GrainCorp chairman sees milling as key step in diversification

by Emily Buckley
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SYDNEY, AUSTRALIA — The investment by GrainCorp Ltd. with Cargill Australia in Allied Mills Australia Pty. Ltd. is "a key plan in the strategy of increasing diversification and enhancing activity along the supply chain," Ron L. Greentree, chairman of GrainCorp, told the company’s annual general meeting.

Greentree told shareholders that the milling business acquired last October from Goodman Fielder Ltd. is "a truly national milling company with solid market share and a range of quality customers."

Allied Mills, Greentree said at the Feb. 28 meeting, represented "a unique opportunity for GrainCorp to enter into the flour milling sector as a major player." He pointed out that Allied Mills holds a market share of more than 35% and processes about 1 million tonnes of grain annually in 13 plants in Australia.

"In addition to a large number of valuable commercial customers such as Kellogg, Nestle, Arnotts, Kraft and others, it can also look forward to a long-term supply agreement with Goodman Fielder for its baking and consumer foods divisions," Greentree said of Allied Mills.

Cargill Australia, Greentree added, "brings a wealth of experience in milling operations. Allied Mills builds on our existing relationship with Cargill Australia in the operation of receival centers at Red Bend and Henty in New South Wales."

GrainCorp holds a 60% stake in Allied Mills; the Cargill Australia interest is 40%.

"The investment in Allied Mills will be earnings per share positive and will strengthen GrainCorp’s performance by helping to even out seasonal variations in future years," Greentree said.

Another major venture in 2002 cited by Greentree was the creation of Bulk Terminals Australia as a joint venture with Grainco Australia for the operation of port facilities in Queensland and New South Wales. In early February, Grainco and GrainCorp announced they were discussing a possible merger.

"A merger would provide an exciting opportunity to achieve operational efficiencies and a smarter use of infrastructure, resulting in increased value to shareholders and clients," Greentree said. "Due diligence will take place over three to four months and once completed, the respective boards will determine if the merger should occur," he said. "We should be in a position to seek formal approval where required from shareholders in the middle of the year."