© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everyone, and thanks for joining us today for GrainCorp's 2018 half year results. The call this morning is for investors, analysts and the media, and it's being webcast live, and a recording will be made available on our website later today. The results materials were released to the ASX this morning and are also on our website. On the call today is our MD and CEO, Mark Palmquist; and our Group CFO, Alistair Bell. They'll go through the results presentation, and then we'll go to questions after that. I'll now hand over to Mark.
Great. Thanks, Luke. Good morning, everyone. Appreciate you joining the phone call. I'm just going to do a quick overview of the results for the half year, go a little bit more detail into the segment performances in our 3 major groups. Then I'll hand it over to Alistair Bell, and he'll walk through balance sheet and CapEx considerations. And then I'll come up and finish with the lookout for the full year '18. And then we'll certainly handle questions after that.So I just want to start on Page 4 and just show the safety results and -- where we're drafting a little bit higher on our lost time injury frequency rate. We're certainly going after and getting recommitted to this. Injuries we're seeing is just a tick up in the slips, trips, falls type of categories. So we just got to get after that again. A lot of that is just a process issue in terms of how we're handling our work considerations at our sites. We're also spending a lot more time tracking our critical incident near misses, just to make sure that we are looking at processes again and keeping our people out of harm's way. Going on to the next slide just a recap of the half year '18 earnings results. As you can, see the underlying EBITDA at $119 million with an underlying NPAT at $36 million and a statutory NPAT at $36 million and a declared dividend for the half year at $0.08. Overall, the earnings is really taking the downdraft on the big 40% reduction that we've seen in the eastern coast Australian production. And this is following up a very good crop that we had in the full year '17. We're making good progress in a lot of the other areas. And it goes well with the process of trying to diversify our earnings streams, so that we can handle the volatility that goes on in crop production in Eastern Australia. For malt, sales down just very slightly, but we're still getting a good, nice high capacity utilization rate. We're still seeing good demand in our 2 primary markets we're focused on with the craft malt beer producers and the distilling customers. As I mentioned on grain, definitely down a lot. This has impacted areas for us in the handlings that we have in our off-country facilities as well as on our export components. But we are going very well in terms of our new formation in the grains group, and I'll talk about that a little bit later. On Oils, when we look at the 4 areas that we have inside of our Oils group, with the liquid terminals still performing well, very good utilization capacity in that business segment. It's our crush area that we had a downdraft on earnings, really based upon what the supply was and some of the quality issues that we had to deal with. Our foods business is performing better. We are seeing great improvement going on in terms of our plant efficiencies particularly at West Footscray and also seeing some improved demand coming for our specialty oils that goes in on the infant formula area. Overall, our restructuring that we set on track that we had talked about earlier in the year in both our oils and our grains group is definitely on track and we still believe we'll deliver $25 million to $30 million in pretax benefits as we work our way through '18 and then through fiscal '19 as well.So on the next page, you see just comparisons from the previous years on EBITDA and the NPAT. And you can see where we're tracking into the similar situations we had in '15 and '16 when we had reduced crop size, so very consistent to what's happening in fiscal '18 as well.So on the following page as I'd mentioned, we have the interim dividend up at $0.08. This is tracking at roughly in the middle of what we set out as a policy for our dividend payout of 40% to 60% on the full year NPAT, and we're targeting to pay an ordinary dividend each year. I also want just to point out to you on the right side of that slide as the dividend dates with the record date of 2nd of July and a payment date of 16th of July. And then on the following page, you'll see an earnings bridge comparison from half year '17, half year '18. And as you can see, no major impact coming from our processing areas. The big impact of course is sitting on the grain side, with a substantial decline in our grain production on the east coast of Australia. What that does is it really affects us not just on the amount that we're handling, but also puts us in a situation dealing with some supply chain costs, primarily coming from our take-or-pay rail contracts that still exist this year.You'll also notice towards the right-hand side in the green that we have a substantially lower tax payable, and we'll talk about that a little bit later. But we're seeing the net benefit of the reduction in U.S. tax rates to 21%. So there will be a onetime advantage but an ongoing advantage as well on our overall tax rate.So moving on, I'll just talk about the different segments, and I'm going to go to Page 11 and talk about Malt first. Again, you can see the revenue is down slightly. That's really more about the price, the gross price of the malt itself. There's no real change in terms of volumes as we run through the market and we look for improving volumes as we get into the second half of the year. Big notable events inside of Malt over this past year, as many of you know, we got our new expansion of Pocatello up and running this past year. It brings on 120,000 tonnes of new capacity. It came on very successfully. It gave us the opportunity to shut down and make improvements on the existing facility, which is roughly 100,000-ton capacity, putting in things such as new burners in our kiln area, big improvement for us in energy efficiency as well as lowering our emissions. That's all gone well, finished that up right at the end of the calendar year of '17. And so we have full on capacity and usage of Pocatello for the remainder of the year. Also in our '18 numbers, we have the downsizing of capacity by the sale of our German malt houses, which is roughly 60,000 tonne in capacity. So the net increase we'll see in capacity for '18 is 60,000, between the 120,000 at Pocatello and the 60,000 that we sold off with the German Malt plants. We're still seeing good demand from malt going into our brewing segment, primarily on the