Thank you for standing by, and welcome to the GrainCorp Limited HY23 results call. 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 the number one on your telephone keypad. I would now like to hand the conference over to Mr. Robert Spurway, MD and CEO. Please go ahead.
Good morning, everyone, thanks for joining us here at the GrainCorp Half Year Results Call. For those of you following the investor deck online, I will refer to the page numbers as we go through the pack. just starting with page three, as we begin, I do want 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. I pay my respects to their elders past and present. If we flick over the page to page four, before we deliver our half year result, I do want to start by talking about safety at GrainCorp and acknowledging the tragic loss of a colleague in a fatal truck accident at our Moree site in April. Philip Burns worked at GrainCorp for three years and was a valued member of our team.
I pass my sincere condolences to his family and friends and to his many workmates in the Moree community. The safety of all employees at GrainCorp remains our highest priority. I don't propose to spend any time on our other safety headlines other than to say that accidents such as the one I've just highlighted are why we remain committed to achieving and maintaining our goal of zero harm. If we return to the first half of financial year 2023, it was an outstanding performance. EBITDA of AUD 383 million, with growth in our processing volumes and margins. Today, we're upgrading our earnings guidance and outlook, moving our guidance up to between AUD 500 million and AUD 560 million. We're also updating our average EBITDA through the cycle to AUD 310 million.
I'll talk about both of those factors later in the presentation. We have a very strong balance sheet with AUD 200 million in core cash. Our United Malt stake is valued at AUD 121 million at the half year, and as many of you will know, that business is subject to a takeover offer. Our working capital, furthermore, is expected to unwind, ensuring strong cash flows into the future. We are driving shareholder value. The board is delighted to be able to declare a AUD 0.24 fully franked interim dividend. We're also providing a strategy update today, confirming that we're evaluating new oilseed crush capacity and a plant. I look forward to taking you through the details of that over the next number of slides.
Just looking at the highlights on page six, this is a slide I like to refer to where the numbers do the talking. AUD 383 million EBITDA at the first half. Net profit after tax of AUD 200 million. I think really underpinning the strength of those numbers is the return on invested capital at 22.7%. Our tonnes handled were 34.8 million. That is down slightly, of course, on the very strong crops we've had over the last couple of years. We are especially pleased, though, about the oilseed crush volumes. That's something that our teams work hard to do to drive our assets harder every day. 256,000 tons processed in the first half.
As I touched on before, the balance sheet, exceptionally strong position with AUD 200 million in core cash, Ian Morrison will talk to a number of those factors shortly. Moving over to page seven, we've been very pleased with our, the feedback we've had on our sustainability report over the last couple of years. The half year is an opportunity to provide an update on the ongoing progress we make across all areas in the ESG space. For those following on the slide, I'm not going to go through every bullet point, but just to call out a couple.
We're pleased with the work our teams are doing to connect with growers across the regions where we operate, talking about nature, climate and sustainable agriculture, getting their input and ensuring that we can be part of improving the performance of the whole sector and creating opportunities for growers. We have secured a recycling partner for the tarpaulins that we use on our grain bunkers, doing our bit to improve our environmental footprint. We're delighted with the opportunity we have to give back to the communities we operate in through the community foundation. We've had strong interest in the grants we provide, it's great to be able to support infrastructure projects, social services and wellbeing programs across those communities. Finally, it covers many aspects of our people, including the fact that we've submitted our Reconciliation Action Plan through the half.
In summary, we're making good progress on all areas of ESG, and we look forward to further updating you in our next sustainability report at year-end in November. On slide eight, our strategic priorities are driving high return on invested capital. This is a slide that we've shared many times over the last 18 months. It supports the fact that our vision and purpose underpin a strategy that's aligned to global trends and delivering results for our stakeholders and shareholders. In particular, strengthening the core is delivering results now as evidenced in the half and the recent financial years. It will continue to deliver results into the future as we strengthen our core business. We're also delighted with the focus we have on targeted growth opportunities where we know we have a right to win.
It's in that light that I'm delighted today to provide the update on page nine, that we are evaluating a new oilseed crush plant. This is an opportunity to build on GrainCorp's position as a leading supplier of renewable fuel feedstocks. It builds out on our belief that particularly in oilseeds, but across the grain sector generally, there's strong demand for feeds, foods, and fuels. Assessing the options for the new crush capacity will create opportunities to build on this leading position. It will create additional local source of ongoing demand for Australian oilseeds, many of which are currently exported without further processing. Ultimately, it's an opportunity for GrainCorp to play a part in Australia's long-term energy security through renewable fuel feedstocks.
