Annual Report 2017 Consolidated Pastoral Company Pty
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ANNUAL REPORT 2017 CONSOLIDATED PASTORAL COMPANY PTY LTD CONTENTS PAGE ABOUT 3 OUR BUSINESS 5 OUR LOCATIONS 7 OUR CORE VALUES 9 OUR APPROACH EXECUTIVE SUMMARY 13 BUSINESS SNAPSHOT 14 MACRO SNAPSHOT 17 CHAIRMAN’S REPORT 19 CEO’S REPORT 21 BOARD OF DIRECTORS IN PROFILE 25 OUR PEOPLE 26 NAREE BRYCE 26 TIM HIGGS 27 SALLY FLETCHER 27 WILLIAM BULO 28 DAVE YOUNG 29 OUR FOOTPRINT 29 INDONESIA FEEDLOTS, SUMATRA 31 MANBULLOO, NT 33 ALLAWAH, QLD 35 NEWCASTLE WATERS GROUP, NT 37 BUNDA, NT CORPORATE AND SOCIAL RESPONSIBILITY 41 COMMUNITY 41 REAL JOBS PROGRAM 43 RECOGNITION 45 LEARNING AND DEVELOPMENT 45 TALENT ENGAGEMENT 47 INDONESIAN EXCHANGE PROGRAM 49 WORKPLACE HEALTH AND SAFETY 51 OUR ENVIRONMENT 53 NATIVE TITLE 53 ANTI-CORRUPTION 55 ANIMAL WELFARE “Our Team is Proud to Connect the FINANCIAL STATEMENTS 59 CORPORATE GOVERNANCE STATEMENT Best Australian Beef to the World” 63 DIRECTORS’ REPORT 65 LEAD AUDITORS DECLARATION 67 FINANCIAL STATEMENTS HEALTH & SAFETY | LEADERSHIP | TRUST | COMMUNITY | VALUE CREATION 71 NOTES TO THE FINANCIAL STATEMENTS 97 DIRECTORS’ DECLARATION CPC is an Australian managed company that is majority owned by an investment fund managed by Terra Firma, which is 99 INDEPENDENT AUDIT REPORT a leading European private equity firm. 101 CONTACT INFORMATION 1 Section 1 - About Section 1 - About 2 ABOUT Bunda Station by Shannon Chatfield 3 Section 1 - About Section 1 - About 4 OUR BUSINESS Australia’s largest privately-owned Globally Majority Respected beef and cattle producer significant owner of and historic . agribusiness international brand 16 5.5 million 345 with a joint venture properties hectares of land team members strong PT Juang presence Jaya Abdi in all Alam (JJAA) major beef markets Yarding up at Newry Station 5 Section 1 - About Section 1 - About 6 OUR LOCATIONS Medan QLD LOCATIONS Indonesian Feedlot ALLAWAH COMELY Operations 3,069 ha 1,200 head* 23,159 ha 10,000 head* Lampung ISIS DOWNS MIMONG Manbulloo 246,057 ha 26,800 head* 79,970 ha 9,600 head* Carlton Hill Auvergne Argyle Downs Newry Wrotham Park Dungowan NOCKATUNGA WROTHAM PARK Kirkimbie Bunda Ucharonidge 852,306 ha 21,400 head* 596,880 ha 47,600 head* Newcastle Waters NT Mimong QLD NT / WA LOCATIONS ARGYLE DOWNS AUVERGNE 72,022 ha 7,900 head* 414,200 ha 30,800 head* Isis Downs Allawah Comely BUNDA CARLTON HILL 178,800 ha 16,100 head* 475,709 ha 49,100 head* WA Nockatunga Brisbane DUNGOWAN KIRKIMBIE SA 445,400 ha 17,600 head* 230,400 ha 15,700 head* MANBULLOO NEWCASTLE WATERS NSW 379,130 ha 18,900 head* 1,033,101 ha 65,700 head* NEWRY UCHARONIDGE 246,700 ha 20,500 head* 245,500 ha 15,700 head* VIC INDONESIAN LOCATIONS LAMPUNG MEDAN ~180 ha 19,800 head* ~20 ha 7,200 head* TAS head* = Carrying Capacity 7 Section 1 - About Section 1 - About 8 OUR CORE VALUES Health & Leadership Trust Community Value Safety At CPC, we At CPC, we have At CPC, we value Creation show leadership the utmost family, diversity At CPC, the welfare At CPC, we are at every level confidence in and recognition of our people, always on the because we are the goodwill customers, lookout for all proud to take and reliability of animals and land innovative ways ownership and our colleagues, is paramount to enhance the responsibility for customers and productivity of our what we do industry partners. land, the quality We are honest and of our cattle, the transparent in our talents of our exchange with people and the others experience of our customers Roadtrain leaving Bunda Station 9 Section 1 - About Section 1 - About 10 OUR APPROACH CPC is the leading producer of high quality cattle Vertically #1 Australian Creating Secure Land Operational Global Cattle Implementing Integrated Supplier of Value Tenure with and Portfolio Producer and Technology Operation Live Cattle Through Geographic Optimisation Marketer to Improve Continual and Climatic Productivity. Genetic Diversity Improvement Manbulloo Station by Jeremy Scott 11 Section 2 - Executive Summary Section 2 - Executive Summary 12 EXECUTIVE SUMMARY Lake woods Holdings Board of Directors 13 Section 2 - Executive Summary Section 2 - Executive Summary 14 BUSINESS SNAPSHOT MACRO SNAPSHOT LONG TERM CAPITAL RETURNS FROM AUSTRALIA’S GRAZING LAND VALUES EBITDA of ARE SUPERIOR TO EQUITY MARKET RETURNS (1996-2016) Returns from Australian Returns from Selected Equity Indices $49.7m, up 31.5 per cent. Grazing Land 9.2% (FY16 $37.8m). Profit after tax of 5.7% $37.1m, up 82.9 per cent. (FY16 $20.3m). 