Annual Report 2019

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Annual Report 2019 Annual Report 2019 Co-operative Bulk Handling Limited Annual Report 2019 The CBH Group is an integrated grain storage, handling and marketing co-operative owned and controlled by approximately 3,900 Western Australian grain growing businesses. We are Australia’s largest co-operative 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. Our core purpose is to sustainably create and return value to current and future Western Australian grain growers. Since it was established in Western Australia in 1933, CBH has continuously evolved, innovated and grown. Its storage and handling system receives and exports around 90 per cent of the Western Australian grain harvest to over 30 countries worldwide. Contents Our Strategy and Tactical Plan 2 Chairman’s Report 4 CEO’s Report 6 Operational and Financial Overview 8 Board of Directors 10 Lead Team 12 Operations 14 Network 18 Marketing and Trading 22 Fertiliser 28 Investments 29 Health, Safety and Environment 30 Grower Service 35 Community 36 People 38 Corporate Governance 40 Directors’ Report 50 Auditor’s Independence Declaration 53 Financial Report 55 Five Year Financial and 120 Operational History CBH would like to thank the Grylls family from Corrigin for participating in our photography. Our Strategy and Tactical Plan Strategy At CBH, our Strategy is how we will successfully achieve our purpose of sustainably creating and returning value for current and future Western Australian grain growers. It is set by the CBH Board, with the support of the CBH Chief Executive Officer and Lead Team. BENEFICIARY WA grain growers, current and future PURPOSE To sustainably create and return value to growers Investments Focus on the Core – Grower Value Chain Portfolio WA Grain Storage Handling Marketing BLUE LAKE MILLING Inputs Growers and Logistics and Trading Three oat milling facilities in Australia Provision of low cost Owned by 3,900 WA 150 upcountry receival Number one Australian 120,000 tonnes of installed inputs (e.g. fertiliser) grain grower members sites, above rail assets grain exporter and marketer capacity and four Panamax ports Reduce grower paddock Growers becoming Provide floor in WA INTERFLOUR costs and access to supply increasingly efficient Lowest cost, large scale, grain market 10 flour mills, one malt and farming at scale grower centric operations facility, operating in South to drive efficiencies that Export to more than East Asia match grower businesses 30 countries, focus on developing new markets More than two million tonnes installed capacity Tactical Plan The CBH Tactical Plan is a guiding document which outlines how we will deliver on our Strategy. It focuses on the Core of our business, the Grower Value Chain, and has six pillars, each with its own set of key performance indicators. Financial Outcomes Paddock to Port All Costs (excluding Marketing and Trading Net Assets (P-P) costs Marketing and Trading Net Profit After Tax and Network) (Pre-Rebate) Health, Safety Grower, Customer Portfolio Productivity and Environment and Community and Network Our Values Serious Incident Grower Value Score Vessel Turnaround Time Deliver Network Sustainability Frequency Rate (SIFR) Strategy Simplicity Courage All Injury Frequency Site Turnaround Tonnes per Hour Maintenance Spend Rate (AIFR) Time on Network Commitment Collaboration Field Leadership Marketing and Trading Transformation Capital Spend Compliance Customer NPS Efficiency Benefits on Network People and Culture Organisational Health Index Gender Diversity 2 CBH Group Annual Report 2019 What we do and where we operate 2018-19 MARKETING M&T CHARTERING PADDOCK STORAGE LOGISTICS PORT PROCESSING AND TRADING AND SHIPPING million tonnes 3,900 16.4 8.9 moved by rail 13.8 9.0 7.6 1.8 grower member million tonnes million tonnes million tonnes million tonnes million tonnes million tonnes businesses received 5.0 moved by road exported traded shipped processed at Interflour Group and BLM RUSSIA JAPAN HONG KONG PERTH ADELAIDE Head Office Port Office Flour Mill (Interflour) Oat Mill (BLM) Malting Plant (Intermalt) CBH Group Annual Report 2019 3 Chairman’s Report I am pleased to report on Many grain handling records were the CBH 2019 financial year broken including for the entire Kwinana Zone where a total of eight million as we continue our strategy of tonnes was delivered, exceeding the providing you the safest, lowest previous record of 7.5 million tonnes cost and most efficient grain in 2013-14. supply chain possible to keep While many enjoyed the season, you internationally competitive. some growers on the south coast experienced a poor season and were While we are disappointed the not able to benefit from these events. co-operative has reported a Group Our thoughts are with affected growers deficit before rebates of $13.3 million, and communities, especially those who we remain in a strong financial position continue to endure dry conditions. with