Given the strength of our processing result, this is a logical next step, and we're looking forward to keeping you updated in the next few months. I'm gonna hand across to Ian Morrison now, our Chief Financial Officer, who will talk you through some of the segment results and the strength of our balance sheet. Thanks, Ian.
Thanks, Robert. I'll now move on to slide 11 in the slides, I'll summarize the financial performance for the half year. It's pleasing to report another strong result from our agribusiness segment and record earnings for processing. I'll touch more on the details behind both of those shortly. In terms of the corporate segment, we have broken out on the slide the UMG investment. As you can see, the half year result includes a fair value gain of AUD 41 million, that's based on the closing UMG share price of AUD 4.75 at the balance date of 31st of March. The underlying corporate cost in the first half is slightly higher than the prior corresponding period last year, also slightly above the long-term run rate we'd expect. That's mainly due to the impact of increased investment in growth initiatives.
We also saw an increase in net interest in the half. That's largely off the back of higher interest rates impacting on commodity inventory funding. As we've spoken about previously, this interest cost on commodity inventory funding, it relates directly to the grain and oilseed that we do fund, and the interest is built into grain pricing and recovered through our margins in EBITDA. I'll now move on to the agribusiness segment on slide 12. I'll start off with providing some additional details on our East Coast Australia business. We saw another well above average crop production of over 30 million tons this year. Combined with the higher carry-in from last year's bumper crop, this led to total grain handled of just under 35 million tons in the half.
Our East Coast business has continued to see good supply chain margins, albeit at lower levels than what we saw in the corresponding half last year. The margins this year were partially impacted by higher costs we saw from a delayed and wet harvest. Another update we're pleased to provide for our East Coast Australia business is that we recently extended our Pacific National rail contract for a further five years across New South Wales and Victoria. This is a really pleasing outcome. Just to note that the results for the half does include the impact of the Crop Production Contract. It includes the AUD 70 million payment and overall as a total expense of AUD 82 million in the half. Just on East Coast, it's pleasing to see continued increases in our bulk material volumes, and that's driving increased utilization of our port assets.
I'll now move on to slide 13 and the other businesses within the agribusiness segment. Firstly, our international business delivered a strong first half result. That's largely off the back of good margins from Western Australia following their large crop. An international business also continues to play a key role in connecting not just West Coast Australian grain to global demand, but also East Coast Australian grain as well. That's part of our multi-origin strategy. Just turning to Canada, our GrainsConnect supply chain is performing well operationally after the completion of the port at Vancouver last year. However, we have seen margins continue to be impacted by the lower exportable surplus as that region does still recover from the recent droughts. Now on to feeds, fats, and oils.
Our liquid feeds business performed well in the half, that's despite the typical counter-cyclical nature of that business to East Coast cropping conditions. This result was supported by a larger national herd size and also higher demand for animal proteins. On the fats and oils side, we've seen continued strong results off the back of demand for renewable fuel feedstocks. Turning to slide 14 and our processing segment. It's been an outstanding half for our processing business and in particular our oilseeds division. As you can see in the graph on the right-hand side of this slide, we've seen a continued trend of increasing crush volumes with an ongoing focus on delivering operational efficiencies at our plants. This has seen the business deliver a 10% increase in crush volumes in the half relative to the corresponding period last year.
As Robert had touched on earlier, we also saw excellent crush margins continue in oilseeds. The supply of canola seed in the East Coast, as well as the increasing demand for vegetable oils underpin those strong margins. Just to briefly touch on our foods business, it also continues to perform well with volumes remaining strong. I'll now move on to slide 16 and touch on the balance sheet. We've continued to generate positive cash flows, continuing a trend of strengthening of the balance sheet over recent years. We finished the half year in a very strong position with a core cash balance of AUD 200 million. We've also seen a reduced net debt relative to the prior half year, with a closing position at the half of AUD 1.4 billion. Noting that this does still remain below the long-term average.
We also hold the additional flexibility of the UMG stake. That was valued at AUD 121 million at the half-year balance date. Overall, our balance sheet is in a very strong position. That provides us with significant flexibility. Now moving on to slide 17. I'll just touch briefly on some additional detail on working capital. As you can see from the graphs on this slide, our working capital continues to be at elevated levels. That's largely off the back of the high volumes associated with the recent large harvest and the ongoing export program. As volumes do normalize, we'd anticipate a release of that net working capital. That provides ongoing confidence and strong cash flow generation into the future. Now moving on to capital expenditure on slide 18.
