Annual Report 2014 Includes 3 Months to 31 March 2013 2 3 CONTENTS
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Annual Report 2014 Includes 3 months to 31 March 2013 2 3 CONTENTS Section 1 — About CPC 4 Our vision 6 The cattle market today 8 Our business model 10 Our strategy Section 2 — Executive summary 14 Chairman’s statement 16 CEO’s report 18 Board of directors Section 3 — Corporate and social responsibility 22 Our people 24 Health and safety 26 Pasture monitoring 28 Corporate and social reponsibility Section 4 — Development 32 Indonesian markets 34 Capital development 36 Developing our people Section 5 — Financial statements at as 31 March 2014 40 Corporate governance statement 44 Directors’ report 46 Lead auditor’s independent declaration 47 Statement of financial position “Wineglass brand, 67 Directors’ declaration symbol of quality” 68 Independent audit report Section 6 — Financial statements at as 31 March 2013 70 Directors’ report The wineglass brand was first registered in 1922 72 Lead auditor’s independent declaration and used at Newcastle Waters Station by the 73 Statement of financial position owners at the time, John Lewis & Co. The brand 93 Directors’ declaration does more than just identify cattle produced by 94 Independent audit report Consolidated Pastoral Company, it has become 96 Contact information an internationally recognised symbol of quality. Front cover: Lani Hart, headstockman, Wrotham Park Station (Nathan Dyer, 2014) 4 Section 1 – About CPC 5 Business overview Our vision “Our team is proud to connect the best Australian beef to the world.” House Roof Hill, Carlton Hill Station 6 Section 1 – About CPC 7 Business overview The cattle market today Consolidated Pastoral owns approximately 1% of Australia’s CPC owns properties throughout land and is Australia’s largest privately owned beef producer. Australia, as well as 50% of two Supplying both domestic and South East Asian markets, the feedlots in Indonesia. company is well positioned to benefit from the expected population growth in the region. By 2030, Indonesia will have an extra 46m residents and China an extra 75m, putting increased demand on the global cattle herd that has declined in recent years. Forecast 2030 Beef Consumption (‘000 tns) Cambodia Key 2000 2030 Malaysia Vietnam Thailand Philippines Indonesia India China 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Source: Mapping Supply And Demand For Animal-source Foods to 2030 FAO - Sep. 2011, World Bank Paddock carting, Wrotham Park Station 8 Section 1 – About CPC 9 Business overview Our business model 80% Cattle are bred 70% on breeding 60% properties 50% 40% 30% 20% Cattle are transferred to alternative Cattle are retained in the properties to grow out breeding herd to secure 10% Key Domestic and add weight and future productivity Export value prior to sale 2010 2011 2012 2013 (3 months) 2014 Domestic vs Export Sales Split CPC owns 360,000 head of cattle, with properties focusing on either breeding, growing or fattening cattle for sale into domestic and export markets. CPC owns in joint venture 2 feedlots in Indonesia making CPC the world’s largest Unsuitable cattle are Cattle are exported to vertically integrated producer, exporter and feedlotter removed from the our feedlots in Indonesia of live cattle. breeding herd and or sold to international sold to ensure quality and domestic markets Private equity firm Terra Firma are our major shareholders. genetics are retained Lake Woods, Newcastle Waters Station 10 Section 1 – About CPC 11 Business overview Our strategy CPC aims to become an attractive cash yielding business by reducing the average age of its cattle herd through increased cattle turnoff and productivity. As one of the largest land owners in Australia, alternative revenue generating activities are explored in order to gain maximum leverage from CPC’s large asset base. Operations Optimisation Indonesia China and SE Asia Domestic Genetics Markets Human Resources Right: Yarding cattle, Newry Station 12 Section 2 – Executive Summary 13 Executive Summary Cattle Sales 2013/2014 - 15 months 103,351 2012 - 12 months 71,919 2011 - 12 months 66,206 2010 - 12 months 52,625 Cattle Brandings 2013/2014 - 15 months 116,727 2012 - 12 months 99,605 2011 - 12 months 85,505 2010 - 12 months 77,457 Mustering, Wrotham Park Station 14 Section 2 – Executive Summary 15 Chairman’s statement Live Export Cattle Volumes (heads) 700,000 600,000 500,000 Key 400,000 July 12 to June 13 July 13 to June 14 300,000 200,000 100,000 Indonesia Vietnam China Malaysia Philippines Thailand The global demand for beef wake of the election of President The growth in export volumes to Into 2014 the dry conditions talents and resilience required by in the Australian Government’s continues to increase as the major Joko Widodo. There was much China in the past 12 months has continued with renewed intensity people to operate effectively in the Green Paper on Developing beef-producing herds of USA, talk of Indonesia improving its been rapid, rising from 59,000 and with approximately 75% of pastoral industry. Northern Australia. We