a robust balance sheet consisting of $1.8 billion in net assets, solid In 2019, CBH made our largest performance from Operations and little ever investment in your network, with long-term debt. $285.3 million invested in network capital Wally Newman and maintenance. This includes more Highlighting our strength is the ability than one million tonnes of new permanent Chairman to provide the lowest supply chain fees storage, throughput enhancement in the country, which we reduced by projects at 37 receival sites and 19 new $4 per tonne ahead of harvest last year. 36 metre or more in length weighbridges. With a near-record harvest of 16.4 million By adding storage to the network and tonnes, your Board’s decision to reduce improving our capabilities in receiving fees benefited growers and marketers by grain, we continue to work to meet the a total of $60.4 million this year, and will changing needs of your farm business, continue to provide growers value up- particularly the increased pace at which front for many years to come as we have you deliver at harvest. committed to holding fees flat in the future. While much progress was made In addition to providing low fees, in storage and handling this year, as a co-operative, surplus funds are our Marketing and Trading team, rebated to growers, not shareholders, as well as our investments, reported via our patronage-based rebate disappointing results. program. In 2019, the total rebate was $16.4 million or $1 per tonne, Along with all other grain trading returned from Operations. businesses in Australia, Marketing and Trading experienced an incredibly When the rebate total is combined with tough trading year because of a range of the supply chain fee reduction, the total external factors including the prolonged value returned from Operations for the drought in eastern Australia, unexpected year was $76.8 million, a significant movements in wheat values and basis, benefit for growers and the Western and the ongoing Chinese anti-dumping Australian grain industry. investigation into Australian barley. The year was also significant because While Western Australian growers of the size and value of the crop. Most benefited from the high values provided growers experienced an exceptional during harvest, the market conditions season, with the second biggest harvest that followed impacted Marketing and on record and coupled with high grain Trading’s ability to make a surplus prices, Western Australian growers on accumulated grain sales. produced the highest value grain crop ever which is something to be very We paid growers more for their grain proud of, providing significant revenue than could subsequently be achieved to the state and having great flow on at sale and as a result Marketing and benefits to our regional communities. Trading reported a loss of $119.3 million 4 CBH Group Annual Report 2019 With a near-record harvest of 16.4 million tonnes, your Board’s decision to reduce fees benefited growers and marketers by a total of $60.4 million this year, and will continue to provide growers value up-front for many years to come as we have committed to holding fees flat in the future. for the year, with growers the Clarke, Craig Doney, Gerard Paganoni, beneficiaries. Over many years, reserves Daniel Sanderson and Jeffrey Stoney. have been built up in Marketing and Trading from growers’ sales to cater In addition, Neville McDonald and Helen for these unexpected events and the Woodhams were appointed GAC Chair division is well placed going forward. and Deputy Chair respectively, replacing Michelle Barrett and Royce Taylor who In our investments, Interflour stepped down from the GAC following is making good progress with its many years of service. business turnaround plan. Underlying operational performance has improved, We would like to thank both Michelle and Royce, as well as the five other outgoing with earnings before interest tax, Councillors, Bill Bailey, David Cox, depreciation and amortisation Andrew Nixon, Frank Panizza, and Barry increasing from US$21.5 million last West, for their work and support of the year to US$41.0 million this year. co-operative during their GAC tenures. Despite the improvement, Interflour We would also like to recognise Member ended the year with a loss, with CBH’s Director Rod Madden who will retire from share $15.2 million, mostly due to one- the Board after the 2020 Annual General off costs relating to its milling business Meeting following the conclusion of his in Turkey. term. Rod has served nearly 12 years During the year, CBH and our on the Board and has been a strong joint venture partner Origold each advocate of Western Australian growers, provided a $44.3 million (US$30 million) always driving to advance their interests. shareholder loan to Interflour to support We sincerely thank Rod for his the turnaround plan, and balance current contribution to CBH and we wish him debt and equity levels.
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