We've continued to invest more in CapEx to support additional capacity and maximize the opportunity from the recent large harvests. For the full year in FY 2023, we'd anticipate sustaining CapEx to be broadly comparable to what we saw in FY 2022. Alongside the increase to our through the cycle earnings that Robert touched on earlier and will provide more detail on shortly, we have updated our target sustaining CapEx to a range of AUD 40 million-AUD 50 million. That's in part to accommodate an increased focus on sustainability initiatives. On the right-hand side of this slide, in relation to depreciation and amortization, we'd expect to see full year D&A at similar levels to FY22 before continuing to reduce over time. Just lastly, for this section on slide 19 and touching on dividends.
The strength of our balance sheet alongside current performance and a positive outlook, enabled the board today to declare an interim dividend of AUD 0.24 per share, fully franked. That's made up of a AUD 0.14 per share ordinary dividend and a AUD 0.10 per share special dividend. Maintaining the ordinary dividend at AUD 0.14 per share reflects the board's confidence in through the cycle earnings. On that note, I'll now hand back to Robert.
Thanks, Ian. I want to pick up at slide 21. It's obviously opportune at the half year to review what the rest of the year looks like, today, we're delighted to share with you an upgrade to our earnings guidance for financial year 2023. We are now forecasting a guidance of EBITDA of between AUD 500 million-AUD 560 million, which translates to a net profit of between AUD 220 million-AUD 260 million. The drivers behind that are our continuing full export program that we expect to continue throughout the remainder of this year. The supply chain is moving well and performing efficiently. We are still seeing strong global net demand for Australian grain and oilseeds, and there's been good rainfall in most areas in the lead up to the East Coast planting period.
It's probably timely to acknowledge that many growers are in the middle of that planting at the moment, we're obviously wishing them well for a strong and productive cropping season ahead. If you look at the longer-term fundamentals that we've talked about for some time now, it's evidenced in this result and our outlook. We see food security remaining a key priority for countries globally. That's underpinning strong demand. We are seeing rising demand for vegetable oils and for food and renewable oils. I touched on it before. There's strong demand across all aspects of the uses of our products. We're also seeing ongoing growth in East Coast Australia grain production as farming practices and technology improves. I've shared with many of you before that as you look through the cycles, you can see that underlying productivity through the practices that growers in Australia employ.
Moving over to page 22. The other aspect of our update today is, of course, the lifting of our average through the cycle earnings from AUD 240 million-AUD 310 million. We do have a slide in the appendix that bridges and provides some additional detail, but I'll work through some of the key factors now. As I touched on earlier, we've already seen an increase in our oilseed crush volumes over successive periods, now comfortably achieving 500,000 tons annually. Alongside that extra volume, we are seeing a sustained or structural increase in the oilseed crush margins. It's driven by that higher demand that we're seeing and the demand for new uses such as renewable fuels. It's also reflected in the margins and the performance of the other parts of that supply chain that we operate in, including used cooking oil.
We're seeing significant operating leverage in our East Coast business. That's clearly evidenced in the very strong results we've produced over the last couple of financial years. That's despite the fact that within those years, we've paid away the maximum under our crop production contract. We're yet though to see the significant benefits that that contract would provide in a drought year. Again, demonstrating the leverage as to the opportunity we can achieve in big years and the protection we're provided in drought years through that insurance product. We have also seen an increase in interest commodity funding, but that clearly flows through to higher earnings in GrainCorp in terms of our ability to pass that on in the way commodities are priced.
As I said, slide 29 in the appendix provides more detail, but I think in summary, we do have a strong business. We're demonstrating strong and efficient performance and the significant operating leverage that large East Coast crops in Australia provide for GrainCorp. Just moving to the last slide that I'm gonna talk to before we open for questions is slide 23. Today, we've shared with you an outstanding first half 2023 performance result. We have an exceptionally strong balance sheet, giving the company significant flexibility to continue to return value to shareholders and to invest in the business and our future growth strategy. We are progressing our strategy, evaluating a new oilseed crush plant and looking forward to keeping you updated on that evaluation.
We are upgrading our FY 2023 guidance to between AUD 500 million-AUD 560 million. We're lifting our average earnings through the cycle to AUD 310 million. We are delivering strong financial results. I do wanna finish by just acknowledging and thanking the team that I work with right across GrainCorp. It's been a busy time for our operating divisions and people. That's a great position to be in. The efficiency, the value, the capability that they bring every day is returning value to our shareholders. Thank you for taking the time as we work through that presentation. I'll hand back to the moderator to open up for any questions there might be.