craft side. Beer consumption itself is relatively flat in most marketplaces around the world, but the craft side continues to grow. We saw in '17 it grew at 5%. It appears to be pretty consistent as we're going through in '18. We're also seeing good growth in the distilling marketplace, primarily at single malt Scotch whiskeys in Scotland. And we're seeing that not just in consumption, but also in the premium side of the market where there is a higher demand for longer aged single malts, which means that a lot of the distilling companies are having to ramp up production. So good news on that front. Also want to point out that we have integrated Cryer Malt. For those of you who remember, it is a company that we've had a long history with in the past and now decided it makes sense to have ownership. This is our continuing process of expanding our distribution capabilities primarily for the craft side of the brewing business. We've got a very good entity named Country Malt existing in North America, another entity in the U.K. and Cryer Malt is a great addition for us for Australia and New Zealand business. Also wanted to point out that we've mentioned in the past is we have seen sizable uptick in our energy costs in our Australian business. For the half year in Malt, NPAT was about $2 million. Moving on to grains, and again the story here is just the significantly smaller crop that we had in the east coast Australia areas, following a near record crop that we had the year before. What that really does is puts us into a much lower exportable surplus in eastern Australia, but a lot of that production was really skewed towards Victoria, Southern New South Wales, with Queensland in the northern part of New South Wales really suffering the biggest impact in the lower production that we saw for the year. The other component is on the export side is that we're seeing very good supplies globally on most of the commodities that we trade in. And so that has made Australian grains oilseeds relatively uncompetitive any time we try to venture outside of our regional backyard. So as we go through and we look at what's happening on this, you can see the impact year-to-date, our total grain receivables at 5.6 million, big impact on the grain exports, 1.4 million year-to-date. We think we will track for the full year at 60% to 75% below last year's 7.2 million tonnes. Our nongrain handling, such as things as woodchips, fertilizers, sugar, cement is tracking very consistent where we've been in the past at 1.5 million year-to-date. And we think that will be pretty consistent as we work our way through the full year. We certainly operated differently with the smaller crop. We ran 160 facilities in '17, down to 145 at harvest time. Less of them open today. And so we really tried to do what we can to try to minimize our cost with the lower crop size that we had to deal with in the year. Outside of Australia, our international growth strategy continues to proceed very well, very good execution, similar levels in '17 coming out of South Australia, Western Australia. We've had very good trade coming out of Europe. And in Canada, with the GrainsConnect joint venture that we have with Zen-Noh of Japan, we've gotten 2 facilities now fully commissioned, with the other 2 in process and fully completed over the next 18 months. So certainly a very important diversification for us and a secure supply coming on commodity to support our international customers that we have.Just wanted to make a comment about the formation of the grains. Change for us in '18, combining our Storage and Logistical group with our marketing group is certainly helping us tremendously. It's really improved our customer engagement most notably with our growers in Australia and with the domestic customers that we have. It's also helping us be better in terms of how we utilize our assets, and that's really resulted in a much better competitive profile for us in the grain markets. Inside the half year results, we do have $3 million in integration costs included. I've mentioned before, and this is the big issue for us. In the short crop years, we have take-or-pay rail commitments that go back over a period of 5 to 7 years. It certainly is challenging as we try to utilize that freight on a take-or-pay basis, and this has certainly been a cost issue that we've had to deal with inside of the grains.Going onto the next page, to talk about Oils. And again, when we look at the 4 segments that we have in there, liquid terminals again doing very well, good high utilization rate. Some of the expansions that we've gone through over the last couple of years putting us into more nontraditional products, the chemicals and petroleum finished products, has really worked out well for us and we see continued good growth on that as we go through the full year in '18. Oilseed side, definitely a lower crush contribution to our earnings. Two areas, first one being that as we have our crush expansion project going on, we've had to have periodic temporary shutdowns as we're tying certain components into the plant, but also issues with the canola supply we had last year. For those of you that remember, we put a fair amount of rain on it right during harvest time. So harvest came off not in a very systematic way. Also there was some issues with some sprouting quality issues on the crop as well. Foods' doing well, improved demand for specialty oils on the infant formula. Certainly are getting a stronger performance with some of the cost reduction and the restructuring that we have done and the improvement in our utilization in the West Footscray facility all has given us an uplift in our food side of the business. Feeds' also better particularly in New Zealand. We're seeing good strong demand coming from the dairy sector on that side. As Malt Oils also has increased in energy costs for the half year, amounted to an increase of about $3 million. And again we think that will be pretty consistent as we go through the full year. So I'll spend a little time talking about foods' repositioning. What we have done is taken our foods and oilseeds group and combined them together, so we got a much more simple type of operating structure. Also it's a structure that allows us to be much more customer responsive in terms of what we're doing in pricing and the type of products that we're offering. We're well on track to meet the cost reductions as we work our way through '18 and into 2019. We got $2 million in restructuring costs included in the results on the income side. Also our Numurkah crush expansion is on track, and we expect to have that commissioned by the end of the calendar year 2018.So with that, I'm going to hand it over to Alistair, and he can spend some time talking about the balance sheet and CapEx.
