GrainCorp Limited (GNC) Earnings Call Transcript

Ladies and gentlemen, good morning. I'm Robert Spurway, Managing Director and Chief Executive Officer, and welcome to the GrainCorp Investor Day for 2022. Before I start, we do just want to acknowledge the Gadigal people of the Eora Nation as the traditional custodians of the land on which we meet here in Sydney. We pay our respects to their elders, past, present and emerging. I want to extend a special welcome to our investors, analysts and bankers here with us today, but also to those of you joining online. This is a hybrid event, and so as well as everyone in the room, I welcome those joining online. Before I get into introducing the GrainCorp team who you'll meet and have the opportunity to talk with this morning, I did just want to make sure that we look after your safety and well-being. As I said, this is a hybrid event. So if you're feeling unwell, the best advice I can provide is to go home, isolate and entertain yourself by dialing in online and that will keep the rest of us well also. In the very unlikely event of an emergency, there will be an audible alarm, and there'll be an address over the public announcement system, telling us what to do in terms of evacuation and will be assisted by hotel staff. The evacuation area is out towards circular key, likelihood the area that you came into the hotel from. Also, we'll be having lunch and morning tea in the immediate area just outside the room here, and the restaurants are about 50 meters further on straight back towards the other side of the hotel. If you do have any questions or need anything this morning, either one of the GrainCorp team can help you or one of the people here at the hotel. So we look forward to hosting you this morning and letting you know about how excited we are about GrainCorp. As I said, my name is Robert Spurway, and it's my pleasure to introduce the team of people that I work with and our Executive and those who will also be presenting this morning. I think most of you know Ian Morrison, our Chief Financial Officer. Also with us today is Stephanie Belton, our Head of Corporate Affairs and General Counsel. Stephanie will be talking with us about what we're doing on sustainability amongst other things. Jesse Scott, our Chief of Innovation and Growth is with us here this morning. As is Klaus Pamminger, our Chief Operating Officer. Cate Hathaway is here, our Chief People and Transformation Officer. And joining us on stage this morning throughout the presentations will be Brad Glass, our General Manager of Oils and Commercial; Sean Barker, our General Manager of Commercial East Coast; Don Campbell, our General Manager of the International business; and last but certainly not least, Nigel Lotz, our General Manager of Operations. You will have the opportunity to hear from that team this morning, but also we'll have 3 question-and-answer sessions through the morning and the opportunity to talk through morning tea and lunch. As I said, we're excited about GrainCorp. We believe we're exceptionally well positioned, and we're delivering outstanding results. We'll share with you the confidence we have, not just in the results we're achieving and our outlook, but the confidence we have in the way we're achieving those and the strategy that's delivering those results. In summary, we're a well-invested business with strategic infrastructure assets. We've got outstanding execution driving record financial results, and you'll hear about the planning and the team effort that goes in behind that this morning. Our strategy not only identifies the areas that we're excited about, where we see opportunity, but it's extraordinarily well aligned to the macro global trends that we're experiencing. We're in a strong financial position and that gives us significant options around both returning funds to shareholders and investing in the future growth of the business. You'll hear many times this morning about the extremely resilient supply chain we operate and how important that is, both strategically and from a results point of view. And you'll hear about our positioning and how well positioned we are for growth and innovation into the future. Just in terms of how we'll work through that. As I touched on, we'll have several question-and-answer sessions through the morning, but we'll also share with you a panel session across the 3 areas around our global macro trends, Australia and New Zealand business and our growth and innovation plans and ambitions. That will be an opportunity to hear in discussion from our team that are busy not just formulating that strategy, but delivering on it. But to start with, I'll share with you an introduction and overview of our strategy. Stephanie will join me shortly to talk about our ambitions and the ESG space and the progress we're making and importantly, the plans that we've set. And Ian Morrison will provide an update on the financial position of the business, the outlook, capital management and cash flows. Now before we get into the agenda, it is my pleasure to share with you a video of our journey through 2021, our plans for 2022. So as well as the material in the video, I think, what's incredible is the amazing people that you'll hear from across GrainCorp. Most of who are not here today, they are out and about in our business. Running it, keeping it going and producing the results that we're so proud of. So with that, I'll share with you a video and an opportunity to hear from that amazing group of people across GrainCorp. [Presentation]

You'll hear those themes come through today repeatedly. I think what's amazing is, I joined this industry about -- or just under 30 years ago now on the basis that people would always need to eat, and it's no more true today than it's ever been. The resilience of the food sector places GrainCorp really well. I think if you look at our history and our vision shared in that video to lead sustainable and innovative agriculture through another century of growth, it also complements our purpose around connecting customers and rural communities to deliver value through innovation and experience. And one of the things I like about that video is, you see the people doing that every day, the capability and the assets and businesses that we operate, and you see that very visually in that video. Perhaps more importantly, though, it's our opportunity today through that video and the conversations to give you some experience in what our business is doing every day and what we're focused on into the future. We're really excited about the value proposition that we offer. We've got excellent fundamentals in terms of the trends and the position the business is in. We've got outstanding execution and performance. We're not leaving anything to chance. We're making the most of the opportunities that exist. That's giving us a strong balance sheet and the outlook, as you'll see, is extraordinarily positive. This slide, in terms of GrainCorp, I like to call from Australia to the world, but it's more than that. It also connects the assets through our joint venture that we have in Canada, called out in the box on the top center of the page there, and the significant presence that we've got across New Zealand. But rightly so, Australia is core to what we do. Over 160 up-country receivable sites connected to more than -- sorry, to 7 deep sea ports across Australia. And connecting more than 10,000 growers with over 350 customers in 50 countries around the world. We've got a team of over 2,000 people that increases significantly through harvest. You'll hear today about our processing business and the 475,000 tonnes of crush capacity to produce not just oil, but a range of food products emanating from that oil. Strategically, our assets are well located and well positioned to make those connections across the globe. If you look at our supply chain, one of the questions I quite often get asked is, how does GrainCorp make money. There's 3 key income streams in our business: the services that we charge for use of our infrastructure assets, be that storage, movement, export or elevation of grain. We also buy and sell grain and oilseeds and move it through that network of infrastructure assets. And our processing business is manufacturing and producing products that we sell to customers and consumers across Australia, New Zealand and the world. The way we organize ourselves is our East Coast Australia business that we often refer to as ECA. That's the business that contains that more than 160 sites and the 7 deep sea ports. Our Oilseeds business represents the largest oilseed crushing facilities in Australasia. We produce a range of canola oil and canola meal products for customers across the food and feed sectors. That brings us to our Foods business, which is a leading refiner of edible oils and fats in Australia. And we supply ingredients such as infant formula, bakery mixes and ingredients for other large-scale manufacturing industries across Australia, New Zealand and Asia. In our Feeds, Fats & Oils business where we procure, ship and accredit the supply of products like tallow, other vegetable oils and indeed, through our Auscol business, the upcycling or recycling of used cooking oil. We manufacture feed solutions for farmers across Australia and New Zealand. And through our international business, we complete the cross-border trade taking product from Australia and elsewhere to customers around the world. We do all of that with a focus on sustainability and more broadly on ESG. And whilst you'll see that come up in all of the slides today and the themes that we talk about, I thought it would be useful to start with Stephanie Belton just sharing the work that we've done, the global context in which we operate in and the ambitions that we have for the future. So Stephanie, if you'd like to join me here.

