Madden makes case for District 1

Rod Madden, of Morowa, hopes to retain his seat on the CBH board representing District 1.

Why are you standing for re-election?

I am re-nominating for the position as director of CBH because I firmly believe there is no other organisation in a better position to improve WA grain growers gross margin than CBH. I have the knowledge and experience to drive efficiencies and changes in the business and am passionate about being part of the team to deliver those benefits to growers.

What experience do you bring to the table?

I have gained extensive experience as a company director spanning almost 30 years including chairman of United Farmers’ Cooperative, director of WAMMCO International, United Bulk Carriers and CBH. I was awarded Fellow of the Australian Institute of Company Directors in 1999 and presented with the Sir John Monash Gold Medal Award for Agribusiness Directors in 2002. I have completed many AICD courses and have an excellent understanding of financial and risk management, strategic planning and policy formulation. I am a member of the Investment, Communications and Network and Engineering committees of CBH.

What changes do you hope to make on the board and at CBH?

Over the last three years, the board’s efforts have been focused on our core business of storing, transporting and marketing member’s grain. With the rapid increase in crop size each year, a lot more work is required in order to keep pace with production.

Respect between directors and the decision making process from the current CBH board are very good. It has been a pleasure to be a part of a team focused on productive outcomes and communicating well with members. We have, however, identified a number of issues within the business requiring cultural change. The cost centres of transport, procurement, maintenance and engineering have been targeted for major changes which will drive down costs and improve efficiencies in these areas.

Recurrent efficiency savings worth $16 million have been pruned from the business last year with further recurrent savings being identified and earmarked for implementation over the next three years.

There is now a clear focus on performance measured in dollars per tonne charged to growers. These savings have assisted to provide $3 per tonne operational rebate and $1.20 per tonne marketing rebate to growers from the 2015/16 financial year. A total of $60.4 million has been rebated to growers during the last financial year.

What are your thoughts on Australian Grain Champion’s attempt to corporatise CBH?

The voice of members in the wake of the AGC/GrainCorp takeover attempt has been overwhelmingly in favour of an enhanced co-operative structure. We now need to ascertain from members those enhancements that will result in a more efficient business unit and long term security to our supply chain. While the governance review produced no surprises, it has provided fertile ground for improvements at board level. It is somewhat ironic that the strong balance sheet and success of CBH may also be our Achilles heel.

What is your view on CBH investing outside of WA?

The board has recently established a high level investment criteria and developed policy with clear parameters and hurdle rates for management to work within.

These parameters introduce much needed and tougher disciplines into the use of grower’s funds. While they do not exclude the investment in opportunities outside WA, the risk weighted hurdle rate is high and the requirement for an immediate, net tangible return to CBH members is now much more appropriate for external investments.

The board’s rejection of a proposal to invest $200 million into the Northern NSW region in 2014 was a good outcome.

There are significant deficiencies in our own network which require capital investment and innovative changes that should be given priority over external investment. CBH was formed by WA grain growers, for WA grain growers and until the members of CBH express the contrary view, the board should respect that position.

What is the biggest issues or challenges for CBH in the next five years?

A number of independent reviews have highlighted that a costly cultural issue exists within CBH.

A Network and Engineering Committee, of which I am a member, has been formed to improve efficiencies and reduce costs in the areas of procurement, major and minor maintenance and network expenditure. We believe the savings and improvements in efficiency from this initiative will be measured in tens of millions of dollars over the next few years and will result in a significant reduction in the cost of storage, handling and transportation of the State’s crop.

The increase in production from the Black Sea and South American regions and the encroachment into our markets in South East Asia should be a concern to everyone in the industry.

It is imperative that we maintain our high-quality standards in order to attract a premium from these and other markets.

Should smaller sites be closed to increase efficiency across the network?

Extensive work on the network strategy indicates that it is more cost effective to replace small JUageing facilities with new facilities at larger sites than maintain the existing facilities. There are a number of factors which have been taken into consideration including paddock turn-around time, adequate segregations, speed of deliveries, marshal, sample and weigh facilities and cost efficiency of delivering grain to port. The board has set clear parameters within which management are to implement the network strategy, the key criteria being total costs within the supply chain measured from paddock to port. It is extremely important that savings at the CBH Group-level do not result in costs being pushed back onto growers

A total of $750 million has been set aside over a five-year program to implement the network strategy and while a building schedule has been drafted, the board will give priority to those areas of greatest need. The downturn in the mining industry has provided an idea opportunity for CBH to capitalise on current low construction costs.

Final comments

I am a member of the communications committee and have pushed for a more collaborative form of communicating with members. This new approach has been demonstrated in the structure and governance review and network strategy formulation. It is important for management and the board to remember that they are the servants of the members, not the other way around.