CASH BOOM: CBH Group delivers biggest annual surplus in history, notching up $497 million after record harvest

The most volatile grain market in 50 years and a record harvest have helped WA-based co-operative CBH Group deliver its biggest annual surplus and ship a record 16.7 million tonnes of grain to international customers. CBH chief executive Ben Macnamara said the key driver of the of $497.7 million surplus to the year ending September 30 was the co-operative’s marketing and trading division — which reported a surplus of $437.9m on the back of the Russia Ukraine war. The division accumulated 50 per cent of WA’s bumper 24.3Mt crop last year, and paid $5 billion to WA growers to buy it. “The marketing and trading division experienced a significant increase in export margins due to the Ukraine conflict, which started after the division had largely completed its accumulation program,” Mr Macnamara said. “Market fundamentals shifted dramatically after the start of the conflict and this significantly increased the international value of grain far beyond anyone’s expectations.” Comparatively, CBH’s operations division recorded a $57.9m surplus thanks to record receivals and strong shipping demand. CBH’s marketing and trading division will retain 62 per cent of its surplus to “bolster its equity position”, which Mr Macnamara said would be needed to fund the purchase of the second-biggest WA crop being harvested right now, and forecast larger crops. It will also be used to manage market risk and to offer higher prices for growers. The remaining 38 per cent of the marketing and trading surplus, or $168m, will be reinvested into the network, as will the operations surplus. Mr Macnamara said an “unprecedented” chain of events boosted demand for grain at the same time the world faced considerable challenges, including the COVID-19 pandemic, supply chain disruptions, the Ukraine conflict and domestic labour shortages. “During the past year, the CBH team has shown resilience and achieved records, resulting in a strong end of year result,” he said. “For the first time in our co-op’s history, the record 2021-22 receivals of 21.3Mt exceeded the logistical capacity of the network, with the size of the crop 50 per cent bigger than the five-year average.” CBH Group — which is Australia’s biggest grain handler and marketer — received a huge 21.3Mt of grain in 2020-21, which was the majority of the record 24.3Mt grain harvest. Mr Macnamara said the bumper surplus would allow the company to continue investing in its network, with the cooperative in the throes of spending at least $250m per year for at least the next five years. It forked out a record $348m last financial year on three site expansion projects, 230 sustaining capital projects, and a “large” maintenance capital projects. Mr Macnamara said CBH had a “once-in-a-lifetime chance to strengthen and reinvest in the co-operative”. “It is that type of forward-looking vision that allowed CBH to deliver major projects such as the Kwinana Grain Terminal in the 1970s, which are still delivering value to growers today,” he said. “Strengthening the network is a long-term investment, an opportunity to set us up for success in the coming years as the crop size continues to grow. “While we have invested significantly in the network during the past five years, we are committed to investing a further $4 billion over the next decade, which is crucial to increase the capacity of the network and deliver sustainable, long-term value for WA growers.” Mr Macnamara said the bumper harvest placed pressure on the supply chain, but said he was proud of how CBH staff overcame challenges to receive, store and outturn the crop and to deliver the biggest network investment program on record. CBH exported 16.7Mt of grain to international customers in 2021-22, and delivered 1.4Mt to domestic customers.. “The 18.1 million tonnes that the team delivered to our international and domestic customers is testament to the resilience of the network and should put to bed any commentary that the supply chain is broken,” Mr Macnamara said. “While we were able to mitigate some of the significant pressure throughout the year, it highlights the need to continue our increased investment in the network over the coming years and execute the vision of our ‘Path to 2033 strategy’.” The co-operative released the Path to 2033 plan earlier this year, with hopes to boost its existing 1.6Mt per month tonnes to port capacity to 2Mt per month by 2024, 2.5Mt per month by 2028 and 3Mt per month by 2033. Despite the challenges, CBH reported its safest 12-month period on record with an all-injury frequency rate well below its target. CBH’s other investments performed strongly in 2021-22, with Interflour Group delivering a year-end profit, $8.6m of which went to CBH, and Blue Lake Milling recorded an after-tax profit of $3.6m. The co-operative’s rapidly growing fertiliser business experienced an 11 per cent increase in tonnes sold year-on-year. “Despite supply chain disruptions and increased fertiliser prices, the division reported an 11 per cent increase in tonnes sold,” Mr Macnamara said. “We also started supplying fertiliser from Esperance and we are set to start supply from our purpose-built Kwinana facility early next year. “This expansion opens the door for more WA growers to directly benefit from access to secure supply and competitive pricing as we continue to grow our fertiliser business.”