Thanks, Robert. As we mentioned in the video, last year, we conducted a review of sustainability and ESG at GrainCorp in order to reshape and refocus our approach to this area of challenge and opportunity. The challenge is clear. The world's food system, effectively our industry, represents 1/3 of global greenhouse gas emissions, and as Jesse will explain a little later, to feed the world's growing population, we must increase current food production by 50% by 2050, the same period during which we all aim to become carbon neutral. Australia plays a key role in feeding the world, exporting 2/3 of the food and fiber we produce and devoting half of our country's land mass to agriculture and agricultural business. At the same time, our industry represents over 13% of our national GHG emissions, meaning that our industry like every other must adapt to the challenge. The UN Global Compact and its sustainable development goals has emerged as a leading ESG framework backed by the 193 member states. The goal to end hunger and achieve food security has probably never been more relevant than it is today following events in Ukraine and the impact on trade flows from the Black Sea region. UNSDG ,#2, is backed by significant research, policy and financial investment in global agriculture, focusing specifically on new food sources, reduction of food waste and on optimizing management of the resources. What just happened to our presentation?

We have a technical issue in the back there. Are the slides back on?

Here we go. As part of our global and national industry, GrainCorp is well placed to support and lead sustainability in agriculture. As Robert has highlighted, sustainability and innovation are at the core of our business at GrainCorp. From our acquisition and expansion of Auscol over the last 10 years through the creation of our groundbreaking crop production contract designed to protect our business and dried affected years, GrainCorp has maintained its focus on both the impact and the opportunities of climate change. As part of our enhanced approach to ESG, we are supporting our industry and transitioning to a more sustainable carbon-neutral environment, partnering with peers and subject matter experts, supporting change across our supply chains, including end-to-end mapping of Scope 3 emissions, carbon research and pilot programs and continued expansion of our renewable fuel feedstock capability. As you will see throughout this morning's presentations, all of our strategic growth areas have strong sustainability themes whether in Agtech, animal nutrition, alternative protein or agrienergy. In summary, at GrainCorp, our history, our vision, our purpose, our strategy and our plans for growth are all founded on sustainability, and we will continue to present a credible tangible roadmap to both grow our business and meet our ESG commitments. I'll hand back to Robert, who I think is going to talk about delivering value to shareholders.

Thank you, Stephanie. And I think what's exciting about ESG broadly is, it's not just something that we believe in, it's not just something that we know we need to do that everyone is working on, but it's something that integrally overlaps with the commercial strategy we have and the opportunity we see, not just for GrainCorp, but for the sector. And picking up on what Stephanie shared in terms of what we've already done and what we're doing, a way to think about it is the 3 pillars in which we operate. Back in 2018, Stephanie touched on the climate study we did on the right-hand side of the -- sorry, left-hand side of the slide there. And that was around understanding what the impact of climate could and would be on our business and the sector. And in response to that, we put in place the crop insurance product to manage volatility. We reduced our fixed cost and variabilized cost to protect shareholders against what was already happening. Importantly, over the last 12 or 24 months, we've made significant progress in the second pillar of setting our own targets and putting in place action plans and developing further action plans to deliver and improve our own performance. And then thirdly, if you look at the third pillar, we're looking at opportunities to change the world, investments in businesses like FutureFeed, development of an agrienergy strategy, areas where the impact on the globe can be much greater than what GrainCorp can achieve in itself. And I think if you think about sustainability from that point of view, that's something that all businesses strive for, looking after the existing business, improving the business and then changing and improving the world. And that brings us to our strategic priorities. Last year at the Investor Day, we shared this slide for the first time and demonstrated our commitment to lift return on invested capital. And I'm pleased to report we're delivering on that promise and doing what we said we would. Picking up on our vision and purpose, the strategic priorities were deliberately split into 2 parts, what we call strengthening the core. So lifting those returns, driving existing assets harder and leveraging the capabilities that we already have. We're doing that well, and I'll share some details and some examples of that in a moment. We're also, at the same time, making good progress on our targeted growth opportunities, the areas that will diversify and improve the profitability and the quality of GrainCorp into the future. Areas like alternative or plant-based proteins, digital and Agtech, animal nutrition and additional grower services. This morning, you'll hear about examples of that in addition to those areas showcased in the video. So if we look at our existing infrastructure assets, not only have we seen the benefit of 2 bumper crops in Australia and another one on the way in the ground at the moment. And you can see that on the top left, grain exports have increased significantly. But at our half year, we reported that we've continued to make progress on the diversification of the bulk materials we handle through our ports. Half-on-half, they were up from 900,000 to 1.3 million tonnes. So that's on top of a big lift in the grain handled, and it shows our commitment and progress around those strategic priorities. Our oilseed crush volumes have increased by 36% since 2019. So not only are we making the most of the great demand and pricing that we're seeing for oil around the globe, we're controlling what we can control to improve our business and deliver exceptional results. We are driving our assets harder and we are lifting returns. That's evidenced in the performance and the results of the business, up 90% from financial year 2021. And this gives me the opportunity just to remind you that as we came out of 3 years of severe drought in financial year '20, the business was still able to produce an underlying EBITDA of $108 million. Since then, we've continued to reduce costs and improve the business so that we're preparing for future drought cycles. We have demonstrated through financial year '21 and our guidance for '22 of $590 million to $670 million that this business, when the grain is available, can produce much, much more than the through-the-cycle numbers. And Ian and others will talk to that through this morning. That lift in earnings reflects the significant capital investment we've made over recent years, but more importantly, the operating discipline in making sure that we extract the most value from those investments and the assets we have. We do have a highly efficient supply chain and the scale of that, as you'll hear from Nigel this morning, gives us optionality and resilience that others can't achieve. We are seeing strong demand for Australian grain and oilseeds and the back-to-back bumper harvest and Australia support domestic production and indeed consumption. For those of you that joined us at last year's Investor Day, you'll remember a slide that was very similar to this. And in particular, it highlighted our commitment to an additional $40 million in operating initiatives and uplift. It was areas like our international expansion and completion of the Canadian joint venture, core uplift, leveraging our assets and working them harder. And increasingly agriculture -- sorry, agrienergy, not just as a driver for current performance, but a strategy for future growth. That supports the through-the-cycle earnings of $240 million by '23, '24 in addition to the point that I've just made that we can deliver much greater than that when we get conditions that are much better than average. When we do get to droughts years, you'll see that we've done a lot to protect the downside in the business. Our crop production contract will come into play. The variabilization of costs will come into play. And indeed, the inventory and carry that we have in the network will come into play. So overall, we are delivering on our commitments. We're lifting return on invested capital from a number that we won't spend too much time on because it's nowhere near good enough to a number that we're very proud of in terms of 25.7% in terms of the current cycle. But I think what we're demonstrating is through our commitment to not just the current performance, but future performance, we will absolutely make sure you're invested in a business that can deliver consistent and positive return on invested capital. We've also seen that our peak CapEx was achieved back in 2018, and we've committed to sustaining CapEx levels of between $35 million and $45 million going forward. Suffice to say, when the opportunity is there for short payback of leveraging our existing network and big crop years, we'll invest that money and get the returns, and Ian will talk about that shortly. Into the future, we expect only a modest uplift in the CapEx cycle to manage those bigger crops, and then comfortable with that $35 million to $45 million in the future. We are maximizing the productivity and the asset performance. Perhaps this slide says it all. It demonstrates the performance that we've achieved and the returns that we've provided to shareholders through delivery of that performance. And today, you'll hear about our confidence in the future as we embed that performance and strengthen and diversify the business for the future. Just to pick up on the strategic themes. You'll hear today us talk about innovation driving that next phase of growth, the progress that we're making in Agtech and the digital areas. At our half year, we announced our commitment to $10 million a year over the next 3 years for digital and Agtech. We think that's a very modest amount that gives confidence around how we're investing to drive financial returns and to reduce risk. We can evidence that in investments we've made in businesses like Hone and some of the areas that Jesse Scott will talk about later this morning. In alternative proteins, we've partnered with CSIRO and v2food, credible partners that has allowed us to access government and grant funding. And that allows us to develop what will be a sustainable supply chain into the future by making sure that we look at it from an end-to-end perspective and look at the opportunity, not just for GrainCorp, but for the sector. We've made progress in our grower services, the pilot with Loam and other areas you'll hear about this morning, partnering and building value for growers and for GrainCorp. FutureFeed is delivering opportunities to embed Asparagopsis as a way of reducing methane and lifting productivity in the animal nutrition sector. And as I touched on before, agrienergy is not just central to our current performance, but increasingly, an opportunity for future growth as the demand for biofuels and renewables increases not just in Australia, but around the world. With that, I'm going to hand across to Ian Morrison, who'll talk about our capital management and cash flow. Ian?

