WEST PERTH, AUSTRALIA — Despite strong operational performance, global grain market forces impacted the CBH Group’s 2019 financial results leading it to a deficit before rebates of A$13.3 million and a net loss after tax of A$29.7 million.
For the 12 months to the end of September 2019, CBH received and managed its second largest harvest on record at 16.4 million tonnes, with group revenue rising by 10% to A$4.2 billion. CBH said the increase was driven by high grain values in the first half of the year.
The increase in group revenue was offset by the A$4 per tonne supply chain fee reduction provided to growers and marketers for the 2018-19 harvest, totaling A$60.4 million, the Marketing and Trading loss, several impairments in investments and one-off costs.
Jimmy Wilson, CBH chief executive officer (CEO), said the group experienced a strong start to the financial year, with large harvest volumes coupled with higher grain prices driving robust underlying performance.
“Most Western Australian growers experienced an exceptional harvest, with the second largest crop on record, also the highest value grain crop ever produced,” Wilson said. “Our underlying performance was strong, particularly from the Operations division, which performed well to safely and efficiently receive the large crop and move it through the supply chain to our four ports for export customers.”
At the end of September 2019, Operations recorded a division surplus before rebates of A$115.9 million, up from A$91 million, which, according to CBH, was driven higher by increased harvest volumes.
“This was a particularly good outcome, given the A$4 per tonne or A$60.4 million fee reduction passed on to marketers and growers,” Wilson said. “In line with our purpose of sustainably returning value to growers, we made a record annual investment in the network, accelerating the pace of new storage builds that will drive throughput capacity and efficiency, enable competitive supply chain fees and meet export demand at the right time to capture value for our growers’ grain.”
A total of A$285.3 million was invested in network capital, maintenance and sustaining projects during the year, including to expand storage capacity, enhance inloading efficiency such as installing weighbridges, and maintain existing infrastructure.
Wilson said headwinds experienced by some areas of the business, particularly grain trading, and in the markets that some of CBH’s investments operate in, negatively impacted the group’s overall financial performance.
“Along with other Australian grain traders, our Marketing and Trading division experienced a set of global and political circumstances during the year that significantly impacted its bottom line, resulting in A$119.3 million loss,” Wilson said.
For the 2019 financial year, CBH recorded a group deficit before rebates of A$13.3 million. The result includes one-off impairments and provisions totaling A$35.1 million including:
- A$13.7 million impairment of Interflour’s milling business in Turkey. Interflour is currently undergoing a review of the Turkey business to de-risk its exposure in the market.
- A$8.5 million impairment of the Newcastle Agri Terminal, which has been impacted by the ongoing drought in eastern Australia.
- A$300,000 impairment in Marketing and Trading’s investment in CI Trading, Vietnam, which CBH has exited.
- A$12.6 million site rehabilitation provision, which relates to future estimated costs relating to site retirements.
After returning A$16.4 million to growers through the Grower Patronage Rebate Program, CBH reported a group net loss after tax of A$29.7 million.
“While the loss is disappointing, it should not overshadow the strong financial position of the co-operative, which has a robust balance sheet that has been strengthened over many years with A$1.8 billion in net assets and little long-term debt,” Wilson said. “Without the one-off impairments and site retirements provision, our underlying performance for the year would have been a group surplus before rebates of A$21.8 million.
“Despite a challenging year, this reiterates the strength of the co-operative’s financial position and capacity of the business to return value to growers, including reducing supply chain fees, while managing unexpected market impacts.”
CBH said it remains well positioned to continue with its investment in the network and deliver storage expansion and throughput enhancement projects for the coming year.
“We remain focused on a disciplined approach on delivering an optimal supply chain with efficient inloading and outloading capabilities to help keep our growers internationally competitive,” Wilson said. “While it has been a tough trading environment, Marketing and Trading will continue to maintain and strengthen customer relationships and explore new export opportunities in the year ahead to help counter some of the challenges that emerged in the past year.”