GNC tumbled -15.4% on Wednesday with investors giving the company the thumbs down on its decision to sell its stake in Canadian agribusiness GrainsConnect for a $5-10mn loss. While the company believes the move fits the company’s goal to rationalise assets, the timing looks average. To compound the decision, GNC announced the harvest had been poor, with the amount of grain it had received at its storage network down over 13% from the previous year – a painful one-two for the share price. The soft outlook was a big pivot for the agribusiness from the optimism earlier in the year, when it posted a jump in 1H profits, rewarding shareholders with a special dividend.
GrainCorp’s profits are highly sensitive to crop size and quality, which are directly driven by rainfall and growing conditions across Eastern Australia, not an ideal backdrop to forecast earnings, but as we’ve witnessed over the last few years, it can reward investors who are happy to sell strength and buy weakness.
- We aren’t fans of businesses that are so dependent on the weather.
MM is neutral towards GNC
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