Thanks, Robert, and good morning to everyone here today and on the line. For those who I haven't meet, my name is Ian Morrison, and I'm the CFO at GrainCorp, and it's my pleasure to be here this morning. I'm going to give a brief update on capital management and cash flow at GrainCorp. I'll start by recapping our capital management framework. Overall, this remains consistent with recent years and maintains a conservative approach. It has a focus on maintaining minimal core debt, funding sustaining CapEx within our $35 million to $45 million per annum envelope through the cycle and generating free cash flows to pay dividends consistently. And as we generate surplus cash flows, we're in a strong position to look at reinvesting in the business in a disciplined manner whilst also returning capital to shareholders, and we've been able to demonstrate that commitment recently. Now moving on to our balance sheet position. The key message from this slide is that GrainCorp has a very strong balance sheet. We reported a core cash position of $129 million at our most recent half year balance date of 31st March. As a reminder, our core debt is defined as net debt less commodity inventory. The reason we focus on this metric is due to the readily marketable nature of commodity inventory. The majority of the debt facilities we have in place are to fund those commodity inventories, and this means net debt does move up and down with a crop and harvest cycle as well as with commodity values. Our net debt mainly consists of those seasonal facilities to support grain accumulation, and with the significant volumes and the high prices currently, it does mean our net debt is well above normal. This is a positive though as it supports high utilization of our assets and is a key driver of earnings. In addition to the core cash position, we continue to retain the 8.5% stake in United Malt Group, which provides additional balance sheet flexibility. The last point just to add on this slide is that we took the opportunity last year to extend out our term debt through to 2025 at a favorable point in the cycle. In summary, overall, GrainCorp is in a very strong balance sheet position. Now moving on to capital investment. As Robert touched on earlier, GrainCorp has a well-invested asset base with many of our key facilities receiving significant upgrades in recent years. We are now seeing returns from these investments flow through. That includes strong returns from the increased capital spend in FY '21, and that was to increase capacity for the large harvest. The majority of the site investments we made in FY '21 had a payback of less than 12 months and in many cases, as short as 6 months. And as we noted at our recent half year, we will be looking to invest in further capacity for the upcoming harvest. Again, we expect those investments to have very short paybacks. And overall, we expect the total sustaining capital for FY '22 to be no higher than D&A. Despite the current higher capital investment with the opportunity from the large harvest, we do remain committed to the through-the-cycle sustaining CapEx envelope of $35 million to $45 million, and we're very comfortable with that level given the capability and quality of our asset base. On the right-hand side here on the slide, you can see that the depreciation is high relative to the sustaining CapEx, and that peaked back in FY '18, and we've seen that reduce over the last few years. We do expect to see a temporary increase in D&A in FY '22 as a result of some of the short-term investments to support the large harvest. That includes short-life assets such as tarpaulins. This will be a short-term increase before we continue to revert to an ongoing trend of reduced D&A. Overall, our approach will continue to be disciplined when it comes to capital investment. Our capital management framework has a strong focus on returns for shareholders and that starts with reliable dividends. The strong cash generation capability of the business and the increased quality of earnings, including in drought years, allows us to be a consistent dividend payout with the optionality to pay special dividends in years with surplus cash flow. As the chart in the middle of this slide shows, we've been able to consistently grow our ordinary dividends in recent years, and that's as confidence has increased in our through-the-cycle earnings. And as I just touched on the reason strong earnings and surplus cash flows allowed the Board to recently declare a fully franked special dividend of $0.12 on top of the ordinary dividend of $0.12 to give a total of $0.24 per share. These dividends were also in addition to the share buyback that we announced late last year and commenced recently after our peak funding period. The buyback is well underway now with almost 50% of the planned buyback now complete. So just to recap on capital management. We've got a strong balance sheet with no core debt. We're confident in the quality of our asset base, and this supports our disciplined approach to capital expenditure and operating within that $35 million to $45 million envelope for sustaining CapEx. We're becoming a consistent and reliable dividend payer with the optionality to pay special dividends or consider buybacks in years with surplus cash flow. The strength of our balance sheet and outlook provides the opportunity for GrainCorp to both invest in the business for growth and also provide strong returns to shareholders. I'll now hand back to Robert to spend more time on our strategy, and in particular, the macro trends that are underpinning it.

Thank you, Ian. Right. At this point -- thank you, Ian, for that. At this point, I'd like to invite both Jesse Scott, our Chief of Innovation and Growth; and Klaus Pamminger, our Chief Operating Officer, to the stage. I've talked through our strategy this morning. I've also touched briefly on growth and innovation and the steps we have taken and the steps we've identified. But now it's an opportunity to step back and look at the macro trends that we've indicated we're so aligned with. And I thought a good opportunity here to introduce both Jesse and Klaus and talk through in conversation style the trends and how we're seeing those develop. So Jesse, I'd like to start with you to give a brief introduction. I think people have met you before, but maybe if you could just provide an introduction 18 months at GrainCorp now.

Sure. Jesse Scott, Chief Innovation Growth Officer at GrainCorp, joined about 18 months ago. So my role covers strategy and innovation in the core business as well as my teams lead those growth themes I'll talk about later on this morning. 18 months with GrainCorp. Previously, I led McKinsey's agriculture practice for Australia and New Zealand, but I am a babe in the woods when it comes to agriculture after marrying into a farming family about 10 years ago. So I'm on a very steep learning curve that became steeper in the last 18 months.

And Klaus, more like 15 years in our business, do you want to provide an introduction?

Sure. Thank you, Robert. Good morning, everyone. Klaus Pamminger, Chief Operating Officer for GrainCorp. I'm responsible for the operations and commercial activities across our Agribusiness and Processing businesses. Being in GrainCorp for 15 years. It's been an interesting journey, but very valuable journey. And prior to that, I have worked for multinational companies both in Australia and in North America. I'm also happy to share with you, I'm a grain producer, producing grains and oilseeds. So I can bring -- enjoy bringing a customer lens to anything and everything we do at GrainCorp.

Thank you, gentlemen. So the trends that we'll talk about this morning is that growing demand for food around the globe and what's driving that, our global supply chain and how resilient it is to the disruptions that we're seeing around the world. And then also decarbonization. We've touched on that this morning in the presentation that Stephanie made, but it's also a theme. But we might start with you, Jesse, just talking about the demand side of things. Let's move to the next slide. That one. So growing population, how are we responding to that? And what are we seeing, Jesse?

Perfect. Thank you, Robert. When I think about demand, let's talk a little bit about both the amount of demand and the type of the preference within that demand. So from the amount, one of the biggest drivers will be the 2 billion additional people that will be in the world by 2050. Those 2 billion people, as Stephanie mentioned earlier, will drive almost a 50% increase in food demand over that same period. But maybe if we go to the next slide, it's also where that demand is coming from is interesting. So as you'll see on this kind of next slide here, left-hand side is grains. The right-hand side is oils. You can see the world is the gray and Asia is at dotted blue line. Similarly, on the right-hand side, you have the rest of the world is that cluster of different colored lines, but once again, the gray is Southeast Asia. Of that demand growth, 0.5 billion people to come from Asia alone, but almost 50% of food consumption spend is going to come from Asia, which for GrainCorp works extremely well and how well positioned we are in that area. So I talked a bit about the amount, but within that is embedded a strong shift in the preferences to that amount of demand. So if you look next, Asia has a major shift towards urbanization. Perfect. So urbanization. So Asia's growth over -- of that 50% of spend increase that's happening in Asia, 80% is in some urban areas. The top 250 cities in China alone will account for a major proportion and it's relatively evenly spread. This kind of second to 100 of that is an enormous driver of urban demand. We're also seeing changes in preferences reflected in that. So for example, McKinsey Global Institute recently did some work with their testing consumer preferences across the world. And on questions like, are you willing to pay? Is there a willingness to pay for a sustainable packaging? Responders in China and India had twice the yes response rate compared to North America and Europe, which will drive a different shape of demand coming from the commodities that we service there. So I think demand is very strong. What's interesting is, what that demand looks like and the preferences embedded inside it.

