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CO-OPERATIVE RENEWAL -THE CBH STORY
TERRY CUNNINGHAM#1267882
CBH Group Linking Growers to Customers
CBH Storage and Handling network
CBH – Our Co-operative Supply Chain
Our Growers~4,500 grower members10mmt annual production95% exportedAustralia’s No.1 co-op - $1.5bn.
Storage & Handling197 sites4 panamax ports20m tonnes of storageEngineering - $85m capexRail fleet of 22 locos and 574 wagons
Marketing & TradingLargest grain exporter in AusWest & East Coast AccumulationAcquire &markets 50% WA Grain7 different Grain Types. Export - 25 Countries primarilyAsia, Middle East, Europe
ShippingLoad 10m tonnes/year
Stevedoring
Processing6 flour mills
Vietnam, Indonesia, Malaysia
1 million tonne demand70% from Australia
Our CustomersFlour millers, maltsters
feed manufacturersfood processors
How did we get here?
50 years of Regulation, 10 years of Deregulation
CBH Tax
Exemption
Corporate Restructure Proposal 1998-2000
“THE BURNING PLATFORM”
• Competition
• Capital raising
• Control and ownership
• Value/equity for members
• National Competition Review
• Deregulation
• Legislative change
THE RHETORIC
• Danger if we don’t change now
• Status quo not an option
• Not change for change’s sake
• We will be in limbo
• Proactive not reactive
• Member will lose plenty if they vote no
• Alliances and mergers only possible with a restructure
• You can have your cake and eat it too
2000 - Co-operative Bulk Handling Ltd
Corporate Restructure Proposal
34% voted(3438)
58.78% for
(2021)
Elig
ible
share
ho
lders
–10,0
70
34.14% against
(1417)
What did we learn: Post 2000 corporate restructure survey
We didn’t listen to our members…
No need for restructure
CBH provides a good service that meets growers’ needs
CBH is owned and run by growers
CBH is a progressive organisation
84%CBH is doing good job/efficient/happy with them
Yes, there is a need for a restructure 31%
59%
82%
90%
71%
22%
76%
85%
91%
71%
Non-voters
85%
“No” voters
* Other key issue….. New Director
CBH – The road to co-operative renewal
1999 2000 2001 2002 2004 2006 2008 2009 20101999 2000 2001 2002 2004 2006 2008 2009 2010
CBH Ltd
Corporatisation
proposal
Corporatisation
vote fails
Proposed alliance
of CBH, AWB and
Grain Pool WA fails
CBH merges with
Grain Pool of
Western Australia
CBH Group acquires
50% of SE Asian
flour mills
Project “Nadia”
– restructure project
stalled by tax issue
CBH international
co-op study tour
New CEO
Project “Dawn”
-structure investigation
New Co-ops Act
Structure…a different approach 10 years on
1. LISTENING 2. ASSESSING 3. SHARING 4. IMPLEMENTING
Project Dawn
Started by listening to our Grower members ...
81% Want storage and handling to remain 100% owned by Growers.
72% Believe CBH should operate under Co-operative principles.
24% Believe CBH should be publicly listed.
90% Believe it is important that Growers can elect Directors.
67% Willing to invest in CBH if provided acceptable return.
71%Prefer value returned through investment in the network than a direct financial return.
TRADITIONAL
CO-OPERATIVE
PROPINVESTMENTCO-OPERATIVE
PUBLIC LISTING
MEMBER-INVESTORCO-OPERATIVE
NEWGENERATIONCO-OPERATIVE
CO-OPS
W/CAPITAL
SEEKING ENTITIES
INVESTOR-SHARE
CO-OPERATIVE
OPTIONS
ASSESSMENT
ME
MB
ER
ST
RA
TE
GIC
FIN
AN
CIA
L,
LE
GA
L,
TA
X
ENHANCED
CBHM
EM
BE
R
ST
RA
TE
GIC
FIN
AN
CIA
L, LE
GA
L�
TA
X
ASSESSMENT
NON-DIST CO-OP
DISTRIBUTING CO-OP
DUAL CO-OP
ASSESSMENT
ME
MB
ER
ST
RA
TE
GIC
$,
LE
GA
L, T
AX
…and continued with a rigorous assessment
From a survival / failure perspective, there is no evidence to support that the co-
operative is a less efficient organisation than the corporate.
““Fabio Chaddad
University of Missouri
Co-operatives are successful when:
• They are run commercially• They are competitive• They seek volume and reward patronage
But can a Co-op Cut it?
Can This Co-op Cut it?