1.2% NT & QLD grazing land values S&P/ASX 200 REIT S&P500 Total assets at year-end Source: MLA, Department of Agriculture and Water Resources $880.5m, up 12 per cent. POPULATION GROWTH INCREASES PRESSURE ON ARABLE LAND (FY16 $785.9m). 12 000 000 0.60 • The world’s population is 10 000 000 0.50 projected to reach 9.6 billion by 2050 World class • In contrast, arable land per person 8 000 000 0.40 is expected to fall. This is reflected in increasing land prices in most genetics Strong regions 6 000 000 0.30 • Australia has ample arable program Focused Team Returns land and is well placed to take advantage of the limited supply 4 000 000 0.20 World Population (‘000) Arable land (ha) per person and rising demand • Australia has land that can be 2 000 000 0.10 developed • Basic supply vs demand imbalance means likely higher prices and 0 - returns for investors over the next 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 decade World population Arable Land (ha) per person Source: World Bank, IMF 15 Section 2 - Executive Summary Section 2 - Executive Summary 16 MACRO SNAPSHOT AUSTRALIA HAS A COMPARATIVE ADVANTAGE OF LAND AND WATER TO OTHER TOTAL AUSTRALIAN CATTLE HERD IS DECLINING AS BEEF CONSUMPTION RISES MAJOR CATTLE AND BEEF PRODUCERS 1,120,000 70,000 30,000 2.50 1,100,000 60,000 25,000 2.00 1,080,000 50,000 20,000 1,060,000 1.50 40,000 15,000 tonne 1,040,000 1000 head head 1000 1.00 1000 30,000 10,000 1,020,000 Arable land (ha) per person 20,000 Freshwater per capita (cubic meters) 0.50 1,000,000 5,000 10,000 980,000 - - Australia United States Brazil China India 960,000 0 Arable land (hectares per person) Renewable internal freshwater resources per capita (cubic meters) Total Australian Cattle Herd (1000 head) Beef Consumption (1000 tonne) Australia is the only major cattle producer with ample arable land and renewable freshwater Source: World Bank (2014) Source: USDA Foreign Agricultural Service and UN Food & Agriculture Organisation GLOBAL BEEF CONSUMPTION RISES WITH INCREASE IN GDP TOTAL CONSUMPTION MAINTAINED DESPITE PRICE INCREASE 35 Australian Consumption 1 200 25.00 30 1 000 25 20.00 800 Forecast 20 15.00 600 15 10.00 dollar kg per '000 tonnes tonnes CWT '000 400 10 5.00 Beef Beef Consumption per Capita (KG) 200 5 0 0.00 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0 Consumption Retail Price $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 GDP per Capita (USD) 2016 MLA: “Beef value share has remained steady as retail prices have increased to record highs – while consumers are eating less, the same amount of money is allocated to beef each shop” Source: OECD Statistics and IMF Data Source: ABARES, MLA 17 Section 2 - Executive Summary Section 2 - Executive Summary 18 CHAIRMAN’S REPORT It is a pleasure to share my thoughts regimes. At CPC, we will continue to about CPC’s achievements in FY17. build on the historical values we hold In the coming year, we will navigate to ensure we retain a strong inner the United States of America’s But before doing so, indulge me as directed personality. A personality decision to withdraw from the Trans I approach nearly 10 years on the that welcomes challenges and Pacific Partnership and continue to Board. Reflecting on the challenges innovation. A company that passes push for live cattle exporting into in these times to maintain the on the values to its successors and China. cultures of these type of enterprises enjoys tough challenges and hard that are charged with producing work. CPC is strong because of its team large volumes of safe food that is and I would like to highlight the nutritionally and flavour intense, it A company that plays it long and has efforts of our head office team, who is difficult to think of an activity that more interest in sustainability than have played a critical role in the past is more fundamentally important to quick profits. Principles that not year designing programs that have humanity. only maximise but are critical to the boosted the company’s bottom line prospects of survival in the long run. and allowed the team to make more Historically, there was little doubt informed decisions. of the industry’s ability to protect its In the past financial year, one of social licence to operate. That belief the most rewarding aspects of my It’s also heartening that so many CPC was founded of the highest levels of role as Chairman has been the team members play an active role trust and respect that the community implementation of world leading in peak industry bodies and provide held for the industry – a result of practices at 16 stations that help leadership to the sector on a range of the heroic efforts of its leaders and produce >30 million tonnes of political and social issues, including employees.