So I think whenever you talk about demand, it's important we talk about supply as well and strong demand, but also some nuances in the supply side, Klaus.

Sure, Robert. So as Jesse has articulated, there is a significant increase in demand. Agriculture or corn production has been able to keep up with that demand with about a 2% increase per annum of wheat production globally. Although in the last 5 years, we have experienced some significant disruption to production, mainly in the Northern Hemisphere, not so much in the Southern Hemisphere. Obviously, as we've articulated earlier, the Southern Hemisphere has actually increased its production, especially Australia in the last 2 years. What that has resulted in is a significant reduction in what we call the stocks-to-use ratio, which is the dotted line, that is available stocks to be traded internationally relative to consumption. And that is now at a 20 year low at about the 20% ratio, which is a concern and that has resulted in increased prices. And on top of that, we have now seen other disruptions beyond the disruption of production. And Robert, if you could go to the next slide.

Well, just before we do that, I think this is an important slide when you look at that global inventory. It's come from probably 3 or 4 decades now of relatively benign geopolitics around the globe, and countries haven't had to worry about building strategic inventories of food to get populations fed. But now we've seen a reset in the conflict in the Black Sea, and I know you're going to talk about that shortly, is adjusting the way countries are thinking about reserves of food. So Klaus, it's very likely that, that -- those inventories will start to build. And that's going to put pressure on the demand side for some years to come as that recovers, and we see countries like China, for example, already buying up to build inventories and improve food security.

So as Robert mention, conflict in the Black Sea and we're all aware of what that conflict looks like today. So Russia and Ukraine put together account for 45 million tonnes of global wheat sales. It's even larger when you allow for other products that Russia and Ukraine produce and export, it's 80 million. So 8-0 million tonne, which includes wheat, barley, corn and canola. So a very important region for global trade, and as Robert said, there are concerns about availability and building of inventories, and we have seen other exporters, maybe India, Indonesia actually putting restrictions on their exports, targeting the available supply of commodities to the world, and that potentially is resulting in a food crisis, specifically in North Africa.

So not only are we seeing good fundamentals around the demand-supply imbalance creating opportunities for the sector and for GrainCorp, but we are seeing supply chains come under significant pressure. So Klaus, talk about what we're seeing around the world. We'll get to how GrainCorp is responding to that, but having a supply demand imbalance is good for business to start with, but you also need to be able to access that opportunity.

So not only is the challenges to the disruption we have seen due to the Black Sea crisis, we have agriculture -- supply chains have had the challenges of COVID, just like many other supply chains. And so therefore, we have had the response and a global perspective to increasing cost of transportation on the back of surging oil and gas prices. The disruption in the Black Sea shipping traffic, not only is the disruption on the land base, but also you can't actually charter ships to go into the Black Sea albeit limited, resulting in elevated shipping and trade costs globally. We in Australia, but also globally are experiencing significant labor tightness or labor shortages due to COVID and also restrictions and movement of labor from countries to countries or even across borders. So labor tightness is definitely an issue and that's not just an Australian issue, it's a global issue. And once again, it manifests itself very much in transportation in form of truck drivers or train operators. And on the back of all, there's higher increases in energy crisis specifically, but also tightness for supply, agriculture input costs have increased significantly as well. So disrupting the producer and grower, not just because of cost because they've gone up significantly. But also the available supply at an appropriate time when it's required.

So I think if you were to bring those themes together, you can certainly see the likelihood is that commodity prices are likely to remain firm for some time given demand's outstripping supply, global inventories need to be rebuilt, and we're dealing with disrupted supply chains at adding cost. And I guess that cost side of things, particularly in ocean freight, as you say, is actually a competitive advantage to us and to Australia, given our proximity to markets.

Robert, it's a very valued point. So Australia actually has an advantage to the point that we're closer to our customer base. As Jesse has explained, our customer base for Australia is very much around Asia, Southeast Asia and North Asia and maybe parts of the Middle East. And given our geographic location relative to the customer, our ocean freight absolute might have gone up, but relative is actually more competitive compared to some of Australia's competitors. That could be the Black Sea, if grain was available from the Black Sea. So it actually plays in the favor of Australian agricultural exports.

So again, that builds on where the diets are changing most. The populations are growing most. Australia is making the most of that opportunity, but also more competitive in a higher fuel cost and transport cost environment. And resilience in our supply chain is proving critical, not just in ours, but in global supply chains, Klaus.

So we have proven -- GrainCorp have proven that we can be resilient. We are agile, and we have had to be because of 2 years of -- 2.5 years of COVID disruptions and the significant increase in demand for Australian products due to disruptions in the Northern Hemisphere. So what's really important for a customer and us is to make sure we have visibility of the end-to-end supply chain. That is how we can operate from the producer through to the end customer, make sure we're adaptable. We adapt. We are agile, and we have a scalable supply chain here in Australia. But also, as it might have been articulated earlier by Robert, in Canada. So we have a supply chain out of Canada as well, making sure we connect producers, growers, direct to consumer. So that's really important. What's become even more important, as Robert alluded to earlier, was security of supply or in other words, inventory. Where is that inventory? How do we make sure as a consumer globally I have access to the inventory and have enough inventory for more customers. So supply chains are being disrupted. Supply chain planning is taking longer and longer. Supply chains are getting longer. And because of certain disruption, maybe the supply that you're used to as a consumer or processor or customer globally, that might not be available. So therefore, the supply chains are getting longer. That means we have to have a longer planning horizon because of those disruptions, number one; number two, access to labor is really important. And you have heard earlier that we employ some 3,000-plus casuals at harvest time, and we're planning for that now to make sure although the crops only just go in the ground, we need to start planning for harvest again and also making sure that we've got appropriate resources for transport. All of that means we need to be really clear and make sure we have the appropriate risk management processes in place to manage those variabilities and demand and very much focused on cost control in our supply chain and value.

And later this morning, after the break, Nigel Lotz and Sean Barker in particular will talk about what we're doing in our East Coast business, specifically on some of those areas. But I think this is an important slide, Klaus, because on the left, we've got kind of the design parameters that give us resilience in GrainCorp. The fact that we have got scale, the fact that we can optimize inventory and do those sorts of things. And then on the right-hand side column is the operations and the tactics that we'll talk about later this morning that access to labor, that planning ahead. Risk management process is important in any business, and importantly, cost management in an inflationary environment, something that we do every day and you'll hear about later this morning. I now want to transition to the third macro theme, and that's the role that agriculture plays in a transition to a low-carbon economy. And there's some obvious areas as a direct opportunity, but some that are less direct, but still maybe an even larger opportunity, Jesse?