Great. Thank you. Thank you, Mark. Good morning, everyone. As Mark mentioned, I'll cover off the balance sheet and CapEx. On Slide 15, the purpose of this slide is just to outline and give a snapshot on our gearing and liquidity. It's centered around our strategic priorities being maintaining our disciplined approach to the capital management, as the large CapEx programs have wound down and finalized. It's also, as they're finalized, it's about portfolio optimization to improve our return on invested capital. Mark outlined some of those initiatives that are underway across the business units there. It's a way to ensure as we create balance sheet capacity to accommodate the seasonal fluctuations. And this table on Slide 15 as well as 16 shows a lot of the impact around the seasonal fluctuations. In summary, our balance sheet shows we're in good condition. Slide 16 does show the seasonal fluctuations. You can see the net debt, how it peaks at the half. And if you go to Slide 22 later in the pack, it also shows the commodity inventory funding and how that fluctuates between the half and the full year.One of the key priorities for this year, the earnings are down. And with earnings down, so is free cash flow. And the priority has been to remain free cash flow positive for the full year. As we think about that, it means we need a disciplined approach to our CapEx and any new projects. I'll come back to that when we talk about the CapEx summary. Turning over the page to Slide 16, this is the core debt summary. It represents our long-term liquidity. That's important for investors when considering the intrinsic value of GrainCorp. The way we calculate it is we take our net debt levels less certain grain inventory, and so it excludes the grain trading as well as the oilseeds component. For the half, the increase reflects the seasonal trends. And it ensures we always maintain it -- by the measures that we've put around this, it ensures we maintain good headroom against any bank covenants.Turning over the page now to the CapEx summary, so Slide 18. This splits stay-in business CapEx from growth CapEx. And there's a couple of key messages to take out of this. The major capital work programs are reaching conclusion, and we expect to initiate that our growth CapEx will be down to be in the range of $80 million to $100 million. Those projects we've outlined those in the past. But just to remind everyone the Numurkah crush expansion, which is in Victoria it's a canola crush plant, and we should be bringing that online in the latter part of this calendar year. The other part major spend in the growth has been across the east coast country network and we have a number of projects underway there. As we think about any new projects with lower earnings, free cash flow is tight. It is dependent on free cash flow. And to remind everyone we have a hurdle rate of greater than 12% IRR that we apply to any new growth projects. And that discipline will continue as we close out this year and go into '19 as well. With the lower volumes and with the newer facilities that we've been dealing with under the growth CapEx programs, our stay-in business CapEx will be in the range of $50 million to $70 million. This is slightly lower than we've indicated in the past and also what was spent in recent years, but it does show you that in the lower volume years where the necessity to spend is much, it's been less. And we envisage this will continue for the next few years.Mark, I'll hand back to you to cover off the outlook.
