Grain handler focuses on infrastructure as farmers back co-operative status quo
Grain handler CBH Group has put near record harvest throughput down to the many millions it spent last year on infrastructure investment and maintenance.
The Western Australian agribusiness and logistics provider also known as Co-operative Bulk Handling saw net profit after tax roll in at $82.7 million as it received and shipped the state’s fourth largest harvest on record.
And capital expenditure was up from $113.1 million to $123.5 million, with maintenance lifting the figure to $177.4 million, its annual report shows.
“We’ve focused on lowering our costs to serve, driving better prices and generating greater returns from investments,” CBH Group chairman Wally Newman says.
“The continued investment in the network is certainly paying off through efficiencies in the supply chain.
“We saw a record one million tonnes delivered to one site, Chadwick in the Esperance zone, largely because of these investments.
“We invested $51 million into our ports which play a significant role in ensuring WA growers remain competitive by being able to get their grain onto ships when their customers want it.
“The CBH Group also developed a network proposal to deliver an efficient and cost-effective network into the future which this year, during its final phase, will be tested to ensure this investment is being made in the most prudent way.”
CBH Group CEO Dr Andy Crane said that the positive financial result was not only the product of a large crop but of a dedicated focus on managing costs and driving operational efficiencies.
“During 2015 we reconfirmed our purpose and set in place clear measures of performance that will ensure a continued focus on current and future generations of growers,” Crane says.
“Our key measure of performance is the dollar per tonne charge for storage, freight and port fees minus rebates of charges generated from CBH’s other investments. This puts our growers and their competitiveness at the very centre of every decision we make.
“Last year, we also implemented long term storage and handling agreements with 10 export marketers, providing them, and our growers, with certainty over supply and service.
“These agreements resulted in 10.2 million tonnes of capacity secured for five years.”
Despite the positive financial result overall, the co-operative reported a loss in its marketing and trading activities for the year, which it put down to grain and commodity markets experiencing “some of their worst declines since the global financial crisis”.
Meanwhile, the battle for the firm’s structural future has seen farming industry WAFarmers continue to back its present governance structure.
Local media has noted a push by former CBH directors to corporatise the co-operative.
“The WAFarmers Grains Council recognises that CBH operates in a competitive environment, and as a co-operative, it is vital that it can compete effectively with other companies,” WAFarmers president Dale Park says.
Grains council president Duncan Young says policy was updated at its recent meeting to reflect the CBH issue.
“The motion ‘At this time, WAFarmers Grains Council support the co-operative model for handling and storage of grain, and a structure that is dynamic and delivers maximum value to growers’ was carried unanimously by delegates,” Young says.
“Additionally, discussion was held about differential pricing and site rationalisation, with the following motion carried: ‘WAFarmers Grains Council support the principle of bin rationalisation of the CBH network and their efforts to gain whole of network efficiency, and will write to the CBH Board to indicate our support’.
“The intention of this motion is to encourage CBH to progress this conversation with farmers, to ensure they give their members the best co-operative for the future.
“Competition is here, now, and we have to allow CBH to adjust to the changing environment with sound commercial decisions that are in the best interests of all grain growers in WA.”
An additional motion, ‘Grains Council strongly urges WA grain growers to exercise their right to vote in upcoming CBH board district elections to ensure a dynamic, competitive and commercially focused organisation for WA grain growers into the future’, was crucial to the upcoming board district elections.
“Recent media attention on the co-operative versus corporate debate could potentially unfairly affect the outcome of board district elections at CBH, so we implore voters to evaluate candidates on their individual merit. If you don’t vote, you shouldn’t complain,” Young says.
“While there is some talk about corporatising CBH, some of that might come from a sense that CBH is not responding quickly enough to the changing environment.
“CBH can be a cooperative and competitive at the same time; they are not mutually exclusive. WAFarmers absolutely supports that.”
CBH management backs this position, with CEO Dr Andrew Crane, who is also Chairman of the Business Council of Co-operatives and Mutuals (BCCM), using his section of the group’s annual report the champion the cause.
“As Australia’s largest co-operative and the second largest private business (BRW 2015), I believe it is important for CBH to take a lead role in promoting the value that member-owned organisations deliver to the Australian economy,” Crane says.
BCCM and CBH had worked to gain a greater recognition of co-operatives’ and mutuals’ value.
“We saw this in practice through our exemption from certain requirements under the mandatory code of conduct for port access and the $13.8 million committed to the development of agricultural co-operatives in Australia through the Federal Government’s Agricultural Competitiveness White Paper,” Crane says.