Thank you. 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're on a speakerphone, please pick up the handset to ask a question. Your first question comes from Sean Xu from CLSA. Please go ahead.
Thanks, Rob. Thanks, Ian. Thanks for taking my question. That was an outstanding half-year result indeed. Congratulations! My question is around the through the cycle EBITDA number. That's a big upgrade. Based on my previous understanding, right, I thought you want to wait to see a tougher crop year, you'll have a much better understanding of this number before an upgrade can be made. I know you have provided quite a bit detailed breakdown, slide 29, for this AUD 70 million upgrade. I just want to try to get an idea, do you have any observation on new key evidence to support this new number, and whether this number can be sustainable in the future? Thank you.
Thank you, Sean, for your question. I'll make some brief comments, and then Ian may also like to add that. I think as well as the bullet points that we've outlined on page 22, page 29, you know, really highlights the evidence and the absolute confidence we have in this number. It is focused on things that we can see and measure in our existing results, including the significant benefit of the increased capacity and volume that we're pushing through our processing division and our crush plants, the ongoing and sustained higher margins we're seeing in that part of the business, and the clear evidence that we have of our ability to pass through interest costs and result in a higher earnings line.
I think, you know, the other factor that we're really spelling out to the market and observers around the business is that really significant leverage we have in large crops. Notwithstanding our AUD 310 million through the cycle number, our average earnings since the merger have been well above that at AUD 415 million. You know, I think what we really are doing is demonstrating a consideration of the fact that not all years are going to be as good as the last couple of years. 310 isn't a roll forward of our current average earnings, but reflects the strong confidence we have in the business, the initiatives we have in place to protect against the downside in drought.
You know, they are all the things we've talked about before in operating initiatives, including, but not limited to the continued growth we see in the bulk materials that we're handling, that of course are not prone to drought cycles whatsoever. Ian, do you have anything to add to that?
Yeah. Thanks, Robert. Probably the only thing I'd add, Sean, is that, if you recall, the original through the cycle update we provided a couple of years ago, talked about an average year with average conditions. But. We have talked to some extent about the benefit that comes from operating leverage. Now, of course, the last few years did include a drought in FY 2020, and as Robert touched on, we've seen a number of years now with bedding conditions that gives us that confidence to highlight the operating leverage benefit that exists across at different crop outlooks. Then the other point just to call out, Sean, is on the interest part.
You know, there is a higher interest cost below EBITDA, that is a reflection that it gets recovered through EBITDA rather than being a net uplift at a bottom-line cash flow level. Hopefully, that makes sense, Sean.
Yeah, that's very helpful. Thanks, Ian.
Thank you. Your next question comes from Apoorv Sehgal from UBS. Please go ahead.
Morning, Robert, Ian, and Luke. A few questions from me, please. Maybe firstly, actually, just. I'm just trying to sort of think about a downside here, right? You have that slide where you show EBITDA since FY 2020, and that was AUD 98 million in five point. Obviously since then, you talked about AUD 40 million of operating initiatives that you called out a couple of years ago, earlier today. That's come through. Today you've upgraded your through-the-cycle number by about AUD 70 million. I guess when we're thinking about like a real downside year in the future in a severe drought, does that number look more like AUD 200-AUD 210 of EBITDA? Are there any other factors that we should be considering in that analysis?
Look, Apoorv, we're just not able to provide, you know, an absolute estimate of a hypothetical individual year in the future. Some of the things to consider are that, take FY 2020, for example, and we've said this previously, it was the end of a nearly three-year really deep drought cycle. Not only were we dealing with the lower volumes of that year, you've already highlighted it was prior to many of the operating initiatives we put in place to strengthen the business. It included a significantly weaker processing result, which we've talked about, I think, very explicitly in terms of the ongoing and sustainable improvement we've demonstrated period on period in that part of the business. It also didn't have the benefit of any carry from the prior year.
The sorts of things you need to think about is when you do have a drought year, how many drought years might you have in a row? What's the starting position for the business and the end position? With the benefit of the crop insurance, it's even quite possible on an average or below average year, you could still have a very good year at GrainCorp when you consider carry in position. I think you can understand the difficulty that we have in providing an individual year, which is why we're providing really great clarity, I think, on the way we think about the business on average through the cycle in terms of the combination of some deep drought years, some average years, and some large crop years.
I, again, I would point to the fact that we continue to demonstrate the capability of this business through the results that we've delivered over the last couple of years, and indeed, the strong guidance upgrade we've provided today for this year.
