Bumper harvest delivers healthy rebate for CBH members

CBH has recorded a healthy 2015-16 pre-rebate surplus of $110.2 million, primarily driven by the above-average harvest of 13.6 million tonnes.

Its marketing and trading division returned to profit, but this was offset by lower earnings from investments.

The pre-rebate surplus reflected a 10.6 per cent increase on the previous year, and enabled Australia’s biggest co-operative to pay a record total rebate of $62.7 million ($60.4 million adjusted for tax) to its 4200 grower members, significantly up from the $16.9 million paid in the previous year.

The higher grower rebates was reflected in net profit after tax being $49.8 million, down from the 2014-15 year of $82.7 million.

CBH chief financial officer Ed Kalajzic said the materially-lower bottom line impact reflected how CBH was now managing the capital base of the business - ensuring as much value was delivered back to growers as possible.

Chief executive Andy Crane said CBH had maintained Australia’s lowest storage and handling fees of $30.50 per tonne and reduced freight fees by an average of 2.5 per cent. The record rebate, amounting to $4.20 per tonne, further reduced storage and handling fees for growers.

Among the individual businesses, CBH operations recorded a strong year following the equal fourth biggest harvest on record. The business delivered a healthy $100.9 million surplus before $55.1 million in rebates, with net profits after tax being $45.8 million.

Investment in the network continued through $132.4 million in capital projects and maintenance, including 800,00 tonnes of additional storage.

There was a return to profit in the marketing and trading division following a loss of $16.7 million in the previous year. Despite challenging conditions, where grain prices were down by 11 per cent on average, net profits after tax for 2015-2016 were $6.39 million, after accounting for a rebate of $7.6 million.

Performance from the investments division was disappointing. CBH’s share of Interflour profits was only $0.3 million, down significantly from $8.4 million in 2014-15.

Mr Kalajzic said the weak performance was because of lower margins and fluctuating currencies across the regions in which it operates. While performance in Vietnam was strong, Indonesia, Malaysia and Turkey experienced tougher trading conditions.

He said the Blue Lake Milling investment made in 2015 of achieved a profit of $2.4 million. Mr Kalajzic said although a satisfactory result, due to challenging drought conditions impacting upon the price of the raw oats in the region, this was below the business case forecast and did not meet expectations,

CBH also disclosed in its annual report that its new fertiliser business sold more than 50,000 tonnes of product to growers and recorded a loss of $1.7 million for the financial year.

The annual report attributed this to significant changes in the fertiliser industry over the past year, including a rapidly declining international market, combined with a very competitive domestic market as new entrants, including CBH Fertiliser, jostled to gain market share.

Dr Crane said an initiative put in place over the year was to drive efficiency through cost savings.

“We have been able to achieve recurrent annual savings of $16 million across the business, and we will look to further reduce costs by $10 million over the coming year,” he said.

Dr Crane said CBH continued its focus on maintaining its prudent capital base at $1.6 billion, with no long term debt.

Highlights

Grain handled 13.6m tonnes (previous year - 13.6mt)

Pre-rebate surplus $110.2m ($99.6m)

Rebates $62.73m ($16.94m)

Profit after rebates $49.78m ($82.73m)

Source: CBH