Annual Report 2016 Consolidated Pastoral Company Pty Ltd CONTENTS PAGE
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Annual Report 2016 Consolidated Pastoral Company Pty Ltd CONTENTS PAGE 1 Section 1 — About CPC 1 Business Overview 3 Our Business 5 Our Locations 8 Our Achievements 9 CPC Values 10 Our Strategy 12 Section 2 — Executive Summary 13 Chairman’s Statement 15 CEO Report 17 Board of Directors 19 Section 3 — Corporate and Social Responsibility 21 Our People - One Team 23 Health and Safety 26 Our Environment 27 Corporate and Social Responsibility 29 Section 4 — CPC Operations 31 Indonesian Markets Overview 33 Operations Feature - Rotational Grazing 36 CPC Animal Welfare Duty of Care Statement 37 Section 5 — Financial Statements 39 Corporate Governance Statement 43 Directors’ Report (March 2016) 45 Lead Auditors’ Declaration (March 2016) 46 Financial Statements (12 Months to March 2016) 50 Notes to the Financial Statements (12 months to March 2016) 76 Directors’ Declaration (March 2016) 77 Independent Audit Report (March 2016) 79 Contact Information “Wineglass Brand, Symbol of Quality” HEALTH & SAFETY | LEADERSHIP | TRUST | COMMUNITY | VALUE CREATION CPC is an Australian managed company that is majority owned by an investment fund managed by Terra Firma, which is a leading European private equity firm. 1 Section 1 – About CPC Section 1 – About CPC 2 BUSINESS OVERVIEW “Our Team is Proud to Connect the Best Australian Beef to the World” 3 Section 1 – About CPC Section 1 – About CPC 4 OUR BUSINESS 3 Australia’s largest privately owned beef and cattle producer 3 Revenue is up 86% for FY 2016 3 Profit after tax of $20.3 million for FY 2016 3 Workplace health and safety incidents down 33% from FY 2015 3 Increased investment in international joint venture JJAA from 50% to 80% 3 Respected and historic brand 5 Section 1 – About CPC Section 1 – About CPC 6 OUR LOCATIONS Manbulloo Station • Breeding station • 379,131 hectares • 18,000 head capacity • Annual rainfall 974mm Wrotham Park Station Darwin • Breeding Station • 596,430 hectares • 38,500 head capacity • Annual rainfall 1,118 mm Carlton Manbulloo Hill Auvergne Argyle Downs Newry Dungowan Wrotham Park Kirkimbie Ucharonidge Indonesian Feedlots Bunda Newcastle Waters • Feedlots located in Medan and QLD Lampung Mimong • Combined head capacity of 35,500 at one time Cooinda • Employ over 150 local staff • 2016 winner of Nutrition Service Associates Feedlot Isis Downs Allawah Brahman Stud • CPC head genetics and breeding stud Competition Allawah NT Mt Marlow • 3,069 hectares • 1,300 head capacity WA Gowan Comely • Annual rainfall 625mm Nockatunga Brisbane SA NSW Perth Bunda/Kirkimbie Station • Breeding and growing station • 408,400 hectares Sydney “5.6m hectares of • 30,000 head capacity Adelaide land across Australia” • Annual rainfall 656mm VIC Melbourne TAS Hobart 7 Section 1 – About CPC Section 1 – About CPC 8 OUR ACHIEVEMENTS 3 Further investment in Indonesian Joint Venutre (JJAA), taking ownership from 50% to 80% and moving the company closer to its end customers 3 Significant improvements in company productivity reflecting investments in station assets including water and fencing infrastructure 3 Expanded world class genetics program, with a strong focus on increasing profitability right through the value chain 3 Revenue up 86% in FY 2016 to $164.8 million 9 Section 1 – About CPC Section 1 – About CPC 10 CPC VALUES OUR STRATEGY Health & Safety CPC is committed to becoming a globally significant At CPC, the welfare of our people, customers, animals and land is paramount. agribusiness with a strong presence in all major beef markets. Leadership At CPC, we show leadership at every level because we are all proud to take ownership and responsibility for what we do. Vertically Integrated Trust At CPC, we have the utmost confidence in the goodwill and reliability of our Operation colleagues, customers and industry partners. We are honest and transparent in our exchange with others. Global Cattle and Beef #1 Australian Producer and Supplier of Live Community Cattle At CPC, we value family, diversity and recognition. Marketer Value Creation At CPC, we are always on the look out for innovative ways to enhance the productivity of our land, the quality of our cattle, the talents of our people and the experience of our customers. Operational Creating Value and Portfolio Through Genetic Optimisation Change Secure Land Tenure with Geographic Diversity 11 Section 2 – Executive Summary Section 2 – Executive Summary 12 EXECUTIVE SUMMARY 3 Continued improvements in work place health and safety, with a 57% decrease in number of time lost injuries in FY 2016 3 Profit after tax of $20.3 million (FY 2015: $0.1 million) 3 Cash generation of $21.8 million (FY 2015: ($4.0) million) 3 Total assets at year end of $785.9 million (FY 2015 : $734.7 