Understood. Okay. Just with the through-the-cycle number upgrade, you've got AUD 10 million there attributed to a higher crop size from, I think 2020 to 2022 to 2023. What's underpinned the thinking there to lift up that average year crop size?
I'll let Ian talk to that, Apoorv.
Yeah, I'm happy to talk to that, Apoorv. You might remember at one of our, I think it was our previous Investor Day, we talked about just seeing the ongoing increase in yields we see across cropping regions, not just East Coast, but broader than that. We think at the time we talked about a 2.8% CAGR growth. We continue to see in some of the areas we invest in, whether it's in startups or innovative technologies, that farming practices do continue to improve and yield varieties continue to improve. I think the recent years have shown how much bigger the large years are than they've been historically, as well as recent drought years have been a lot better than drought years of the past.
We do think the 10-year historical look back supports that ongoing trend of improving yields from where it might have been a few years ago.
Okay, that's helpful. Thank you. Maybe just a question, specific to this FY 2023 guidance. It does imply a pretty big first half skew to the full year EBITDA. Can you just talk about what some of the key movements you're expecting second half versus first half? I mean, are you basically incorporating a moderation supply chain and crushing margins in the second half versus first half?
I'll let Ian talk to that. It's not an unusual dynamic you see in the business, Apoorv, so I'll let Ian talk to some of the details.
Yeah. You're right on what your comments are, Apoorv. To some extent, we always forecast for a moderation in the second half, partially because of uncertainty around the following year's crop, which does have an impact, particularly on quarter four. There is an element of that comes into it. Typically, we do have a skew from first half to second half to do with the crop cycle being in the first half and the more available seed as well. That's quite normal. Also, just noting the first half does include that benefit from the fair value gain on UMG, so it might look like more of a skew even than normal with some of those elements that are one-off.
Yeah. Yeah. Great. Okay. Thanks, guys.
Thank you. Your next question comes from David Pobucky from Macquarie Group. Please go ahead.
Good morning, Robert, Ian, and Luke. Congrats on another very strong result and the other items, including that strategy update and the sort of cycle upgrade. If I could, and appreciate you'll speak more about the oil seed crush capacity plans in coming months. Can you give us any more color at the moment around how much capital you'd potentially expect to deploy? How do you think about returns?
I mean, look, that's a good and obvious question, David, and all part of the evaluation that we're doing. You know, what we would say is if you look at the position that we have with our Numurkah site, that's a scale site. Certainly, there are some benefits of scale in this type of activity. The study and evaluation that we're doing is looking at all aspects of it, including defining what scale that we need to be as efficient as we can. That obviously correlates very closely with the demand and the offtake opportunities, which are also part of the considerations that we're working through. Location, of course, plays into that as well. You know, really it's an end-to-end study, making sure that we're considering all of those factors.
I think it'd be unwise to be drawn, early, on what the shape of that might look like, other than to reiterate with the significant strength in our balance sheet. We've got plenty of flexibility, for even a scale expansion and to fund that within our existing means.
Thanks.
You know, the final thing I'd say, David, it's just, you know, on returns is, you know, again, we're not gonna be drawn on the exact profile or return other than referring you back to one of the underpinning elements of our strategy, which is about driving better return on invested capital through the cycle. We're pleased with our performance and the way we've been able to do that over the last couple of years, and we remain committed to doing that into the future, including, of course, any new investments we might make.
Thanks, Robert. Just following up on that, in terms of capital management, how do you think about special dividends going forward in the context of that very strong balance sheet and core cash position, as well as the potential growth opportunities? Then at the same time, you know, with seasonality, coming off peak conditions as well.
Yeah, I think if I reference our capital management policy around returns of between 50% and 75% through the cycle, rather than commenting on the special dividend, what we'd reiterate is the ordinary dividend that at half year or interim dividend of AUD 0.14, extrapolated out to a full year number, is a pretty strong signal of the confidence that we have in the through the cycle earnings of the business and ability for the board to consider and deliver a consistent dividend over time. I think the special dividend reflects the incredibly strong performance of the business and the returns we're delivering in this cycle, this year, last year, and the year prior. Finds that right balance between our commitment to return to shareholders and invest in the business.
The slide that Ian spoke to, when you look at the strength of the balance sheet and the growth in core cash over the last five reporting halves, I think it's about slide 16. It probably doesn't explicitly call out something that should be well understood, and that is the significant capital we've returned to shareholders through that period. Despite that, we've still been able to grow the strength of the balance sheet. Just looking at last financial year, we returned AUD 50 million through a share buyback. Ian you'll have to remind me of the number in terms of total dividends over the last year.
