CBH GROUP ANNUAL REPORT 2013 1 2013 OVERVIEW Creating and Returning Value to Growers
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CREATING AND RETURNING VALUE TO GROWERS ANNUAL REPORT 2013 CONTENTS 02 OVERVIEW 22 YOUR PEOPLE 03 YOUR CHAIRMAN’s report 26 YOUR COMMUNITY 05 YOUR CEO’s report 30 YOUR ENVIRONMENT 07 FINANCIAL AND Operational SUMMARY 32 YOUR BOARD OF DIRECTORS 09 SuMMARISED REVIEW 36 YOUR EXECUTIVE 10 YOUR NETWORK 39 Corporate GOVERNANCE 14 YOUR MARKETER 48 DireCTORS Report 18 YOUR INVESTMENTS 52 FINANCIAL REPORT 20 YOUR Support 01 02 03 YOUR YOUR YOUR NETWORK MARKETER INVESTMENTS PAGE 10 PAGE 14 PAGE 18 04 05 06 YOUR YOUR YOUR SUPPORT PEOPLE COMMUNITY PAGE 20 PAGE 22 PAGE 26 07 YOUR ENVIRONMENT PAGE 30 80 YEARS STRONG AND HERE TO STAY. CBH GROUP ANNUAL REPORT 2013 1 2013 OVERVIEW Creating and returning value to growers The CBH Group is an integrated grain storage, handling and marketing co-operative controlled by growers for their benefit and the benefit of the grain industry in Western Australia. We are 4,200 30 GRAIN GROWER GLOBAL Australia’s biggest co-operative ENTERPRISES MARKETS and a leader in the Australian grain industry, with operations extending along the value chain from grain storage, handling and transport to marketing, shipping and processing. 1,000 195 10 Owned and controlled by PERMANENT RECEIVAL REGIONAL around 4,200 grain growers, EMPloYEES LOCATIONS OFFICES the core purpose of the CBH Group is to create and return value to growers. Since being established in PROCESSING Western Australia 80 years ago, CBH has constantly evolved, innovated and grown. SHIPPING The Group currently employs approximately 1,000 permanent employees supported by up MARKETING AND TRADING to 2,000 casual employees during harvest months. These employees are located across one of our ten regional offices, 195 receival site locations, four ports, our engineering workshops or at our head office in West Perth. STORAGE AND HANDLING Our marketing division, aided by additional offices in Eastern Australia, Hong Kong, Japan and the United States, is responsible for exporting a range of grains to more than GROWERS 30 markets across the world. 2 CBH GROUP ANNUAL REPORT 2013 80 years strong Wheat marketing was deregulated five years ago For growers to have their 2013 which has had a significant supply chain still in their control impact on the way in which we is exceptional in these modern operate. And competition is now times. No more than in recent right on our doorstep in storage years, when competition, YOUR and shipping operations. globalisation and privatisation have been the trend. We are confident, but not complacent, that a solely Our co-operative has stood the CHAIRMAN’S grower focussed export supply test of time, but that has not chain dedicated to low fees and been without some moulding to good service will prove a very suit the changing shape of our REPORT competitive business model. industry, our growers and our customers. The CBH Group celebrated its 80th year Returning value to growers It is imperative that we move The CBH Group exists to create with the times and that is anniversary in April 2013. It gave us and return value to growers and certainly how a business like in 2013 your co-operative was the opportunity to reflect on the history ours has survived and grown able to do just that. of our co-operative and recognise its stronger for 80 years. During the 2012-13 harvest, I am amazed when I look back CBH reduced rail freight rates importance to both today’s and future on the changes that have taken by an average of seven per place in our lifetimes; and see generations of growers. cent providing real value back how much we have adapted to to growers from the investment new technologies and practises. in rail. The purchase of 22 Just a decade ago we were locomotives and 574 wagons faxing each other transaction as well as employing a new paperwork. Today we blend above-rail operator in Watco and sell our grain at the stroke WA Rail, had a significant of a computer key from the impact on the efficiency of the comfort of our lounge rooms. rail task and that was able to be passed back to growers Over this time there have been through reduced rates. significant changes in the way growers operate on their farms The Grower Patronage Rebate and this has been reflected Program was also introduced in through CBH’s own evolution. 