Absolutely. So agriculture accounts for about 13% of global greenhouse gases, which obviously is already an area of enormous pressure and likely to continue in the future. It is also, as Robert said, an opportunity for our growers and our grazers there through methane reduction land management practices, input practices around, especially fertilizer, methane management. There is a way for our growers to access increased revenue and diverse revenue streams there. So when I think about GrainCorp's role in this space, it's twofold. I think one is about helping our growers and our grazers navigate the right pathway through sustainability. I was at a dinner that we had hosted in Albury recently, where we set with 30 growers there, and we had many conversations. And one of the themes that came across quite strongly was almost a proliferation of people who are knocking on their doors to help. A dozen different carbon companies who want to offer them something, the economists offering them land management practices, sustainable feeds companies who had the next kind of fix for methane. And there's something about how can GrainCorp help find the right solutions that do 2 things. So both take a step forward in terms of sustainability or also take a step forward in terms of the yield or the productivity of their farms. And examples like FutureFeed, which will both -- I'll talk about this afternoon help with the productivity of the cow as well as methane reduction or Loam, which helps with yield improvement of the crops as well as carbon sequestration. So GrainCorp has a role in navigating this field. Also, I think GrainCorp has a second role in terms of accessing the premiums. We've already talked about things like IFCC, how do we connect our growers or our grazers to get the premiums they deserve for taking up or being early adopters of some of these positive practices. So while there is pressure to reduce the greenhouse gas emissions of ag, there's enormous opportunities for our growers and our grazers. I think GrainCorp is leaning in heavily in our core and our growth themes.

So as we move through the agenda today, we'll talk more specifically about exactly, as you say Jesse, some of the initiatives, but it's not just about reducing carbon and ag, it's the broader opportunity and the growth in renewable fuels. Perhaps talk to us about the role that agriculture can play in that because it's not something that people necessarily think about when they think about renewables.

Absolutely. So renewable fuels, which is simply the use of kind of plants to produce diesel or sustainable aviation fuel rather than fossil fuels. Renewable fuels are on this enormous growth trajectory. The next 3 years alone, I think North America is going to add 150% capacity. And where is that feedstock going to come from? The feedstock for renewable fuels is either coming from oilseeds, tallow or used cooking oil, GrainCorp already plays heavily in all of those feedstock and extremely kind of well positioned. And over the next, not only 3 years, but frankly, probably decades. This will help both provide an additional demand, but underpin the prices that we are seeing to an extent. So I think renewable fuels is an opportunity for GrainCorp, and we're already probably the leading integrated player in Australia in the space.

So if you look across those 3 themes of the growing demand for food, we've talked about what's driving that, the global supply and supply chain disruptions and the themes that many companies and countries are having to manage and decarbonization. We can now start to see the way GrainCorp is responding and indeed, the way GrainCorp is well placed and well positioned to respond and even benefit from many of these trends. I'm going to invite Don Campbell up shortly to talk about our International business and how not just supply from Australia, but our multi-origin strategy will help satisfy that demand. We've started to talk about supply chain resilience, and we'll come back to that after the break in terms of what we're doing day to day to make sure that we're well placed to be better than the competition when it comes to supply chain resilience. And as Jesse just talked about decarbonization, it's not just an opportunity and a challenge for the industry, it's an opportunity for broader involvement in areas like agri, energy and renewable fuels. So Don Campbell, if you'd like to join us on stage and just make a couple of introductory remarks around your background and the business and then get into GrainCorp International.

Thank you, Robert, and good morning to you all. Don Campbell, GM of International. I manage the International vertical whose purpose is to generate the channel to export customers globally. We also manage vessels and container operations or traffic and the documentation or the execution process around those activities. My background, born and raised in Queensland. State of origin [indiscernible], you miss it, we're going to win it. The -- sorry, a cheap shot. The [indiscernible] beef cattle have traded more than 35 years in cross-border trading and worked through both multinational western and non-western cultures. Experience in cotton, begalls in the last decade in grains and oilseeds. Okay. Let's get on with this. Let's firstly look at our footprint. In terms of where we trade, the graphic on screen identifies our primary customer and supplier regions of focus. Our largest trade flow is the cargo going from Australia to Asia, where we have our largest dedicated supply chain assets and to a customer whose preference is for Australian grain. We do have customers that trade outside of the highlighted regions. However, our efforts logically concentrate on those customers who are consistently engaged with our own supply chain assets in terms of what we trade. The volumes highlighted measure the 10-year average export and import programs of wheat, barley and canola, and these are the commodities that our supply chains most frequently export. We do trade other commodities where we have an edge, for example, corn from Ukraine into Asia and organic grain and oilseeds for human animal consumption into the United Kingdom. In terms of how we trade, most of our flow is configured for export in bulk via vessel. However, some specialty products for whether customer scale or logistics are the limitation, we do make trade in containers. From a people perspective, we have marketing teams highlighted in China, Vietnam, Thailand and India and these are supported by trading hubs in Australia, Canada, Singapore, United Kingdom and the Ukraine. Considering a moment the layout or the footprint strategy, specifically our supply team, specifically, our supply chain structure in Eastern Australia and Western Canada, we own and operate supply chain assets, connecting directly to the grower and managing the product through that supply chain all the way to the customer. In all other regions, we use an asset-light model, where we utilize third-party logistics and connect in all cases directly to the customer. Our strategy is designed to strengthen relationships with customers who are meaningful for the supply chain assets that we own and operate, to increase trade and products where we have a robust experience and to increase our earnings outside the Australian hub. Okay. Looking further at the Canadian assets, our supply chain operation in Western Canada comprises 2 key partnerships: firstly, GrainsConnect Canada, we refer to it as GCC. It's a joint venture between GrainCorp and Zen-Noh Grain Corporation who is a major Japanese agricultural cooperative in 2015. GCC has built 4 high-capacity grain terminals, 2 located in Saskatchewan and 2 located in the province of Alberta, highlighted as blue dots on the screen in front of you. These facilities are built to maximize the supply chain efficiency, each contains a continuous rail loop track. It enables the loading of railcars in the most extreme temperature conditions that only Canada seems to manufacture every year. These loops can support up to 140 continuous carloads, which is about approximately 14,000 tonnes of grain per train consist. The framework allows a cycle time and a load outturn time of a train to best practice standard in Canada today. The second partnership to highlight is the Fraser Grain Terminal. We refer to it as GCC, sorry, we refer to it as FGT and it's marked red on the map. FGT is a joint venture between GCC and Parrish & Heimbecker, who we will refer to as P&H. P&H is a family-owned Canadian agribusiness founded more than 100 years ago, containing grain and oilseed trading and supply chain assets, flower and milling and feed mills across Canada. FGT is a grain-export facility located in Surrey of British Columbia. The facility is configured to export a range of grains, oilseeds and pulses. It's capable of loading up to 3.5 million tonnes of bulk cargo and 0.5 million tonnes of container pack cargo annually. The position of FGT is south of Vancouver, so it enables the rail to bypass the congestion that happens often in the north aspects of Vancouver, and it allows us to maximize rail unloading and cycle times. This forthcoming season is the first time that both GCC and FGT will be operating at full capacity. In Canada, today, the farmer is wrapping up their seeding for this coming season. The weather conditions have improved dramatically over the last 2 to 3 weeks, and we're looking forward to return to more normal seasons. Thanks, Robert.

Thank you, Don. The Fraser Grains terminal is one of the opportunity that we have today, as I said, visually through pictures and videos is to share the breadth and scale of our business. And this picture here, Don described as a gateway to the Pacific. It is our completed terminal just outside of Vancouver. So at this point, we're heading into a break just before 10:30, but as I said, there's 3 question-and-answer opportunities through the morning. And this is the first one. Just like Ian Morrison and Stephanie Belton, to also join us on stage. What I do ask is just conscious that we have an online audience as well. If you do have a question, make yourself known, we'll get a microphone to you so that the audience online can hear your question. And if you could be so kind just to introduce yourself as well. The other point is, as I said, with 3 question sessions. We have still got a bit to run in the agenda. So whilst we'll take any questions, if there is a question that's specific to areas that we plan to cover after the break, I'll get Luke from to note that question down, and we'll come back to it if we haven't answered it in the next session. So try to keep your questions on the material we've covered this morning, the introduction to GrainCorp, the breadth of our operations, our strategy and the global trends and our initial response to those global trends. For those of you online, there is a chat function where you're able to enter in a question. And in that event, Luke Thrum, who's sitting in the front row, here will articulate your question and we'll go from there. So Luke, are there any questions online at this point?

No.

No questions online. So any questions in the room down here? All right. Thank you.

