Cooperative Bulk Handling’s investment in South-East Asian joint venture Interflour is shaping as a healthy move for the group, as the flour miller prepares to post a considerable turnaround in profit early next year.
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Cooperative Bulk Handling’s investment in South-East Asian joint venture Interflour is shaping as a healthy move for the group, as the flour miller prepares to post a considerable turnaround in profit early next year.
But further supply chain integration hinges firmly on a bulk wheat export licence, under consideration by the federal government’s Wheat Export Authority.
Interflour was named runner-up in the 2005 AustCham-Austrade Business Awards announced recently in Singapore, and chief executive Greg Harvey said there had been positive changes in the business over the past 12 months.
“There have been numerous changes to the business, including a noteworthy turnaround in profitability, which we expect to be able to announce in the first quarter of 2006,” he said.
CBH chief executive and Interflour chairman, Imre Mencshelyi, said after recording a loss last year, the profit result would be achieved through streamlining the management structure across the group’s operations.
Interflour’s Berdikari flour mill in Indonesia is considered the world’s fourth largest milling plant. The company also owns a state-of-the-art plant in Vietnam, and grain terminal.
CBH Group took a direct interest in Interflour with a $72 million investment just over a year ago with The Salim Group, its Indonesian joint venture partner in Pacific Agrifoods.
Interpacific Holding, a major Asia-Pacific pharmaceutical distributor, sold 66 per cent of Interflour to Pacific Agrifoods, retaining a one-third stake, which was subsequently sold to the joint venture in May this year as well, giving CBH 50 per cent of Interflour.
Last week, CBH announced it was applying to the WEA for a licence to export WA wheat from its growers to its Interflour mills, independent of the Australian Wheat Board monopoly exports.
If successful, WA growers in the Interflour Premium Pool will gain an extra $10 a tonne for their wheat. The initial licence application is for 100,000 tonnes of wheat exports.
The extra $10/t represents a $5/t cost to CBH Group as part of its investment in Interflour.
However, Mr Mencshelyi said this was made up in the supply chain, delivering a net gain to CBH in the end.
The co-op will know later this month if it has been successful in the WEA application.
Mr Mencshelyi said the licence request was different from anything submitted to the WEA before, since CBH owns a half-interest in the destination mills.
“The Interflour Premium Pool and application for bulk export consent is not about dismantling or undermining Australia’s single desk for wheat,” he said. “Rather, it is about allowing Western Australian growers to leverage their end to end supply chain, from the storage and handling of their grain all the way through to the processing of that grain into flour.”
AWB is currently asking Asian flour mills the same $10/t extra for its wheat that CBH is seeking.
“The CBH Group and Interflour continue to encounter difficulties in sourcing the appropriate grade and quality of Australian wheat via current wheat marketing arrangements,” Mr Mencshelyi said.
“This opportunity will see the CBH Group displace wheat sourced by Interflour from non-Australian origins with Western Australian wheat.”