Thanks, Alistair, and I'll go through what we think we will end up with on the full year '18, so I'm just going to start with the outlook on the processing side. Some of the points, I've already mentioned. I'll just highlight a few of them. So first looking at Malt, and this is on Page 19. Global barley production is down from last year. Impact to us is just watching where this acreage goes on a global basis. But we contract the vast majority of our production directly with the farmers so we're in good shape. Still looking for growth to continue on the crafter side and the distilling side. And just to make a point, we're also seeing good demand coming on the Mexican-style beer, and we certainly are a major supplier of malt to Mexican brewers. So outlook we're going to continue to run at very high capacity utilization, getting good demand for our specialty products, really benefiting from our expanded distribution network in North America, U.K. and with the addition again of Cryer Malt in Australia and New Zealand. And then when we look at Pocatello we're full on now with our production after going through the expansion and then the upgrade on the existing facility. So definitely we'll benefit in the second half. And also as many of you know, we've got a major portion of our malt capacity sitting in North America and they're coming in the summer time so there's generally an increase in demand from a cyclical base as well.. On the oil side, bulk liquid storage we'll continue with really good demand based on this thing. I just want to point out when you look at the Australia canola crop, production estimate at 3.7, which is down from last year. As we look forward, it's early days, so it's very difficult for us to really say what the crop will be coming up this year. But we are certainly watching not just the weather but just watching planting progression as well. We still are seeing this ongoing shift in consumer preferences to dairy blends. And so we are definitely producing dairy blend products in West Footscray. And we're really pleased with the improved demand we see coming back for our specialty oils and the infant formula group. So on the rest of the full year outlook, we're really looking at a continuance in a lot of what we felt in half year, the first half. And that is good utilization in the bulk liquid terminals, the crush margins will continue to have some pressure throughout the rest of the year. But we're really making good progress on capturing the benefits on the foods restructuring programs and the continuous improvement programs that we have with a lot of that cost being front end-loaded in our fiscal year.From the grain side, again, the fundamentals are we're just dealing with a very small crop relative to what we had last year. That means [carry outs] are starting to get very tight. The farmers at this point, there's very little activity and selling going on as they're busy working on their planting side of things so [carry outs] are not only tight but a lot of the [carry out] is sitting in non-farm storage which probably had little movement going until they progressed farther into the planting season. Just wanted to point out the summer crop, which is primarily sorghum estimated at 1.5 million tonnes, which is certainly down from where we were in '17. Just looking over at the outlook side of things, year-to-date total grain receivables at 5.6 million. And again, as I mentioned before, we have the grain exports at 1.4 million. What that number will be by the time we get to the end of the year is very dependent on what happens in the markets on a global base and what happens on our planting. We typically we'll have a very swing point as we get into our fourth quarter, and what does that mean in terms of any additional exports that will happen before new crops starts to come up. We're continuing on our diversification of our grain origination. I've mentioned, GrainsConnect Canada to you before. We are loading trains, unit trains out of 2 facilities right now, been very well received in that area. And those plants are really working at the level that we had expectations for in terms of their productivity.Moving on to Slide 21 and the final slide I have to go through today before we take any questions. I just want to reconfirm our earnings guidance that we put out earlier. On the EBITDA side underlying EBITDA $240 million to $265 million. And from an NPAT we have a range of $50 million to $70 million, which again does include the ongoing tax benefit with the recent changes that we had to the 21% rate in the U.S. and does incorporate an initial $19 million tax benefit with that. So some of the variables that will impact us for the full year. Again just looking at what we are expecting for exports for the remainder of the year, where the [carry outs] drive and most notably what does the planting intentions ends up turning out to be. It's early days for most of the areas. Eastern Australia, they will plant the cereals, wheat and barley, all the way to the end of May, some into early June. So we're still quite a ways away from having any predictable levels in terms of what the crop size would be. We are approaching a tighter window in terms of canola acreage in terms of what goes in. But again, they can be readily converted into cereal production. And we still have a number of weeks to go before we know what that's going to end up being. So other variables I just put out there, again, we talked about global crush margins as an impact. As you know, we have to price ourselves at parity with competition of imported oils and minerals. And foreign exchange rates have been moving around quite a bit of late, and that will certainly have an impact on us as we translate everything to Aussie dollar. So with that, Luke, I will turn it back to you.
Thanks, Mark. I'll hand back to the operator and we'll take some questions now.
[Operator Instructions] Our first question comes from Jordan Rogers from UBS.
First question just around the oils side. Can you just give a little bit more color around some of the issues you had in foods? You mentioned the restructure is on track, but can you talk through -- can the actual division produce all the products that you want to produce?