Richard Barwick from CLSA. I've got several questions. So maybe -- I might get them all done now. But...

We'll start with one and set got one, Richard, then we'll come back.

I'll try and pick the best one. So this is for you, Ian. Thinking through the, I guess, the $40 million EBITDA uplift. I know that it's a reiteration. You've been talking about it for some time. You talked, I think, I'm on the slide, you said #3, areas but you've never been particularly clear about where that $40 million is coming from, how it's being allocated. Even if it would be interesting to hear how that might be split or how you anticipate that being split across the 2 divisions across Agribusiness and Processing. And part of that question is when we think about the $240 million through the cycle EBITDA, again, how do you think about that across the 2 main divisions?

Sure. Thanks for the question, Richard. I've given you directed and I'll get in to answer it. But I would say, look, absolutely, we intend to be and we have been transparent about where it came from. We did that in last year's update, and we are well on track towards delivery of that. So Ian, do you want to answer Richard's question around where it sits and some of the specific examples?

Yes, sure. I can do that, Richard. Thanks for the question. So on the $40 million last year, we articulated that $15 million of it related to an international business and the main portion of that, so that's an agribusiness segment. And the main portion of that was from our GrainsConnect joint venture, which Don spoke about before. And the Canadian joint venture has been drought affected in the last couple of years and also the supply chain was only completed with the completion of Fraser Grain terminal in January this year. So as conditions return to normal, we expect to see that contribution from GrainsConnect come through. Pleasingly, what we have seen so far with the asset base in Canada is it's achieving in fact, better than business case volumes and capacity. So we're very confident in what that business will be able to deliver once the volumes return to Canada. So that's the $15 million initially. Then the other $25 million was related to about half and half across agribusiness and processing. There was a range of opportunities in the one of the ones we've called out more specifically in the update today is Agri-Energy. So that's businesses like ASCO and some of the contributions from a ability to supply some of our products into the renewable fuels space. The challenge in being able to articulate exact details on amines, as we're clearly demonstrating at the moment, we're delivering earnings well above that through the cycle and being able to articulate how much is coming from each individual initiative is more difficult, but we are very confident in the overall delivery of that $40 million within the time frame we set out. So hopefully, that answers the question.

I think a few other areas in their bulk materials we referred to this morning, that's a part of it. We've seen growth in that even in addition to the huge uplift that we've seen in grain volumes. And then there's also a range of operating initiatives across the network around taking cost out and improving the optimization and planning. And after the break, Nigel will touch on some of those things, including the advanced analytics program that we're running that will embed some of those planning improvements. So we're not going to disclose all the specific details of every project because there's many of them. But what we can say is that we're absolutely confident that we'll deliver the full $40 million and possibly even a little more and particularly in the international business. I think we touched on the fact last year that it was assumed that, that business was kind of a breakeven and the upside was from a breakeven point. As it happened, that business was actually slightly below breakeven. So the gap or the opportunity is slightly greater. And as Ian said, full confidence in that business delivering to its full capability. I think, Ian, the other sort of part of that question, is how you should think about the through-the-cycle number, and it's not necessarily an average across a 10-year period, it's set on an average year, an average set of conditions. So do you just want to reiterate how we think about through-the-cycle?

Yes. No, it's a good point, Robert. So when we introduced a through-the-cycle concept at last year's Investor Day, that is based on a set of assumptions where you've got normal carry in and carry out and an average harvest size -- as we've seen over recent years, it's rare to see that average season. And you do see over, let's say, a 10-year period, a range of drought years, large years and maybe 1 or 2 average years. I think what we've been able to demonstrate in the last 2 or 3 years is that we've done a good job of protecting the downside in the right years through reduction of fixed costs, through the crop-production contract, through managing that fixed-variable split. So I think that allows investors to be comfortable that the downside is very well protected. But as we're seeing in the current environment, when conditions are good, the scale of our operations, our ability to adapt and flex up and down means we can achieve much greater earnings than those average earnings in large crop years. So one of the ways we're articulating that is you shouldn't only think about GrainCorp over a 10-year period as 10 average years because we know that it's very unlikely you will see 10 average years. It's difficult to articulate exactly what that means, but I think you can see from the earnings in the last 2 or 3 years, that's 10 years with variable-production cycles. We believe we are better positioned to respond to that than other businesses because of our scale and our adaptability. And that means it can provide a strength of earnings that can be better than that average season.

Thank you, Ian. A question over the back right-hand side from where I'm sitting -- and Richard, I'm conscious you've got other questions, so we'll come back to you once everyone else gets a chance.

Apoorv Sehgal from UBS Research. Probably a question for Ian again. There was a slide up before showing global wheat stock-to-use ratios at 20-year lows and obviously compounded with the Black Sea disruption in the last 6 months as well. So I guess those supply-demand dynamics have taken a bit of a step change in just the last 6 months. To what extent is that incorporated in your thinking around that $240 million through-the-cycle number, given that number was done sort of this time last year, but things have changed a bit since then?

Yes. It's a good question, Apoorv. That $240 million was certainly before we were seeing those conditions. I know it was on the basis of what we see in average conditions. I guess the hard part in terms of answering the question for the next few years is how long does that imbalance stay in place? And what does that do to margins for supply chains? If you do see a protracted imbalance of supply/demand globally, and conditions in our key regions, particularly East Coast Australia, continue to see good supply and production, then absolutely the opportunity to leverage good margins through that supply-demand imbalance. It leaves us really well positioned.

I think, Apoorv, one of the ways to think about it is as difficult as it is to predict long-term commodity prices. We can point to the trends that influence those prices. And we do that when we talk about the variables in our guidance and outlook, for example, and 2 of those key variables are the size of the Australian crop and the demand we see around the world. And I think given the themes we've talked about this morning, you can see both of those factors are going in our favor. Certainly, the outlook for the next crop, and we'll talk about that after the break is very positive in Australia from a supply side point of view, and the rest of the world likely remains disrupted for at least 2 or 3 years. And some of the more pessimistic views on the Black Sea is it could be disrupted with insurgency for close to a decade. So it is likely that there'll be disruption to supply for a protracted period. And then when you look at this slide that you referred to here up on the screen, Slide 33 and the fact that global inventories are low, that's another demand driver as they recover. So I'd say that the drivers all point to a protected period of demand outstripping supply that's good for demand for Australian grain and it's good for supply chain operators like us that need to get their grain from Australia to where it's needed around the world. Over the back here. Thanks.

Yes, can you just talk to your market share of Australian grain for export versus domestic use? And obviously, GrainCorp at its best with full utilization all the way through your ports into export markets. Is there an opportunity in good seasons where you can take more of that share or swing more of the product that comes through your terminals through export? Can you just talk to that?

I can. It might be a comment for both Klaus and Ian to talk about as well. It does vary. And the reason it varies is it depends on the size of the crop and where it is. So I'll just make some opening remarks. Certainly, with the inventory that we're carrying in our network, we've flagged in our guidance, that's like a carryout between 5.5 million and 6.5 million tonnes in our network. That will be replicated across the industry. So there are a lot of on-farm storage and other networks that are full, which in effect means that the domestic task for next year is already satisfied with grain that's in inventory. So it's likely to see a greater portion of production going to exports over the next 12 months as that new harvest comes through. But Klaus, maybe if you talk about it in terms of the way we look at share of grain received, but also grain exported and what drives that?

Sure, Robert. But I'm also cognizant of that shown back will actually cover some of that. Yes. But if you think on a big picture for the East Coast of Australia, this year's core production was, give or take, 30 million tonnes, of which 11 million to 12 million tonnes gets consumed domestically, and therefore, it depends, as Robert has articulated, what is the carrying relative to the carryout task this year and the prior year is give or take 19 -- 18 million, 19 million, 20 million tonne when it comes down to how well the supply chain can function because as we've articulated, there is very, very strong demand for Australian grain and Australian grain is very competitive globally.

