CBH GROUP ANNUAL REPORT 2016 As Part of As a Beneficiary Your Community
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CREATING AND RETURNING VALUE TO GROWERS ANNUAL REPORT 2016 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 Australia’s largest co-operative and a leader in the Australian grain industry, with operations extending along the grain supply chain from storage, handling and transport to marketing, shipping and processing. Owned and controlled by around 4,100 grain grower member businesses, the CONTENTS core purpose of the CBH Group is to create and return value to growers. Since being established in Western Australia more than 80 years ago, CBH YOUR NETWORK 14 has constantly evolved, innovated and grown. The Group currently employs YOUR MARKETER 18 approximately 1,100 permanent employees, supported by up to 2,000 casual employees during harvest months. YOUR INVESTMENTS 22 These employees are located across the state at one of our nine regional offices, YOUR SUPPORT 195 receival site locations, four ports, our 26 engineering workshops or at our head office in West Perth. YOUR PEOPLE 28 Our marketing division in Western Australia, aided by additional offices in YOUR COMMUNITY 32 South Australia, Hong Kong, Japan, Vietnam and Russia, is responsible for exporting a range of grains to more than YOUR ENVIRONMENT 38 20 markets across the world. Creating & Returning Value to Growers CBH creates and returns value to growers through the following means: As a User As a Member As a user of CBH’s services, our Our members: growers receive a number of benefits including: ∙ Own and control the supply chain and its critical links. ∙ Low fees. ∙ Have a say on who governs CBH. ∙ Patronage rebates. ∙ Vote on key issues. ∙ Grower focused products, such as Quality Optimisation, Pre-Pay Advantage and Oil Bonification. ∙ Access to an efficient storage and handling system that operates for the benefit of WA grain growers. ∙ Grower driven segregations on site. ∙ Reduction of standing crop risk. ∙ An honest broker on price in grain markets. 2 CBH GROUP ANNUAL REPORT 2016 As Part of As a Beneficiary Your Community As beneficiaries of CBH, we help our As part of your community, CBH: members to build wealth for the long-term by: ∙ Advocates for WA grain growers with government and markets. ∙ Increasing the profitability of their ∙ Supports the development of the farm business. grain industry. ∙ Contributing to increasing the value of ∙ Contributes to the vitality of rural their farms. communities. CBH GROUP ANNUAL REPORT 2016 3 YOUR CHAIRMAN'S REPORT In 2016, WA growers delivered an above average harvest, for the third year in a row. Your Board re-confirmed its commitment to maximising value to growers through greater efficiencies in the network via the introduction of the five year Network Strategy. In addition, the Board commenced a comprehensive review of CBH’s structure and governance to determine grower preferences.” WALLY NEWMAN CHAIRMAN 4 CBH GROUP ANNUAL REPORT 2016 The past year saw growers deliver 13.6 million tonnes into the to provide input to the Board on the structure and governance of CBH network. This followed on from 13.6 million tonnes the CBH. What this review clearly indicated is that our growers want previous season and the record harvest of 15.9 million tonnes in a co-operative, with most growers supporting a non-distributing 2013-14. co-operative. This doesn't mean we are going to rest on our laurels, however. Over the coming year, we will explore a number There’s no doubt that 2016 was an interesting year for CBH. In of ways to enhance our existing non-distributing co-operative February 2016, the Board received a proposal from Australian structure, particularly in regards to how we return value to Grains Champion Pty Ltd (AGC) to take control of all of the issued WA growers. share capital of the co-operative. After considerable consultation with external experts on our options and careful consideration, the On governance, there was no single issue that stood out for Board rejected the proposal on the basis that it did not represent reform but the Board will look at a number of governance elements value for Western Australian grain growers and this decision was and potential changes for the future, including encouraging supported by 78 percent of our members who were surveyed greater diversity on the Board and minimum skill and experience in April 2016. The proposal was subsequently withdrawn in requirements for Member Directors. September 2016. It is imperative that any structure or governance changes to The proposal highlighted what we’ve been well aware of and CBH truly represent our grower members’ needs for a profitable working on for a number of years now – that as CBH grows and and sustainable future for their business, community, children external forces change, we need to continually adapt so we can and future