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One of Australia's leading agribusinesses GrainCorp (ASX: GNC) is pulling out of a Canadian joint venture that was impaired to the tune of $26 million last month, following a strategic review of GrainsConnect Canada (GCC) due to challenging financial performance.
Graincorp and Zen-Noh Grain Corporation, its joint venture partner in GCC, have entered into a binding agreement to sell the business to Winnipeg-based grain company Parrish & Heimbecker.
The transaction values GCC at C$150 ($164.5 million) on a ash-free, debt-free basis, with an additional cash payment for net working capital at closing. Graincorp's recently published annual report valued the Australian company's share of GCC's net assets at $26 million.
GrainCorp is expected to recognise a loss on sale of approximately $5-10 million, with the company claiming it does not impact through-the-cycle EBITDA of $320 million.
"This transaction reflects GrainCorp’s ongoing commitment to portfolio optimisation and our readiness to rationalise assets where necessary to improve returns," says GrainCorp’s Managing Director and CEO, Robert Spurway.
"Divestment of GrainsConnect allows GrainCorp to focus on alternative value-creating opportunities that are in the best interests of our shareholders."
GrainCorp handled 31.6 million metric tonnes of grain last year, handling grain and oilseeds from Australia, South America, Ukraine, Canada and the UK.
The group emphasises that its own marketing offices in Winnipeg will not be included in the sale, and will continue to support customers and provide key market intelligence to the broader GrainCorp team.
In an update alongside the announcement, GrainCorp revealed that harvesting is largely complete in Queensland and northern NSW, while weather interruptions continue to affect southern NSW and Victoria.
A lower year-on-year Australian East Coast crop has impacted receival volumes, with a combination of near-record international grain and oilseed production alongside prevailing commodity prices meaning that less grain is being brought to market and margins are under pressure for grain handlers.
GNC shares are down 12.17 per cent in early trading today at $7.36, representing a $227 million cut to GrainCorp's market capitalisation.
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