Yeah.
I'll come back to you, David, on what that number was. I've got it here. I've just lost it in the melee of numbers. About AUD 121 million in dividends over the last financial year alone.
Thanks, Robert. Maybe just one last one, if I could, for Ian. Net interest of AUD 33 million in the half. Look, that was lower than our forecast and consensus as well. Is there anything in there in terms of the second half, whereby you wouldn't assume a similar amount for the second half?
Yeah. No, that's probably a fair assumption, David . It was lower than what we expected in the first half, partially to do with softening of commodity values, but also a slightly lower commodity inventory holding than what we had initially thought. That's the main driver behind that lower number.
Thank you very much, and congratulations again.
Thanks, David.
Thank you. Your next question comes from James Ferrier from Wilsons. Please go ahead.
Morning, gents. Thanks very much for your time today. Maybe if I could just clarify one aspect to your answer there to David's last question, that probably explains why the NPAT upgrade to guidance is proportionally stronger than the EBITDA upgrade.
Yes.
Yes.
Great. Just looking at the FFO business and the sort of references you've made there to through the cycle EBITDA. Historically, that's been a reasonably small contributor to agribusiness EBITDA, so a $10 million uplift to through cycle earnings expectations, that must be pretty big. That must be probably double what the previous earnings would have been, does that sound right ballpark?
It wouldn't be quite at that level, James. It does feed off the back of what we've seen as sustained increases, not just in the used cooking oil part, but also in general in other parts of our business. I commented on the performance we've continued to see across our feeds business, even in periods that typically, we've historically seen as more countercyclical in nature, have performed better. I think we've been making good progress across all parts of our feeds, fats, and oils platform, that, you know, underpin that increase.
Yeah. Okay. That's, that's good, Ian. Thank you. I guess there's probably been a, you know, say 15% or that thereabout correction in domestic tallow prices in the last couple of months from their from their highs. To what extent does that impact the FFO business and your sort of forward projections?
Yeah. Not a huge impact. Of course, right across all commodities, we have seen that weakening of prices, and we've seen that not just on tallow, but lots of other commodities. To an extent where we operate is much more in the supply chain and similarly on grain. It's not necessarily a direct exposure to what various commodity values are doing. It's how we add value from origination through to end customer through the use of our assets. Now, to an extent, prices moving around provide opportunity, but I think from a long-term perspective, it's mostly about what we're delivering through our supply chain and capabilities, not from a movement of price perspective.
Yeah. That's helpful. Thank you. Next question is around crush margins again, in reference to that through cycle, EBITDA slide. The expectation on higher volumes, increasing from 460 to 500 is essentially what your nameplate capacity is of the two plants. Is that a view that GrainCorp has around where future domestic canola crop production is going, or is that a view that GrainCorp has around what share of that crop you're going to sustainably win?
No, it's a much simpler explanation than that. James, if you look at the half, we reported crush volumes of 256,000. The 500,000 is volume that we're already doing and demonstrating through the assets that we have. There's a significant surplus of oilseed produced in Australia that's exported as oilseed. We don't see any constraints on supply in terms of what's grown. You know, really the economics of future crush capacity come down to the, you know, efficiency of the assets and the scale of the assets that we can deploy relative to the growing demand and opportunity for oil use, not just in Australia, but globally as well.
You know, obviously, the crushing process, it improves the value of the oilseed, because you're dealing with the individual components, including the oil, which can be used for food or renewable fuel stocks, but also the canola meal, which of course, has a strong market in the feeds area, again, both in Australia and globally.
Probably the other thing to add, James, is we have seen increased acreage go to canola off the back of some of that additional demand. Another comment, just referencing back to something I mentioned earlier is we also anticipate seeing continued yield increases, you know, across all grains and oilseeds. That's gonna be moderate over time, but we do expect that to continue and therefore, create that additional supply to start with.
Thanks, Ian. Just one last one, if I may, to the opportunity to invest in more crush capacity. I mean, it looks attractive. The unit economics certainly are very attractive as they stand right now, and then certainly as you've just explained a moment ago, the volume opportunities there. Just interesting that that's probably more about deploying capital into your existing business. When you look at some of the targeted growth opportunities that GrainCorp has referenced previously, alternative protein, animal nutrition, agri-energy, et cetera, we haven't yet seen any sort of very substantial announcements around capital deployment there. To what extent are there opportunities presenting, and anything imminent, or is this really just a case of where there's logical opportunity to deploy capital in the near term?