Yes, Jordan. I'll handle that question. This is Mark. So the foods group is definitely performing better in fiscal '18 than when we were in '17. We've gotten through a lot of the commissioning issues that we had in the West Footscray plant. So we're seeing a continuous improvement, not just in utilization, also efficiencies and what I'll call change over times on the lines. So we are able to produce the vast majority of the products that we want to. The bigger issue for us now is trying to figure out how we can keep reducing runtimes for any amount of product going through and we are seeing improvements on that. In terms of the restructuring, that's really as much about a go to market. So much of our product is very price-sensitive because at the end of the day, it's still a commodity-based type of product and business. And it's just working through helping our customers see how they can change their mix and their buying habits that really improves their cost effectiveness. But it also has impacted us on the production side of it particularly at West Footscray. We've got to [continue some] program that continues to run. We look to gain further improvements not just through this year but we think we will as we go forward into fiscal '19. I am confident that we will realize those benefits as we go forward.
And just the Numurkah expansion, when is that expected to hit the P&L?
Yes, so we're on track. We think we will have most of the construction side of it done by the end of this fiscal year. And then we'll go through commissioning on the front side of fiscal year '19 and we anticipate that we'll be producing products on a commercial base by the time we get to the end of the calendar year. So that will give us an uplift in capacity down there of roughly 50%. And so we'll see -- should see a full on impact in last half of 2019.
Are there any other issues we should think about in terms of one half, 2 half splits in the oils division? It sort of moved around a fair bit over the years?
No, I don't think we'll see much of a change. The only thing that I would say is that from a crush margin side, those typically go out on 90-plus-day type of cycles. So we can see through that. We think that's going to stay fairly consistent. From the foods side of things, we would look for continuing improvement so we should look for some uplift coming into the last half of 2018. And I'd also mention that a lot of the restructuring costs that we have in the oil side were more front end loaded into the first half year with a little bit of tail through into last half but more of that cost restructuring is front-end loaded.
Just on the grains side, can you just give us an update on where you think the right number of grain silos are placed when regen is completed and perhaps have any additional greenfield sites you know?
I think that's a great question, Jonathan, and it's one we're still working through. The reason why I say that is because the marketplace is evolving as the market deregulated we're seeing increase in non-farm storage and we think that will continue to grow, maybe not at the same pace as in the last 2 years. But that has an impact on us in terms of how many facilities do we need to run in the country, where are they located and what are their capabilities? So storage for us is becoming less of a component. Facility now is more about high-volume speed, more unit train and also quick load up capabilities into the domestic market. So I think we'll see a continual reduction in the amount of sites that we run in the country but it's highly dependent again on where on-farm storage goes and also where the railroad investments end up coming. And the inland rail, as an example, is that going to get built or not? That will have an impact on where we would invest in facilities and also where would we shut down facilities. Also the impact that we have going on in Victoria right now on the rail improvements, that will make a difference for us as well. So I can't give you a hard number of what it is. But I would just say is that we believe the decline in the amount of sites we're running will probably continue just because of the evolution in the market.
Okay. And just last question. Have you gone with sort of managing grain on farm for growth?
Actually, that's going very well. And that's one of the big changes we made in the grains integration, that it is getting us much closer with the grower in understanding what is success for a grower in terms of marketing, warehousing capabilities and then also helping them manage their freight considerations that go on. So it's a shift for us as an organization being traditionally trying to physically handle the grain through our network and understanding that a lot of the grain that we need to handle as we go forward is really coming off the farm. So a big shift for us, Jordan, in terms of how we are handling our customer response and experience.
Our next question comes from Peirun Ji from Macquarie.
Maybe just a couple from me, firstly on the upstream business or the grains business, just in terms of marketing. We saw that the recent price gap between international price versus domestic grain prices has narrowed to some extent. So I'm just wondering if that has provided any relief or is it likely to provide a relief to our marketing business going forward?
Thanks, Peirun. It's a good question. What we're seeing so far in the marketplace is pretty good demand that runs through June. And then once we get to the end of June, then that's the big question mark going on. It's the prices have narrowed a little bit. The issue we have right now is that we're just not seeing a lot of grain being marketed by the farmers, and there's still a lot of that supply sitting out on storage on the farm. So I don't think it's going to have any impact the next 60 days because we just got to get to the planting. We have to see what the crop looks like it's going to be in terms of its total volumes. At that point in time, I think the farmer could make a decision to release some of that. So it's an unknown for us what August, September will look like for us at this point in time, but we'll have a much better idea over the next 30 to 45 days.
And just in terms of our take-or-pay arrangements, just wondering what the impact could be in '19 from I guess the removal of that arrangement? Or even into FY '20?
It's a little bit early to be able to give an outlook to you to '19 of the impact of take-or-pay. And we're in -- we're finalizing the arrangements on a new contract now so it's -- we'll hold that over until close to the time.