So I think, Klaus, you make a good point. We will come back to that after the break because Sean does talk about export capacity. The fact that the export supply chain is running at 2, 2.5x normal. So I think we'll pick up a lot of that question after the break. But Ian, any closing remarks from you on that point?

Probably the only thing to add is in terms of what happens with the exportable surpluses. Some of it will have to go to Katy just because supply chains are working at full capacity. So in essence, market share is much more about how much you can get to the supply chain in the cutting season. And I think we've been able to respond pretty well in relation to just the supply chain resilience to maximize that throughput and really get as much of the grain out in the current environment as possible.

Thanks. Luke, any questions coming through online?

Yes. There's a couple.

Thanks.

This question is from James Ferrier from Wilsons. So he asks, there's been talk of imports of European grain into the East Coast of Canada, is this reflective of current seasonal production or more of a structural trend and if it's the latter, what are the implications for GCC?

It's certainly not structural. It's more a response to current conditions, but also who would believe we've exported Bali shipments for malting from Australia to Canada. So that's creating opportunities for Australia. But Don, you might like to make some comments around what we're seeing, go on in that space and the current drought or the recent drought in Canada and how that's driving global trade.

Thank you, Robert. The -- as Rob mentioned, it's just a temporary position given the drought in Canada. Our asset GCC is located in Western Canada, not Eastern. This is the major and the bulk of the export program from Canada to the world. It will have little influence on our activities there.

Thanks, Luke. Next question.

From David Pobucky from Macquarie. So he's got a few questions. I might just start with the first. FY '22 guidance reaffirmed, what are the drivers to get to the upper or lower end over the next few months?

Good question for Ian to answer.

Yes. So we had a half year update just about a month ago, and the drivers we called out there will be the same today. Part of it will be how the season develops in terms of the production and supply from the East Coast. So those supply-side drivers in terms of pressuring capacity and supply chains and growers looking to clear out grain for another harvest. So that will be one factor. And the other one will be the continuation of demand-side drivers, whether that be ongoing disruption or ongoing conditions in the northern hemisphere that means supply could be lower than typical. So those would be the major drivers that see strong margins continue into the fourth quarter this year and also into next year.

And I think we're just coming into that period now where we're starting to sell into the fourth quarter, and we'll get a view as to where that's at. But the macro drivers around production in Australia and demand around the world as we flagged, have continued to move in our favor. So I think we'll give David one more question given that one is pretty straightforward, Luke.

Okay. There's 3 more. I'll just choose which one. Okay. So for the Ukraine disruption, do we have any view on how long we think that could persist?

Yes, it's a really good question. And I'll just make a couple of comments about Ukraine. First and foremost, humanitarian crisis for the people of Ukraine. But as we've touched on this morning, increasingly, a humanitarian crisis for those populations that rely on Black Sea wheat and particularly those populations that can least afford the disruption across North Africa. The other thing is if you look at our business in Ukraine, whilst I don't think anyone necessarily foresaw the conflict coming, the advice right up through February and conflict broke out on February '24 was that these sorts of things have occurred every year and it may or may not happen. But as we came through January and early February, GrainCorp was listening to what everyone else was hearing. And given the priority we had on the Australian program, we had the opportunity to reduce our financial exposure in Ukraine. So we understood what our cash burn rate was there to look after the very small number of people, the 15 Ukrainian nationals that we employ and also to reduce our inventory exposure. And as we said at the half year, we've got no forward financial exposure to Ukraine in that respect. And it did mean that when hostilities broke out, we were able to focus on one thing and one thing only, and that was the safety of our team and Ukraine. And I'm pleased to report they remain safe. Don, you're in touch with them, if not every day, certainly every week. And I took the opportunity to meet with a number of our team who we've relocated out of the Ukraine into our U.K. trading office. In terms of the specific question around how long it will go for? I think, very difficult to predict. Other than our best estimate and what we've been saying is that there will be disruption for at least 2 or 3 years. And I'll put some logic as to why that is. First of all, the harvest that's going -- or the crop that's in the ground in Ukraine at the moment is significantly reduced through the impact of war. A lot of the grain in Ukraine also comes from Eastern areas that are under conflict and control of Russian forces but also infrastructure has been severely damaged. So road, rail and port infrastructure, even in the event that peace breaks out will take some time to recover. So I think if you listen to any commentator across Europe or the world in grain or food or energy markets generally, it's very easy to see a disruption for at least the next 2 or 3 years. And as I touched on earlier, it could well be longer than that. So hopefully, that answers the question. Back to the room. I know Richard has got another question, but anyone else in the room with a question? Richard, have you still got another question or we covered it?

Should be relatively straightforward. I think another one, sorry, back to you, Ian. Obviously, you talked about the ROIC and how that's improved in the last couple of years. I'd just be keen to sort of marry that up with the through-the-cycle guidance. So where you'd be seeing ROIC balance? And I guess caught up with that question, you did talk a little bit in detail about the depreciation profile and what you thought that would look like. Can you be a bit more specific in terms of what that would -- is there through-the-cycle, D&A, you can even talk to or that continue to come down?

So I'll start with the D&A one. So we'll see a slight increase this year, and you can probably see that from the first half profile of D&A. And before, we'd expect to see a continued downward trend. And that's just off the back of the sustaining CapEx being lower than D&A. The reason for the slight increase at the moment is an increased spend on basically the current opportunity from the large harvest with some shorter life capital. [ Taupo lands ] are depreciated over between 2 and 3 years. So those assets essentially are shorter life. So that has a temporary impact on D&A. And we don't have a specific through-the-cycle D&A because we do expect the profile to continue to trend downwards over time. And then your first question, remind me what that one was?

ROIC.

So we haven't put a specific target out on ROIC. But when we talked about it at last year's investor day, first area has to be that we're above the cost of capital and aiming for certainly double-digit ROIC from an ongoing basis. And secondly, from new investments, it has to be that it can drive up our overall ROIC. So looking at it from that perspective. And that's also why we have a focus on a number of the aspects outside of just the core business. One of the items we announced last year was targeting $50 million of release of capital from essentially underutilized assets from the network of sites and assets that we don't really use within the network today. So we've progressed that pretty well, and we've achieved $27 million of cash so far against that target of $50 million. So that will continue to be a focus as well. And so those aspects are all part of that drive towards that improved ROIC on an ongoing basis.

Thanks, Richard. Luke, any normal question online?

I have a question from John Campbell from Jefferies. In this very volatile environment, with grain prices around 20-year hires and supply chain constraints all over the world, how are you viewing risk management in your trading and marketing activities? And can you share any specific concerns we have?

Yes, it's a really good question, and we've got a really mature risk management process in the business. But first of all, some fundamentals, whenever we don't expose ourselves to positions in the market. So whenever we buy grain, we back it up with a back-to-back sale or the purchase of a futures or hedge product to protect us. Klaus, you might like to talk about, though, the way we manage that on a day-to-day and week-to-week basis in terms of the business and confidence we haven't been able to manage that volatility. I think bearing in mind that it's been volatile now for over a year, and our results speak for themselves in terms of our ability to navigate that environment.

Sure, Robert. So some people might recall, some [ investors ] might recall, going back in time. We've had a bad experience in 2018 early call, where we incurred some trading losses first time in 10 years. So very valuable lessons have come out of that, and we have reviewed our risk management framework process and procedures. So we actually have now an independent risk assessment unit, valuing our open positions against barb and global volatility. But as a well.

Sorry, barbing value at risk in terms of that abbreviation.

Correct. As Robert said, we very much focused on driving volume through our supply chain. That's the focus in making returns on assets employed that being our infrastructure. At times, when the producer wants to sell is not necessarily when the consumer wants to buy. So therefore, we have to enter into a timing mismatch, which then gets managed by futures or options positions as well as has articulated. We, as the executive meet on a weekly basis with senior managers, general management, Don, Sean and others to assess the risk and also our position. And it's highly transparent, its value, every day to understand our exposures and our risk management processes, procedures and policy are much more mature than there was some 4 or 5 years ago.