A couple of comments that I'll make. You know, I think overall you can see the discipline we have around capital deployment, and that commitment we have to make sure that we're getting appropriate return on invested capital where we are looking to deploy capital. Secondly, the crush plant capacity certainly would be very closely related to our agri energy strategy. This is, you know, in some respects, yes, an opportunity to invest in our core business and what we already do, but we'd see it as a significant strategic expansion into the demand opportunities that we see ahead, and I think we've called that out pretty clearly.
Not gonna be drawn on other inorganic activity around, other than to say the strength of the balance sheet continues to give us options to look for the right areas to expand the business, without jeopardizing the very strong returns that we're providing to shareholders. I think that could easily accommodate the sort of plans that we have for CapEx deployment, and also inorganic opportunities as they do present.
Okay, great. Thanks very much for your time.
Thank you. Your next question comes from Jonathan Snape from Bell Potter. Please go ahead.
Yeah. Hey, guys. Can you hear me okay?
Yes, Jonathan, all good.
Thanks. Look, just one quick one on the. I, you know, I hate to labor all this uplift in sustained earnings. I guess the AUD 20 million I get, AUD 30 in oilseeds, is it reasonable to say that maybe AUD 10 of it is the volume and the other AUD 20 is the margin? Then looking at the margin, I mean, if I looked at the last couple of years, I mean, we've had grain bases, we've got oilseed bases as well. How much of that kind of fits into your thinking? Like, there seems to be a big disconnect right now between Australian oilseed prices and everywhere else in the world, but conceivably, you're a beneficiary of this year and probably even for the next twelve months with what's happening in South America.
I'm just trying to get an idea on how much of it is, you know, this year and last year is probably that basis benefit, and then how you've thought about that in that additional bit coming from oilseeds in terms of the margin uplift.
Yeah. Thanks, Jonathan. I can take that one. On the oilseeds one, it's probably fair to say there's three components contributing to that, and I won't put specific numbers on the three components, but they'll help you understand some of the thinking. The first one is the volumes, which are more clearly understood from a perspective of going from a historical view of 460 up to 500,000. That's just come from the focus on incremental investment and improvements in operational efficiency over our current plans. I think that's easier to understand. There's an element of a view around structural crush margins from a global perspective and with increasing demand and uses for the various products. That, you know, talks about the meal as well.
The third aspect is the operating leverage. That's the acknowledgement that you do see different conditions in East Coast Australia. You'll see a mixture of large years and lower years of crop cycles, and the average of a cycle of differing crop sizes does bring a benefit from that operating leverage on the large years. As you referenced, we have seen that increase from a basis perspective with the significant surpluses, not just in oilseeds, but obviously grains. There's an element of taking account of that average of where margins do increase more in the big years than they decrease in the more challenged years. Hopefully that makes sense.
Yeah. Yeah, look, while I've got you, Ian, can I just ask as a quick reminder, 'cause I can probably do the exercise, but you probably have it to hand. How much have you now cumulatively paid out on the East Coast Grains Agreement? Can you remind me what the ceiling was on your payments?
Yeah. We received AUD 58 million or AUD 56 million, sorry, on the first year. We've paid out the maximum of AUD 70 million on the last three years. We've paid out AUD 210 million, received AUD 58 million. That's from a net perspective. Then the aggregate limit is AUD 270 million. There is a bit to go to get to the net aggregate. It is a net as well, if that's what you're getting at.
Yeah, that's what I'm getting at. Okay. Look, can I just draw your attention? I just wanna ask about the slide you've got towards the back in the appendixes. Bear with me while I find it. The waterfall for your corporate cash, I think it's slide 35. In particular, what I'm trying to figure is, I mean, there's obviously a release in working capital that's gonna come through on your trading book that necessarily doesn't flow through to your corporate cash numbers. There's elements you do kind of have to come, I guess, from where you're putting your own balance sheet down in kind of booking ships and stuff like that, but also in unrealized, I guess, cash earnings on your marketing book.
That AUD 45 million in the MtM asset liabilities and margin deposits, is it reasonable to say that that's kind of unrealized cash earnings?
Yeah, that is right. The slide I touched on earlier as well, Jonathan, on 17, the aspects we've included in that from a net working capital do include the mark-to-market assets and liabilities. That slide gives you kind of a sense of the total build-up in the balance sheet across both the traditional kind of working capital items like the export shipments and debtors and creditors, but also the aspect that relates to cash, I guess, earnings that haven't converted to cash yet from a forward sales and a mark-to-market perspective.
All right, great. Thank you.