Got it. And just lastly on the malt business. We're obviously seeing good growth in the craft beer segment with the U.S. craft beer this year up 5%. Just wondering what does it mean for our malt business, especially with Pocatello now commissioned?
Well, 2 impacts for us in terms of the craft continuing to grow. One is Pocatello is in a nice place. It's operating at full capacity as we speak, and we look for that to continue as it goes forward. That impact is not just on the craft. It's also on the Mexican side of it, and plus some of our existing customers and the mega brewers. But the other benefit that we gain out of that, Peirun, is that it fits into our distribution network that we have expanded pretty aggressively. We're up to 11...
Yes.
11 facilities. I got to keep remembering because you keep commissioning. We're up to 11 facilities sitting in America. We're probably 2 more distribution centers away from being fully completed. But where the benefit comes in is that it provides a multiple of different types of products that we are able to aggregate together and being able to be a one-stop shop for a lot of the craft brewers. The other issue going on in the craft business, particularly in North America, is it's not just that that it's still growing, but it's fundamentally changing. The big growth, which is double digit, is in the micro brewers and nano brewers. And these are the typically destination points that will be these little brewery setups alongside a restaurant. That's where the big growth is, and it fits very well into our distribution network to be able to perform successfully for the customer.
Our next question comes from Richard Barwick from CLSA.
The take-or-pay, can you actually just confirm the exact timing those contracts expires? You're sort of talking about 2019 or FY '19. My understanding was they didn't expire until the very end of FY '19. I'm not certain I got that right.
Richard, we won't be providing specifics around it, but it's around the end of fiscal year '19.
Right, okay. And the -- you talked obviously, highlighted the supply chain issues, a 12 to 15 number for grains within this FY '18. Of the 12 to 15, is that all attributable to take-or-pay? Or there's some other issues in there when you're talking supply chain issues?
Yes, Richard, it's primarily the take-or-pays, or it's using the freight capacity that we've got sitting under take-or-pay. There are some other issues in there just because of the small crop and a very small [carry out] there to satisfy customers on things, either quality or in terms of quantity. We're having to move grains in different type of flows. If you remember back, the primary production that we saw this past year was coming out of Victoria. That's an impact on our New South Wales and Queensland customers. So there's been a fair amount of moving grain on what I'll call nontraditional or uncommon grain flows. And so there's a little bit of that going on as well.
Right, okay. And in terms of the malt, forgive me if I missed it. Did you say -- obviously there's an impact within that first quarter so you say with the upgrade at Pocatello. What was the impact in terms of volumes? Or if you can talk to earnings, if there was a drag in the first quarter?
Well, from a volume impact, yes, we brought 120,000 on the expansion, and then shut down 100,000 tonnes, and basically have that shut down for about the time it's fully commissioned back up for the first quarter. It didn't really get the full-on production coming out of Pocatello until we got through the calendar year of 2017. So that's the large part of why you're not really seeing any uplift when you look at the revenue side of things because we think it can fall on a bit capacity in the expansion of Pocatello until both sides came back up there after the first year.
Okay. And can you also give us a bit of an update in terms of the currency exposures across the Malt business? And I imagine as you roll out these facilities, servicing craft brewers, you're getting more and more exposure into the U.S. dollar. Just interested to talk about that, any color you can give there, or at least just the overall currency impact perhaps, even within this result.
The translation of foreign exchange is I think what you're talking about there. Our North American operations that's both the U.S. and Canada are sizable operations, so we do translate earnings back in. In the past, we've disclosed the FX impact on the half. This time around, there wasn't such a big impact of where the US dollar traded year-on-year -- sorry, period-on-period, or between the movements of the average movements throughout the half. So we haven't needed to quantify. Obviously, it is a lower U.S. dollars in the recent 3, 4 weeks. It's dropped over $0.02. It does have a benefit on a full year run rate. And we expect to pick that up over the next 5 months, 4.5 months. We'll report the impact at the end of the year if it's material. We're not planning on giving a forecast on the Aussie dollar. We just deal with that where it is.
Understood. And the last one, obviously, you talked to the $25 million to $30 million of benefits coming through in grains and oils in the restructuring. Does this result capture any benefits yet? If not, should we expect to be seeing some in the second half?
Yes. So from a financial aspect, not a lot of benefits to the bottom line yet because we're incurring most of the restructuring costs on the front end of 2018. So we should look for that to have a bigger impact as we come into last half '18 and more importantly as we get into 2019.