And I think I'd just add, that's fully embedded in the business with oversight from the Board Risk and Audit and Risk Committee. The Executive Committee that Klaus touched on and then the processes that run every minute of every day as we run things through. And I think, as I said right at the start, the key thing there to look at is the fact that we've been operating in a very volatile world and our results speak for themselves in terms of our ability to navigate that. Any final questions online, Luke?

No.

Any final questions in the room? If not, we are on time to go for a break. So bearing in mind that we do have people joining us online, if we could be back here for 11:00 and just under 30 minutes' time, that would be great. We look forward to talking to you. Those of you in the room through the break. Thanks, everyone. [Break]

Thanks everyone in the room and those online. I'd now like to ask Sean Baker, Nigel Lotz and Brad Glass to join me here on stage as we get into a deeper dive on GrainCorp, Australia and New Zealand. But just to recap, through the course of the morning, we've gone through some of the larger mega-trends shaping the industry and the opportunities for food and agriculture and for GrainCorp. We've heard from Don Campbell about our international business, and how we have intentionally diversified both our supply but also our demand in terms of the number of countries and customers we trade with. That will allow us to be more resilient in terms of supplying customers year round. And in this session, we want to understand and share with you a little more what we're doing in Australia and New Zealand, the businesses that comprise of East Coast Australia, ECA, as I said before, feed fats and oils and our processing and oil processing business. So we'll talk through how these businesses have evolved and what we've done to undertake improvement in these businesses and set them up for the future, the changing markets and the opportunities that are ahead. Across all of our business units, we're confident in the foundations we've got, and we're confident in the outlook for the businesses, not just to survive, but to thrive and excel across these categories. So before we start and get into that discussion, I might just get a quick introduction from Sean, Nigel and Brad in the order in terms of what you do in the business and your background. So starting here with Sean Baker.

Thanks, Robert. Sean Baker, GM of Commercial. So I look after the commercial activities in the ECA business, as Robert described that, I've been with GrainCorp for just over 15 years, 25 years in commercial roles across our Ag overall.

Nigel Lotz, GM operations across the grains and processing; businesses. I've been with GrainCorp now for nearly 10 years, prior to that in a number of our business and supply chain roles, including fuzzy pulp and paper.

Good morning, Brad Glass, been with GrainCorp just on 3 years. I look after the -- basically the businesses where we process, we value add, which includes our feeds, our oils our Foods businesses and originally [ have a farm ] in Northern Victoria.

Right. So we'll talk about the East Coast business now. And I think the context I'd like to provide around that is we often based here in Australia, end up thinking about the short term, the month-to-month, the year-to-year activity that's going on, whereas GrainCorp and agriculture generally is fundamentally a business you should look at through the long term and fundamentally stronger when you look at the trends. So Sean, if we look at the East Coast business in Australia, we can clearly see the standout performance at the moment, the fact that we're making the most of the opportunity, and we're delivering exceptional results. But can you talk us through how we're setting up for the future and why it looks strong in the longer term?

Yes. Thanks, Robert. And I think as we go through that, we might look at some of the production factors sitting behind that for the East Coast. We've spoken a lot today about the last 2 years, and those record productions that we've had of just over 30 million tonnes on our winter grains overall. So looking at that chart and what those 2 years look like, if we go back to the other big years of '16, '17 and '10, '11, as we see on the chart, those big crops are significantly higher than we've had in the past. So we've seen those back-to-back, which is really pleasing to see. Another factor on this chart, and this is looking on the left-hand side there. If we look back to the drought periods of '06 to '08 and '18 to '20, so 2 like-for-like periods in terms of drought, we produced over 4 million tonnes more in the drought of '18 to '20 than we did back in the '06 to '08 period of droughts. So overall, our farmers are adapting their practices. We're seeing those yields increases coming through. In the chart on the right-hand side, we're seeing that growth of 2.3% per year compounded growth on that from production overall. So how our farmers doing that? Well, we thought rather than us sit up here and tell you, we've got a video now of a third-generation farmer, Charles Edmondson, down in Ballarat. He's going to step us through pretty quickly what's happening on his farm and stepping through why we're seeing some of those yield increases.

We'll go to the video. [Presentation]

I think the story Charles tells there is pretty common across Australia. We do have some of the most innovative farmers in the world when you look at what we're doing, especially in water-use efficiency, the uptake of technology and what we're doing. So we have a lot of confidence in that yield and how that will take us forward as a business. We think back and remembering the chart that we had there before, what's that been short term, we've spoken on the prospects of a third crop coming from that. [ ABARES ] recently produced their first forecast for the '23 year. On winnercrops, that was 24.2 million tonnes. So that's the largest first forecast in June that we've ever had. So that's reflective of the positive conditions. Robert's touched on it there before, good soil moisture profile looking forward. And that optimism we've spoken about for that crop -- we look forward, we look at the Bureau of Meteorology. The 3-month forecast is out for anyone looking at that, just go to their ag services area, 3-month forward view and they're showing a greater than 80% chance of above medium rainfall between July and October this year. So we get a lot of confidence from that, and we're definitely planning towards that for the season ahead. So if we take those good conditions, we look at that, we'll apply those back to sort of what's happening now, particularly in the export area. I know there's some questions around that overall. The really good supply of grain that we've had has been really good for the export supply chain. So going back 2 years ago in drought. Obviously, we were not exporting grain to go from that to record production. And as we've seen, the supply chains have had to go pretty low utilizations, as Robert said, to over 2, 2.5x an average task in the matter of times. So as an industry, we've done very well on that overall. But we definitely -- the supply of grains maxed out that capacity from that. So when you think through that, what is the constraint in terms of how we're getting grain out at the moment, it is transport from that point of view. So it is the road, it is the rail. Klaus mentioned it in his -- talked earlier around some of the constraints around labor, that's compounding it as well in terms of the number of truck drivers, number of train drivers. Transport is limiting how much rail we can get from up country through our ports overall. In a recent analysis by [ Rabobank ] for those out there. They put the total East Coast supply chain capacity at 19 million tonnes, I guess, that's a theoretical capacity. The recent ACCC report pulled out, I think, a maximum exports we've ever got to 17 million tonnes as the East Coast from that. The exportable surplus we're looking at from that great supply. So the exportable surplus is our supply of grains, so our carry-in plus our production less domestic demand at around 24 million tonnes on that overall. So that's what's driving the market at the moment, just that [ skew ] supplies, maximizing the transport that we have available to get that growing to a port, and that's where our focus is ensuring the industry that we can run our supply chain at maximum capacity to that transport, making sure we get the exports out for where we sit today.

So I think a couple of points on that, Sean, starting with that export capacity, and it picks up on a question before the break. Really what you're saying is there's excess capacity in the ports, but really where the constraint is getting the grain from up country down to the ports?

Yes. And yes, that's exactly right. In terms of birthing space, our ports, there's plenty of capacity there for that. I'm just to put it in the context, road transport at the moment. Road rates are double where they were 2 years ago. So that's the industry doing everything to make sure we turn on all those transport options available to the industry.

So before we move on to the next slide, I think talking about that cost is a really important aspect of the resilience of GrainCorp because when we talk the intrinsic value of grain and there's a slide in the appendix that reminds you of that concept we launched last year. Buyers and sellers have grain, recognize the quality, the location and the timing of that grain and that's reflected in either what we buy the grain for or what we sell it in. So although we're seeing higher costs, as Klaus talked about earlier, that's actually a competitive advantage for Australia when it comes to an ocean-freight point of view. And from a domestic point of view, it's not that we have to pass on those prices that automatically picked up in the way grains price. So GrainCorp is an incredibly resilient model when it comes to an inflationary environment. We're not having to pass on those costs that flow through automatically.