generations and your Board will explore a number of do it smarter and be best placed to face challenges and capture initiatives on the structural enhancement and governance fronts future opportunities. during the first part of 2017, with the goal of implementing any changes before the 2017-18 harvest. Structure and Governance Review Network Strategy In 2016, we commenced a comprehensive review into the structure and governance of the co-operative. Throughout the last year, one thing has remained very clear and that is your Board’s commitment to delivering on CBH’s purpose Throughout the review, we spoke with around 1,700 growers at of creating and returning value to growers. meetings held across the state and conducted the largest survey ever undertaken by the co-operative, consulting more than The key way in which we do this is through our storage and 2,600 of our grower members (or around 63 percent) about the handling network. Over the past 12 months, we’ve commenced a structure and governance options for CBH going forward and Network Strategy that will see investment of $750 million over the their preferences. next five years, focused on the 100 sites that currently receive 90 percent of the annual average crop. The review explored the various options, benefits and trade-offs in relation to potential changes to the structure and governance Our network is the core of your co-operative and the best way of the co-operative. in which we can create and return value. The Network Strategy is aimed at ensuring we continue to deliver a cost effective and As the owners and sole beneficiaries of the CBH business, this efficient storage and handling service to growers and marketers review provided our grower members with a critical opportunity for generations to come. Undertook a Committed $750 million Announced a new oat comprehensive review to the storage and processing facility for of our structure and handling network over Western Australia governance the next five years CBH GROUP ANNUAL REPORT 2016 5 Growth and expansion Growers Advisory Council Another way we aim to create and return value to our growers is In 2016, four new members were elected to the Growers Advisory through growing the business through value adding initiatives, Council (GAC). The new members include Frank Panizza from mainly in grain processing. Toodyay, Andrew Nixon from Moora, Natalie Browning from Kondinin and Bill Bailey from Jerramungup. Michelle Barrett from The best example of this is our Interflour investment, which has Munglinup and Michael O’Callaghan from Marchagee were delivered benefits to the co-operative and our grower members in both successful in re-nominating and will remain on the GAC the past 12 years. Over the past year, Interflour has undertaken a for another term. number of projects including construction of a new malting plant in Vietnam and a new flour mill in the Philippines. I thank and recognise the significant contribution of our outgoing Councillors Brendan Williamson from Bruce Rock, Darrin Lee from In June 2016, your co-operative announced a new oat processing Mingenew and Ashley Wiese from Narrogin. facility for Western Australia which builds on our acquisition of Blue Lake Milling Pty Ltd (BLM), one of Australia’s largest suppliers All retiring Councillors are eligible to become members of the of processed oats. Once complete, the new facility will make GAC Alumni, which is growing in numbers and providing valuable BLM the largest independent oat processor in the Australasian information back to your Board and management. region and enable us to better service the increased demand for Australian oats from the Asian market. Your CBH, Your Future Through such growth initiatives, CBH aims to remain globally competitive by capturing additional value for our growers. CBH has grown and evolved over the past 83 years to meet the changing needs of our grower members. We have built a strong and efficient supply chain from paddock to processor that delivers Investment in our communities value to our growers, keeping them internationally competitive. We remain committed to making a difference in our grower Over the coming year, we will continue to consult and work with communities and, in 2016, we delivered more than $1.8 million growers to ensure that we have the right governance and structure back to our communities. This included a donation of $250,000 to enhancements in place to allow us to continue as a sustainable, the Lord Mayor’s Distress Relief Fund – Esperance Fires Appeal efficient, cost-effective and valuable business for our growers both to support those in the Esperance community, following the now and for generations to come. devastating fires in the region at the end of 2015. As a Board, we remain committed to delivering on our purpose to As the largest employer in regional Western Australia, we create and return value to growers.