Okay. So really if we think about that $25 million to $30 million, the vast majority of it should be in FY '19, and you're basically saying a small amount in second half '18.
Yes. That would be a good way to look at it, Richard.
Our final question comes from Gregor Heard from Fairfax
Just a question regarding the volumes with the grains business. We're looking there and this is sort of a fairly consistent measure. So 450 at '16 and '18 markedly lower than '17. Is that the sort of year you're going to have feel as being normal and the outlier being '17 in terms of both higher number of receivables and [indiscernible] sort of the perennial topic [indiscernible] ?
Yes. I'm -- I've been here for almost 4 years now, and I'm not sure what normal is for production in eastern Australia. So the bigger issue for us is finding ways to deal with the volatility and in production. So it is an issue of one continuing to try to diversify our earnings in other areas, but from the grain handle side, it's really trying to take down our fixed cost load and make our cost structure more variable in nature, so that our costs correlate a lot better with what the revenues will be in a particular year. So that's part of the reason, Gregor, why you're seeing less sites. It's easier for us to verbalize the cost structure [indiscernible] but it also means that upgrading the capabilities of those sites allows us then to handle higher volumes in each one of those particular sites when we have bigger crops, we can go on extended hours. So it's really changing the format of how the network operates I think is the most important thing. Volatility in crop production, that is the normal in east coast Australia. And so it's just getting our system to better respond to that.
And is there sort of regional variation [indiscernible] northwest New South Wales the classic example you got the [indiscernible] catchment taking 1 million tonnes, [one year] to next year it's not open. Does that present the time challenges? Do you expect to perhaps focus on more reliable areas in the future? Or we continue to sort of roll the dice on those more marginal but potentially high-volume areas?
Yes, they still end up being -- if you look through the cycle, they still end up being very good areas for us and very profitable for us. And we've got a really good group of what I call loyal customers in those areas. So really the weight and responsibility on us is trying to find ways where we can get the cost again to be more variable in nature so we continue to operate on those areas but our costs correspond better with the type of volumes that come out of there year-on-year.
[indiscernible] on-farm storage and promoting that and where do you see that in terms of your overall receivables or the grains business?
So part of it is on the on-farm storage component of it. A lot of it has to do with us looking at our facilities and what can we do to be able to turn them off and on, on a better format or cost...
[indiscernible] et cetera.
Yes, so it's facilities that can handle higher volumes. And they can also run extended hours so that we can take the amount of crops that need to flow through on that particular region. And then when that is done, then being able to shut those facilities down and improve a lot on that.
One final question comes from [ Darren Gray ] from [ Lee H ].
I might just start with a simple one. I'd love for you to give me a health check on the business. What kind of health do you think it's in?
I think we're in good health. As Alistair went through, our balance sheet is still very, very strong. We're walking through a dramatically downsized crop yet we're still able to hold ourselves in a positive cash flow base. And a lot of the opportunities that we've got in the other areas of the business, they continue to be there so we can keep growing that. And our goal again is to make us less susceptible to the volatility in cash flows coming off the grain time. So very, very confident in terms of the overall health of GrainCorp.
This one is a similar question, but trust me, it is different. I just want to ask you how you write this half year result obviously in light of the smaller NPAT, smaller EBITDA, I recognize that flows through from the significantly smaller crop. But how would you write this half year result?
Well, again considering the size of the crop, I think we're doing very well. If I took a similar size of crop, I'd have to go back 11 years ago. And at that point in time, GrainCorp I believe lost $21 million. So we're forecasting a range of $50 million to $70 million this year. So I think that speaks well to what have we done to really improve the financial consideration and, quite honestly, the overall financial health of GrainCorp.
That's an interesting comparison. So just to make sure I heard you correctly you said that the last time the crop was this kind of size, the GrainCorp business recorded a loss.
That's correct.
Yes, okay. Maybe not on this call, but I'd love to hear what year that was because it would make a great comparison. And look I know it's early. I know we're only 11 days or so into May. But what do you think, to the best of your abilities, what do you think is the outlook like for the 2018 grain harvest in the eastern states?
Well, I wish I could help you out, but it really is early days. It really does depend on what type of moisture profile you get over the next month. It's still very easy to put in the cereal grains all the way to end of May beginning of June. So we're still quite a ways away from being able to predict what those acreage plant will wind up being, let alone what is the health that the crops are going through. So we're just going to have to put that aside here probably for another 30 days.
Sure. And 5 minutes or so into the call, Mark, you mentioned how the lower production last summer affected your costs. I'd just love for you to expand on that a little and talk about how it affected your costs.