CBH - a Real Competitive Advantage
Grower• Only grower owned S&H and marketing business
in Australia.• Returning margins made from grain to the grower.
Grain Exporter• Most secure grain export pathway in Australia.
Grain Buyer• Origination direct from the farm:
Quality - known quality/traceable.
Security - most direct way to secure supply.
Price - shortest/cost effective supply chain.
4%
35%
62%68%
47%
53%
32%
65%
38%96%
2011 (May)2011 (Feb)2010 (Mar)2009 (Sept)2005 (Sept)
Grower meetings to discuss structural options
Deregulation
New mindset
Increasing commercial focus
Growers seeking more value
“Project Dawn” begins
Grower Vote -EGM
Communication of “Enhanced Co-op”benefits
**EGM
20% vote
Support for Enhanced
Co-op
**Support / Retain / Enhance
Undecided / Oppose / Change
Trends and Key Events
Support for a Co-op – grower views
HOW VALUE IS
CREATED AND
RETURNED PROFITSPROFITSPROFITS
IFHLSHIPPING
PROFITS
SELL
GRAIN
STORE
GRAIN
CBH OPS CBH GRAIN
•RAIL INVEST
•QUAL OPT
•ON-FARM
SERVICES
•CO INVEST
INSTRMNTS
MAINTAIN
LOW FEES
MAINTAIN
WORLD
CLASS
NETWORK
CBH GRAIN
LOYALTY
PAYMENT
EXTEND
LOYALTY
PAYMENTS
GROWER
CBH GROUP
Value in use:Base S&H charges vs Competitors
Scenario: Standard Wheat, delivered on October 1st to a main/primary country storage, exported in July, railed to port and stored for one week prior
to ship loading. Outloading and inloading during normal working hours. Assumes use of cheapest product available. Freight excluded.
(18)
$60
$10
$50
$40
$30
$20
$0
$ p
er
ton
ne s
hip
ped
Distance to port by road (km)
0 100 200 300 400 500 600 700
Value in useLower Freight Rates
Rail Investment
• 17 Narrow Gauge Locomotives
• 5 Standard Gauge Locomotives
• 446 Narrow Gauge Wagons
• 128 Standard Gauge Wagons
Grower Value Statement
§ Initiated in 2011.§Annual statement of value returned by CBH.§Summary of value returned:§ For the industry§ For a grower’s zone § For a grower’s
business
83%81%
77%
67%
61%
71%
83%84% 85% 86%82%
85% 84%
0
20
40
60
80
100
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Grower loyalty increasing again
Consolidation of the Australian Grain Industry
Sixteen into six
?
Glencore
?
CBH focus: Create and ReturnValue to Growers
Our Purpose:Create and ReturnValue to Growers
Questions
Financial and Operational Summary
6.4
8.5
12.3
11.1
6.5
15.1
27.7
40.1
119
-21.4
28.1
2007 2008 2009 2010 2011 2012
Tonnes Handled(million tonnes)
Net Profit (Loss) After Tax($m)
2007 2008 2009 2010
(21.4)
Financial and Operational Summary
Revenue($m)
2007 2008 2009 2010 2011
30.9
90.7
73.9
67.0
128.8
2007
Capital Reinvestment
($m)
2008 2009 2010 2011
581.5
1,102.9
1,541.3
1,304.2
1,951.3
63% (2898) of Members
80%
100%
60%
40%
20%
0%
80%
60%
40%
20%
0%
100%
25%
of Grain
25%
of Grain
19% (874) of Members
25%
of Grain
25%
of Grain
12% (552) of
Members
25%
of Grain
25%
of Grain
6% (276) of Members
Cumulative Grain Volume
Cumulative Member Numbers
Decreasing
size of
Members
6%
18%
37%
Delivered by:
Delivered by:
Delivered by:
Delivered by:
One Grower, One Vote
… this is
why we exist
We are proud to be a grower-owned co-operative
… this is
who we are
We are ‘One CBH’
… this is
how we will act
We have a clear focus … our growers
We are here tocreate & return
value to growers
Challenges for CBHBigger crops, fewer growers
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1931
/32
1935
/36
1939
/40
1943
/44
1947
/48
1951
/52
1955
/56
1959
/60
1963
/64
1967
/68
1971
/72
1975
/76
1979
/80
1983
/84
1987
/88
1991
/92
1995
/96
1999
/200
020
03/0
420
07/0
820
11/1
2
Th
ou
sa
nd
To
nn
es
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Nu
mb
er
of
Sh
are
s
Tonnes Shares held by Growers