Drought to hit profit – CBH

West Perth-based grain storage and marketer, Co-operative Bulk Handling Group, has warned that its strong $87.3 million net profit in 2005-06, a rise of a more than 40 per cent, won’t be repeated this year due to this season’s drought.

At its annual general meeting last week, CBH chief executive Imre Mencshelyi said a surplus of $4 million was expected for the group for year ending October 31 2007, with a $17 million loss forecast for the storage and handling division.

Drought conditions in Western Australia during the 2006-07 season reduced the harvest to 6.4 million tonnes, about half that of the previous year.

The strong 2005-06 result was on the back of a 12.5MT harvest, the second largest harvest on record.

The group’s $100 million Asian flour mills investments, including a 50 per cent stake in Vietnam-based Interflour Flour Mills and Eastern Pearl Flour Mill in Indonesia, has started to reap financial benefits for the group, realising an $11.7 million profit before tax. This is up from $4.8 million for the previous reporting period.

The value of the group’s assets rose 10 per cent to almost $1.2 billion.

However, chairman Tony Critch faced a vocal backlash from some shareholders regarding the group’s diversification into grain marketing and its South-East Asian flour mills investments.

The group’s board elections a fortnight ago also highlighted the divisions among grower-shareholders over CBH’s foray into wheat exporting late last year, after it was granted a one-off export licence, with the election of fervent pro-single desk candidates Kevin Fuchsbichler and Trevor Badger.
But Mr Critch defended the direction of the company, saying its investments will create long-term value for the group as the industry approaches a crossroad.

“The board has to make brave decisions, that are not necessarily universally popular,” Mr Critch told shareholders.

“WA has no lucrative domestic market, our domestic market is Asia.”

Mr Critch said the outlook for the group remained positive, with CBH well positioned to cater for impending changes to the wheat marketing system.