believe Australia and China decline in size. beef self-sufficiency. However, tonnes during the period from Queensland still remaining drought the key to developing the region the fact is that such an aim June 2012 to June 2013 to 94,000 declared. Efforts required to The tough drought conditions will be lowering production costs Nothing occurred in 2014 that remains problematic against tonnes in the following 12 months. mitigate the risks arising from the affected sale prices as record by increasing total productivity caused us to doubt our projections the reality that a country of 240 The completion of a FTA with conditions included a substantial numbers of cattle were slaughtered to improve profitability and for improved returns over the million people split across 13,466 China will establish a level playing increase in cattle movements, total domestically and exported overseas. international competitiveness. medium term in CPC’s business. islands has limited resources field for Australian producers; destocking of some properties and This supply and demand imbalance We share a faith that the region to fundamentally improve its • The suspension of the additional supplementary feeding. is unlikely to ease until we receive has vast potential to exploit These projections are formulated capacity to produce quality beef. Indonesian live trade carried Whilst the strategic geographical some significant rainfall allowing market opportunities in Asia, in the slipstream of declining The post election comments with it the necessity for Australian location of our properties and producers to retain cattle. When however to attract the capital numbers in the major producing of the new President seem to producers to more aggressively access to Indonesian feedlots this occurs we believe the trend will needed to develop the region we beef herds, changing diets and acknowledge the difficulties of pursue alternative markets. assisted in the management of reverse very quickly. Witness the need to demonstrate improved rising incomes in populations to achieving beef self–sufficiency. Significant growth was seen in the this challenge, the true heroes USA- a decline in the US cattle returns. Assistance with improving our north and food safety issues Live export volumes will set new markets of Thailand, Cambodia were our people- moving circa herd to a 50 year low followed by infrastructure remains key to in China. records on the back of Indonesian and Vietnam in particular. These 100,000 cattle throughout the favorable producer conditions has, delivering improved returns. live import permits, which are are positive signs that affect the financial year. This was all done over a few months, caused cow 90 CL But whilst these macro drivers likely to total 750,000 head for growing demand for Australia’s with an uncompromising regard prices to rise by approximately 50%. During the year Keith Warren remain solid more temporary 2014; cattle in South East Asia. for animal welfare and rangeland stepped down as CEO to pursue issues continue to distract. • The continued strong demand sustainability. It was yet another As Australia’s largest private beef opportunities in Sydney and was from China, combined with reminder of the extraordinary producer, CPC has a strong interest replaced by Troy Setter, previously In 2013 it was the continued increased demand from the USA “The quality of a CPC’s Chief Operating Officer. challenges faced in the Indonesian chasing grinding beef as their business can never Troy has extensive management live trade market following herd rebuilds, pushed boxed beef 650 experience in the agribusiness suspension in 2011. values higher; exceed the quality 550 sector and his direct experience with Asian markets makes him well • Australia signing free trade of its people.” 450 This year it was the continuation agreements with Japan and qualified to take the helm at CPC of one of our driest years on record. 350 as the business moves into the next Korea, allowing Australia to I made this statement last year Chilled Grassfed Fullset phase of its transformation from a remain competitive with other when reflecting on the substantial 250 Cow Meat 90 CL So in relation to the macro picture farm based production business to beef exporters such as USA and additional workload imposed on we saw: 150 one focused on diversification into New Zealand. We welcome our people following the events fast growing Asian markets. • The resumption of the the Australian Government’s of the Indonesian live trade Indonesian live trade market and continued focus on finalising a suspension and dry conditions. stabilization in the local currency in free trade agreement with China. Aug 2012 Oct 2012 Dec 2012 Feb 2013 Apr 2013 Jun 2013 Aug 2013 Oct 2013 Dec 2013 Feb 2014 Apr 2014 Jun 2014 Aug 2014 . Above: Mark Bahen in CPC’s Brisbane Office 16 Section 2 – Executive Summary 17 CEO’s report “In contrast to the difficult domestic market conditions, global demand for beef remains strong, supported by increasing demand from growing markets in China and South East Asia.” Backdrop a decade, reflecting a c.