I'll just make one additional comment that may go without saying, but we consider that our investment in UMG as a liquid cash equivalent investment effectively. Obviously we'll be following the process that they are in at the moment.
Thank you. Your next question comes from Owen Birrell from RBC. Please go ahead.
Yeah. Good morning, guys. I guess my question is a bit of a follow-up on that last question, just with regards to that working capital buildup. You effectively got a doubling in your net working capital buildup over the last 2.5 years. If we do see things, what is your normalized from here? Is that as a first question.
I'm gonna make one comment, Owen. We hope it's no time soon, because the bigger the crop, the higher the working capital. We all know that's a good thing. Ian will answer a little more objectively for you.
Yeah. Well, I would agree with that, Colin, firstly. In terms of where do we think normal sits, it's hard to put a specific number on that 'cause there's obviously lots of elements, not just volume related, but commodity price related as well. You know, looking back to FY 2020, that was a drought-affected year. It's probably not back to those levels. I'd say, you know, 2021 and 2020 are more at your typical levels across those two rather than where we're at at the moment. There's certainly a level of release. You're right to say it is a doubling, and it is a fair amount to convert to cash still.
Hopefully that's some time away, but it does kinda highlight if conditions do return to lower levels of volumes, at moderate commodity prices, then yes, there is some amount of balance sheet that will convert to cash.
I guess the second question then is, you've got AUD 200 million of core cash. Let's say this unwinds in the next couple years. There's probably another AUD 200 million coming out from working capital. Then you've got UMG. Let's say that gets taken out. There's another AUD 120 odd million of cash coming in the door there. Call it, say, AUD 500 million-AUD 600 million of cash on the balance sheet. At what point do you say the balance sheet's got way too much cash on it?
Yeah. To answer that question, you know, we'll continue to stay focused on our capital management framework and ensure we are looking at the balance between pursuing attractive opportunities to invest, and we will stay very disciplined on that and ensure the returns are appropriate, while also looking at returns back to shareholders. Robert touched on it earlier, we have provided quite significant returns back to shareholders through not just the ordinary dividends, the specials, but also buybacks. I think all those capital management options will continue to be a feature of how we look at the balance sheet alongside our growth strategy and the options to deploy capital where it makes sense.
I guess one last question from me is on this, the interest uplift. If I understand the metrics where you obviously charge the interest and you're passing that back through in a price which boosts up your EBITDA. Can I just understand, the funding facilities that you have, are they at spot prices? They're not fixed rate facilities, and therefore I see you've upgraded your through the cycle EBITDA by roughly AUD 20 odd million , which is effectively what you've achieved in this period. Is there any further upside to that if interest rates continue to run higher from here?
Yeah, it's a good question, Owen. We've used essentially a forward curve from an interest rate point of view to assess that, over a period from, what's normal on commodity inventory interest. I guess the other point to add though, and the key point we want people to think about though, is that effectively it's an in and an out. The way to think about upside. It would be upside to our lower interest and downside to an EBITDA. The way we look at commodity inventory interest internally is really assessing it like a cost of goods sold type item, where it's the EBITDA after commodity inventory interest that we think of as the sustained earnings or cash generation that we view the business through.
Hopefully that makes sense, that we don't necessarily focus too much on viewing it as upsides or downsides from that matter on the commodity inventory piece. Lastly, just to touch on, they are annual facilities. They don't have a long-term fixed portion like our long-term debt does. They are subject to what prevailing interest rates are doing.
To get this right, you're basically taking a through the cycle inventory level, interest cost based on a forward curve, rate. That's for the through the cycle EBITDA estimate. For the current FY 2023 EBITDA estimate, are you factoring any further uplift into the second half?
Yeah. We use exactly the same type of approach even on short term. What the market is pricing essentially into a forward period. Of course, there's only a matter of months left in this fiscal year, and the commodity inventory balance does moderate in the second half to some extent, where we're past that peak period now. We think the volatility in terms of forecast on it now is a lot less at this point in the year.
Okay. No, that's good. Thank you.
Thank you. You have a follow-up question from Apoorv Sehgal from UBS. Please go ahead.
Oh, no. All good, guys. My question got answered. Thank you.
Thanks, Apoorv.
Thank you. That does conclude our time for questions. I'll now hand back to Mr. Spurway for closing remarks.
I'll keep it very short. Thank you everyone for joining us, for your interest in the business, and support of GrainCorp. We're delighted not just with the results, but the confidence that we've been able to share about the outlook, both in terms of the earnings upgrade for financial year 2023, and the update to our through the cycle numbers. Thanks again, and have a good day ahead, everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.