The lower production?
Yes, the smaller crop.
Yes. So we have -- our costs are a combination of fixed and variable. And so for us when we sit with fixed cost load not just in concrete but also fixed cost load such us take-or-pay on rail, it has an impact on our cost structure. The rail take-or-pay in surplus years becomes a great benefit, but on lower crop years, it becomes a constraint to us.
Sure. And another thing, and it might actually be the last question for me. I just wanted to ask about the, on my math you're expecting a smaller contribution to NPAT from the second half of the financial year. But your estimate for EBITDA when you're going through EBITDA for the second half looks to be similar to the first half or bigger. So I just wanted to get an understanding of why you're expecting a smaller contribution to NPAT in the second half.
Yes, it's Alistair Bell here. Your observation is right. We tend to see the operating profit stronger in the first half. And that's driven by the crop being received into the grains business. Whilst the second half, we tend to see the balance of the business, the malts traditionally has a stronger second half than first half. Oils will be the same. And then the variability within grains. We've taken in the grain in the first half. And the second half is about the execution, the trading, the marketing of the grain. And so that's the profile that we typically see into the second half.
So the grains we acquired in the first half, it really trails off in the second half as the export program comes to an end.
Our very final question comes from Belinda Moore from Morgans.
Mark and Alistair, just a few questions, please. I know you've consolidated marketing in [indiscernible] but I was wondering can you reveal what your first half '18 marketing volumes were? Also so in '18, there's going to be no one-off costs that are sort of hitting the business units just wanted to check that. And then also Mark, maybe if you could talk about opportunities for maybe asset divestments or new growth projects you're considering please.
I'll start from the marketing aspect, the first question. We haven't disclosed where we'll add on that, Belinda. We'll take a look at it on the full year aspects. And we're writing down your question right now. Because as we put the grains group together, we're still working on what we think we should be out there reporting, so that investors have an opportunity to really understand what's going on in the company. So we'll have to work on that a little bit. So we'll take that under advisement [fully well]. We haven't disclosed that at the half year results. Second question?
The marketing, there's less grain around. So it's fair to assume we haven't executed as much in the first half. But that's on a full year basis, we have to see how the full year goes. Your second question again, sorry, Belinda?
Just around I think one-off items I think around the restructuring. I was sort of led to believe that might be below the line. Looks like you're being a bit more conservative putting them into the business units. So is that the trend we expect sort of for the full year in '19 on back of this restructuring program, the one-off costs hit underlying business units please.
Yes, we're putting all of the one-offs as part of the business unit reporting. We've done that now to 12 months, and -- but we'll call them out whether it's significant or material enough to warrant a disclosure. So you'll see that Mark called out some in his speech, but on each of the slides, we've called out the impact. But they are all above line as part of the contribution in earnings from each business unit.
And the third question in terms of divestments and new growth projects. And so Belinda, -- we keep looking at the portfolio optimization. So if we have some underperforming assets that we don't think fits into future strategy, we certainly will look to divest. That's a perfect example as what we did with Schill. They just didn't fit into our portfolio of malt capacity and they were underperforming, and so we got rid of those. We keep looking at assets that we have inside of our portfolio. I know there's been a lot of conversation about infrastructure assets. Those infrastructure assets are very important to us in terms of the business that we run in our core facilities. It's just the examination of that and saying do we have to have full ownership of those assets or not? We're going to be very careful to make sure that we're not putting at risk the business that we have running through those assets that we need to support the core components of our business.
And just lastly please, sort of any new growth projects we should think about seeing...
Yes. So we are looking at some growth projects. Again, they'll be more skewed towards the processing side of the business. We still have some areas in the malt that we're looking at that makes sense for us. As we mentioned, we've been expanding our distribution network. We bought Cryer. We'll keep looking at that, as that market keeps evolving and changing. We've mentioned that the distilling demand for single malt has been going up so we're examining that component of it and seeing is there a different configuration in that area, any increased capacity and distribution issues as well. So we'll just keep looking for them, and those are good growth, organic type of projects. But in terms of any major acquisition or anything like that, that's just not on our radar screen right now. I say that for 2 reasons. One is we're trying to be very disciplined in terms of how we're managing our balance sheet and our cash flows. But the second reason is that the ones that could look like being attractive to us appear to be pretty expensive right now.
Thank you, everyone. I will now hand back to Luke Thrum for closing.
Okay. Thanks everyone for joining us today. And if you've got any questions, please give me a call. Goodbye.