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FILE PHOTO: A silo bearing the logo of GrainCorp Ltd was seen in the Tasmanian town of Devonport, Australia on November 17, 2016. REUTERS / Clyde Russell
(Reuters) – GrainCorp, the largest publicly traded bulk grain handler, announced Friday that it has signed a 10-year contract with Aon PLC to reduce the cash flow volatility badociated with production. eastern Australia, especially during droughts.
This agreement would help protect GrainCorp from the effects of the harsh and arid climate, which has resulted in a loss of revenue.
Last month, the company recorded a larger than expected half-year loss and also reduced its dividend due to severe crop drought.
Under this agreement, GrainCorp will receive a payment of A $ 15 per tonne of winter production on the East Coast when production falls below a defined threshold, and will pay the same amount when production exceeds a specified level.
The amount of payments will be limited over a period of ten years.
"The contract will streamline GrainCorp's cash flow and enable long-term capital allocation and business planning throughout the cycle," said Managing Director Mark Palmquist.
Excluding production payments, the contract would likely cost Graincorp less than $ 10 million ($ 7.0 million) before taxes, the company said.
(1 $ = 1.4333 Australian dollar)
Report by Aditya Soni in Bengaluru; edited by Richard Pullin
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