AWB will be under pressure to maintain Landmark in the event that the single desk is taken away from its management as a consequence of the Federal Government¹s response to the oil-for-food saga.
The single desk provides the company with a regular and reliable revenue source that helps underpin and instil confidence in its long-term investments and financial planning schemes.
But costs associated with the Cole inquiry threaten to shatter the company¹s financial security and loosen its grip on Landmark.
AWB has announced a disastrous 68.4pc slump in profits, and has already spent $23.7m on its defence at the inquiry and $10.2m on redundancies, with more payments set to follow.
The decline in annual net profit was mainly attributed to adverse seasonal conditions, a lower contribution from domestic grain trading, and costs associated with the inquiry.
Landmark, purchased by AWB in 2003, supplies agribusiness products and services from more than 400 outlets throughout Australia.
About half of these outlets are company-owned, with the balance owned and operated by franchises, agents and affiliate members.
Pastoralists and Graziers Association (PGA) Western Graingrowers Association chairman Leon Bradley said AWB would struggle to maintain a grip on Landmark if it was forced to pay out against the legal claims facing the company.
³I would suggest that AWB¹s ability to pay the contingencies facing it over the Cole inquiry will depend on the strength of their balance sheet,² Mr Bradley said.
³I am not a financial expert but in my opinion the company is a train wreck that will need to be broken up and sold off just to pay at least a third of the fines, legal costs and class actions facing it.
³But even then it would be difficult to say what another buyer would pay for Landmark in the event that one is found.
³My biggest concern is that the company has no cash to pay these debts with and that the money will be forced to come out of the national pools, leaving growers to be unsecured creditors.²
Mr Bradley said that in the worst-case scenario, AWB would be forced to sell Landmark because it was the company¹s most obvious and lucrative asset.
³What AWB gets for Landmark all depends on what it is now worth, which some people say is now more than what they paid for it originally,² Mr Bradley said.
³If they had to borrow money to pay off these fines and penalties the interest payments would eat up shareholder dividends and would probably lead to another crash in the share price.²
AWB managing director Gordon Davis said AWB would not give up Landmark without a fight.
Mr Davis denied that his company had engaged an investment bank to see if any buyers existed for all or part of the business.
³At this stage the basic business platform we¹re operating, being the Landmark business, being the grains business in Australia, our growing international trading business, financial services business, together they constitute a very strong agribusiness platform,² he said.
Mr Davis confirmed that another financial threat, the break fee, would be invoked in the event that AWB was stripped of the single desk, but was not as high as the $400m estimated.
³In the current services agreement there is a clause which recognises that AWB Limited has got some obligations which extend beyond the life of any individual pool,² he said.
³These are fairly straightforward things like forward freight agreements for rail transport.
³Clearly there¹s potential redundancy costs if we weren¹t to be managing the pool and there¹s a small element of IT charges, but they¹re not big numbers. It¹s in the low tens of millions at this point in time.²