Network investment the focus as CBH reports record 2021-22 surplus
The CBH Group will continue its increased investment in the network building on its record exports for the year, as it today reported its largest ever annual surplus.
The grower-owned co-operative has released its 2022 Annual Report, which outlines the financial and operational performance for the year ending 30 September 2022.
CBH reported a Group surplus (or net profit after tax) of $497.7 million, primarily driven by a record harvest, strong shipping demand and dramatic shifts in market fundamentals as a result of the Ukraine conflict.
CBH Chief Executive Officer Ben Macnamara said it was a year driven by an unprecedented set of events, including the COVID-19 pandemic, global supply chain disruptions, the Ukraine conflict, and domestic labour shortages.
“Over the past year, the CBH team has shown their resilience and achieved new records, resulting in a really strong end of year result,” Mr Macnamara said.
“For the first time in our co-op’s history, the record 2021/22 receivals of 21.3 million tonnes exceeded the logistical capacity of the network, with the size of the crop 50 per cent bigger than the five-year average.
“Unsurprisingly, the record harvest placed pressure on the supply chain, but our people worked together to overcome all the challenges thrown at them to receive, store and outturn the crop, while also delivering the largest network investment program on record, and navigating through significant global market volatility.
“I’m especially pleased to say that the team were able to achieve all this safely, with the team reporting the safest 12-month period on record.
“The record 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.
“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 so we can improve our logistical capacity, particularly with moving grain from upcountry sites to port.
“This strong financial result positions us well to continue the investment in the network over the coming years and execute the vision of our ‘Path to 2033’ Strategy.”
The key driver for the Group surplus was the Marketing and Trading division, which reported a surplus of $437.9 million. The division accumulated 50 per cent of the record WA crop and paid a record $5 billion to WA growers during the year.
“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.”
Marketing and Trading will retain 62 per cent of its surplus to bolster the division’s equity position, which will be necessary to fund the purchase of the current and forecast larger crops, manage market risk and offer higher prices for growers.
The remaining 38 per cent, or $168 million, will be reinvested in the network in line with the CBH Strategy, which was refreshed during the year.
Operations recorded a surplus of $57.9 million driven by record receivals of 21.3 million tonnes combined with strong shipping demand.
“The 2021/22 harvest smashed dozens of records, including outstripping the five-year crop average by 50 per cent, and growers delivering their grain to CBH sites quicker than ever,” Mr Macnamara said.
While the team safely received the record harvest, the size of the crop challenged the outloading program, which was compounded by disruptions from COVID-19 related absenteeism and labour shortages, including truck and train driver availability.
“Despite these challenges, the team came together along with existing and new contractors and growers, to collectively export 16.7 million tonnes and deliver 1.4 million tonnes to domestic customers,” Mr Macnamara said.
CBH’s fertiliser business continued to report excellent growth in a difficult year.
“Despite supply chain disruptions and increased fertiliser prices, the division reported an 11 per cent increase in tonnes sold comparted to last year,” Mr Macnamara said.
“We also started supplying fertiliser from Esperance this year and we are set to start supply from our purpose-built Kwinana facility in early 2023.
“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.”
This year CBH invested a record $348 million to improve the network, including completing three site expansion projects, more than 230 sustaining capital projects, a large maintenance program and preparation for another massive 2022/23 harvest.
“We currently have a once-in-a-lifetime opportunity to strengthen and reinvest in the co-operative – it is that type of forward-looking vision that allowed the co-operative to deliver major projects such as the Kwinana Grain Terminal in the 1970s, which are still delivering value growers today,” Mr Macnamara 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 over 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 Western Australian growers.”
CBH’s grain processing investments delivered strong results for another year with Group delivering a year-end profit, with CBH’s share $8.6 million, and Blue Lake Milling ended the year with an after-tax profit of $3.6 million.
Looking ahead, Mr Macnamara said CBH was focused on delivering on the ‘Path to 2033’ Strategy, which aims to lift the supply chain’s logistical and export capacity.
“Right now, we are working to hit the first target of being able to export two million tonnes each month by 2024, and then progressively lift this to 2.5 million tonnes then three million tonnes per month by 2033, or sooner,” Mr Macnamara said.
“We are making good progress on this, with projects underway including the acquisition of more locomotives and wagons, construction of rapid rail outloading facilities, and working on the re-establishment of the Avon rail transfer facility.
“We remain focused on the core of our business, our storage and handling network, marketing and trading grain, and providing a secure and consistent supply of fertiliser for WA grain growers.
“Our immediate focus is safely receiving the remainder of this year’s harvest, with a large amount of preparation put into receiving a massive crop that is currently looking like it might beat last year’s record.”