SINGAPORE — Interflour, a joint venture between the Australian-based CBH Group and Indonesia’s Salim Group, will reportedly receive nearly $60 million from the joint venture partners to help balance its books.
CBH advised its grower members on Aug. 27 that a $30 million (A$42 million) shareholder loan has been provided to Interflour to “support the flour milling and malting business’ turnaround plan, and balance current debt and equity levels.”
Interflour, of which CBH has a 50% interest, is well progressed on a turnaround plan implemented last year amongst increasingly competitive conditions in the Asian flour milling and malting industries, CBH said.
Established in 2005, Interflour has spent more than $300 million on capital and maintenance expenditures, including approximately $100 million for a malting facility in Vietnam and Mabuhay Interflour Mill in the Philippines, without any equity from CBH and with the majority of this being funded by debt.
Interflour has 10 flour mills operating in Indonesia, Malaysia, Vietnam, the Philippines and Turkey.
Wally Newman, chairman of CBH, said the Interflour management team was acutely aware of the headwinds facing the business and has developed and is robustly progressing a turnaround plan.
“The plan has successfully gained traction and Interflour is on track to improve underlying performance for the year ending Sept. 30, 2019,” Newman said. “Interflour has improved its position by significantly lowering costs, targeting high margin sales and improving the efficiency of its milling operations as part of a wide-ranging turnaround plan.
“While solid progress has been made to date, further work will continue to improve the performance of the recently commissioned malt facility in Vietnam and the new flour mill in the Philippines.
“Interflour’s operations in Southeast Asia continue to have a solid long-term growth story as the region urbanizes, incomes rise and diets change. The turnaround plan and shareholder loan that has been put in place will maximize the opportunity to generate value in the years to come."
Doug Warden, chief financial officer of CBH, said CBH continued to have a strong balance sheet and cash flow, and the provision of the shareholder loan to Interflour would not impact network investment or any other operations within the group.
“Our strong capital management and financial position has provided us with the opportunity to support Interflour with a shareholder loan without compromising investment within CBH, including for our ongoing significant capital investment in the network,” Warden said. “We’re on track to spend more than A$240 million on CBH network capital and maintenance this year, including A$150 million funding 800,000 tonnes of new permanent storage as part of the network strategy.”