2013 which included a rebate from Operations, Marketing and When we began in 1933, CBH Trading as well as an Investment had just five trial sites. This Rebate, made possible due to quickly grew to over 300 in the the returns from the Interflour 1960’s, but as time went by investment in Asian flour milling. and we learned more about how to store and move grain, The Operations Rebate will that number of sites was provide growers a credit of consolidated to the 195 we $0.85 per tonne, the Investment have today. Rebate $0.75 per tonne and the Marketing and Trading Rebate Finding markets for grain (formerly the Grower Loyalty around the globe was the realm Payment) $1.00 per tonne. So of statutory marketing bodies, collectively some growers will see but this too has changed. a reduction in their storage and handling fee of up to $2.60 per tonne in the 2013-14 harvest. CBH GROUP ANNUAL REPORT 2013 3 experience to the Board. The next 80 years I wish him all the best in his By creating value through future endeavours. investments in rail, grain In April 2013 the Board processing, capital expenditure announced a new Deputy on the network, quality Chairman in Vern Dempster, optimisation, and returning who has been a member value through rebates, CBH is of the Board since 2008. as relevant and as important Mr Dempster replaced Clancy to growers today as it was Michael. in 1933. I have absolutely no doubt that as long as we Growers Advisory Council focus on both creating and returning value to growers, In 2013, four new members CBH will remain a co-operative were elected to the Grower and play an integral part in the Advisory Council. The new sustainability of your business members include Michelle and your community. Barrett of Munglinup, Brendon Williamson of Korbelka, Michael O’Callaghan of Marchagee and Darrin Lee of Mingenew. Under the Grower Patronage maintenance, as well as $40 The successful candidates were Rebate Program, growers will million for the following three selected by a panel consisting receive one or more of these years on projects to improve of four grower Directors, the rebates each year, although site turnaround times. GAC Chairman and the CBH Neil Wandel the value of each rebate may During 2013, $155.2 million Group General Manager of Chairman vary depending on the financial was spent on capital Grower Services. performance of each of the expenditure and maintenance business units. These rebates The GAC makes a valuable activities on the network. are a demonstration of the contribution to the CBH Group value that a co-operative can and the number of nominations provide its growers. That is Board update was particularly pleasing. what co-operatives do. The CBH Group welcomed I take this opportunity to extend Derek Clauson from District 2, my thanks and recognise the Investment in the network who replaced Mick McGinniss. significant contribution of our Another way your co-operative Kevin Fuchsbichler was outgoing Councillors Andy returns value is through re-elected in District 3 and Duncan of Ravensthorpe, investing in your storage and Trevor Badger was re-elected Andrew Crook of Merredin, handling network. The CBH by growers in District 4. Norm Jenzen of Cunderdin and network is the most efficient, Rodney Messina of Mullewa. and the lowest cost, grain I would like to take this Both Andy Duncan and storage and handling system opportunity to thank Mick Andrew Crook are former in Australia, and we are proud for more than nine years of GAC Chairmen. of our record of reinvesting to service to the Board and the ensure the service provided to significant contribution he has growers is maintained. made during his tenure. He has been a member of the Board’s In 2012, your Board took the Remuneration and Nomination decision to reinvest a minimum Committee and the Investment of $85 million each year Committee and provided on capital expenditure and a depth of knowledge and 4 CBH GROUP ANNUAL REPORT 2013 Western Australian growers are Creating value for growers well aware of many challenges As a grower co-operative CBH 2013 they face to profitably grow has a sole focus to create, and and market a crop in any one as importantly, return value to year. It is however the long growers. The first way we do term trends in inputs, yield, that is by running a low cost YOUR CEO’s supply chain costs, prices and and efficient grain supply chain new competitor origins that will to market. The integration of determine whether farming in that supply chain is what keeps WA is truly sustainable. REPORT the co-operative strong. That There have been many reports strength allows the co-operative There was a high level of discussion about the and newspaper articles on to focus on growers’ priorities the so called ‘Asian Century’ of storage and handling fees, sustainability of the Western Australian grain bringing new prosperity to freight costs, a marketer truly the region and unparalleled focused on grower interests industry during the past year with profitability demand for Australia’s raw and downstream investments and farm viability in sharp focus. Coming materials and food.