities that exist in the market, regardless of prevailing pricing. Much of that risk is, of course, worn by the farmer, both on the upside and downside. Ian, have you got anything to add to that?
Yeah. For agribusiness as well, John, the other couple of aspects is our international business has had a really good performance this year, partly off the back of WA as well, having a strong crop. Also, as I touched on earlier, that the feeds, fats and oils portion that's reported in agribusiness has definitely improved since FY 2021. So that, I guess that diversification of earnings across the portfolio is something we're quite focused on as well. So it's not just all about the harvest and the margins you achieve from there. And I touched earlier on a nice highlight out of our East Coast business as well, handling more bulk materials or non-grain commodities. So all of those aspects we focus on as well, that are driving ...
You know, we're always trying to increase that diversification of earnings to solidify that base and make sure we're well set up for any set of conditions to maximize the benefits from the asset base and the infrastructure we have.
Yeah, but I, I guess you can see what I'm saying is that the 2021 throughput is almost identical to the 2023 throughput. So there must be a way you can look forward and say, what component or aspect of that uplift in profitability? I think obviously there's different carry-ins and that sort of thing, but what aspect in there is your own initiatives versus maybe what was, you know, done by trading? Because, I mean, it's hard to argue that there hasn't been a benefit this year from, from basis.
Yeah, I would agree with your observation that there's multiple factors, and, you know, that's the point I was trying to make, almost, that it's not just that one item around basis and the impact of margin on margins. I think it's multiple factors. And I think if you looked at it, you'll see that it is other components as well of the broader agribusiness that are contributing relative to 2021. And, you know, no two years are ever the same. Even when you look at volumes, it depends on timing of volume in the year, the outlook for the following year's crop and what that drives in terms of margin. So you do see that quite a lot of variability in what different volume is generating.
In saying that, though, there's no doubt volume historically has been the best predictor of our overall financials, 'cause there's quite a good correlation, certainly to contribution margin. So I think it's the right way to think about it, but be careful about only assuming it's around basis.
No worry.
Yeah, finally, John, I think, our transparency around the through-the-cycle, our commitment, that, you know, we can protect against the downside and then the demonstrated leverage or benefits in the upside on very large volume crops, has been demonstrated in the results over the last few years. So the assumptions that sit behind that through-the-cycle are around more normalized factors in the business, but we're really demonstrating the upside leverage and reiterating our commitment to protect against the downside, including the crop insurance product, which, over the last three years, including this last year, has had a AUD 70 million cash cost and, as Ian touched on, additional non-cash costs that are all reported within the results.
Really, the business is set up well and strongly, both from a balance sheet and a performance point of view into the future.
Okay, thank you.
Thank you. This concludes our question and answer session. I'll now hand the call back to Mr. Spurway for closing remarks.
Thank you. Look, I'll finish with where we started. Appreciate your interest and support in the business. Thank you for joining us this morning. We look forward to meeting with a number of you over the coming days, for further understanding of the results. We're proud of the result, and we look forward to staying in touch. Thank you again.
That does conclude our conference for today. Thank you for participating. You may now disconnect.