million) 13 Section 2 – Executive Summary Section 2 – Executive Summary 14 CHAIRMAN’S STATEMENT The CEO’s Report highlights As the owner (through various performance excellence awards, the significant operational forms of tenure) of over 5.5 million respectively, and one of our most improvements that have continued hectares of land it is timely to northern stations, Manbulloo, to be implemented. I thank our remind of the opportunities has been implementing southern team for their efforts in this that exist to further develop this Australian grazing techniques to regard for without dedicated land and improve productivity – boost and manage sustainable execution all plans fail. One of particularly against the backdrop pasture use. the most rewarding aspects of of a world population predicted my role as Chairman is to have to reach 9.6 billion by 2050 and This year we welcomed Margaux the opportunity to forge strong a falling area of arable land per Beauchamp to our Board as an friendships with those who are person. CPC believes that the next independent non – executive charged with the delivery of few years will not only see director. Margaux is Executive these improved processes in a continual improvement of Director Corporate Finance at remote and sometimes dangerous improved market access but BDO and has a broad background environments. Led by our CEO, significant breakthroughs in terms of advice in the agrifood this band of talented people of productivity and alternate land transaction and corporate M&A require ranges of skill and levels of use. CPC understands the criticality sectors. She also has significant resilience and commitment rarely of implementing these practices in operational experience in the required in any other industry ways that are fully environmentally beef industry having grown up sector. Too long not heard against sustainable – not only because that on stations in Queensland and the noise of the mining sector it is is consistent with its values but maintaining involvement in her Mark Bahen, CPC Brisbane Office gratifying to see the new level of because increasingly a clean, safe, family properties in Western It is a pleasure to pen this The confidence of the Board’s long (the US herd at a 60 year low and recognition of their contribution to animal welfare focussed production Queensland. Margaux makes statement in the context of CPC’s held belief in the strong future for Australia and Canada currently the national interest. system will become more of a point a major contribution to the achievements in FY 2016. the industry driven primarily by the at 20 year lows) it is not difficult of difference for consumers. execution of CPC’s strategic supply vs demand imbalance, was to justify long term decisions Particularly I pay tribute to those plan with the support of the two Whilst the outcomes were greatly bolstered by the prediction that by for substantial further capital of our team who contribute to the By way of example of our support directors nominated by our major assisted by the rising tide of the 2024 beef consumption in the investment in the improvement of work of our peak industry bodies for environmental projects across shareholder Terra Firma - Ruhul macro industry factors, it was developing countries is set to rise CPC’s assets – something that has and to the debate on political and our stations this year CPC sold Amin and Andrew Miller. gratifying to observe how well to a level equal to half of current been strongly pursued over the social issues. Their contribution 700,000 tonnes of carbon by way of positioned CPC was, through well global imports. When this factor previous years. illustrates the importance of having the federal government’s savannah With more grass around, well planned management decisions is bookended by all-time low herd participants like CPC in the sector burning project. Our two feedlots in positioned properties, a strong and goodLARGEST execution, GROWTH to take IN EXPECTED full BEEFnumbers DEMAND held COMING by someFROM ASIANof the AND MIDDLE EASTERN NATIONS WITH AUSTRALIA UNIQUELY POSITIONED TO BE A KEY SUPPLIER TO THESE REGIONS with the scale and integration of Indonesia at Medan and Lampung outlook on cattle price and advantage of the opportunities on largest beef and cattle exporters activities required to promote and received environmental and market access, an enhanced offer. facilitate that contribution. investment in our Indonesian feedlotting operations and a strong WORLD POPULATION GROWTH VS ARABLE LAND PER PERSON management team and Board we - 1.15MT are confident of our ability to not With no population only deliver strong results in FY17 0.44MT growth, a but in the knowledge that CPC 1kg/capita increase in is well positioned to continue to - 2.25MT demand from Asia, build its scale and prominence 1.64MT