Ex-CBH manager says change not needed

09 Mar, 2005 10:00 PM

COOPERATIVE Bulk Handling was more likely to face competition in its core storage and handling services if it was corporatised, a former CBH manager said.

David Williams, who was managing director of CBH's BulkWest subsidiary from 1999-2003, said the tax-exempt status of CBH would make it difficult for any other company to compete.

He said the loss of tax advantages, potential loss of control and potential loss of ownership through corporatisation provided a cast iron argument for CBH to stay as a cooperative.

Mr Williams said that without the cooperative's tax advantages CBH would be open to competition from other companies, including AWB.

"How are you as a corporation going to compete with a competitor that doesn't pay tax and has all the advantages of rates relief and everything else," he said.

Mr Williams said AWB would see CBH as a predator if it did corporatise.

"AWB is a lot bigger than CBH and I don't think AWB would have too much trouble, if it seriously put its mind to it, on doing some serious damage to CBH," he said.

Mr Williams said CBH had the best grain handling and storage assets in Australia ­ possibly the world ­ and did not need to corporatise.

"I also think there needs to be some reality on how far you can go with that, you can really only spend the budget,² he said.

"If you have one of the best asset structures in the world today it should be returning you satisfactory revenue.

"If each site is not returning satisfactory revenue to pay back whatever borrowings that site has to create it then you shouldn't be upgrading it in the first place."

He said if corporatisation was needed to fund mega-receival sites, perhaps it was better to keep the smaller sites.

Mr Williams, who was also CBH general manager of commercial operations during his time with BulkWest, said there would not be much difference between running CBH as a cooperative or corporate company.

"When you have such a vast shareholding in a cooperative as CBH has it is virtually a public company in its own right but instead of referring to owners as shareholders you refer to them as members," he said.

Mr Williams said the obvious difference was that cooperatives did not pay dividends and the share value did not rise.

"Providing members or shareholders are happy with that scenario in return for maintaining unequivocal ownership and control - which I believe the majority is - then you can certainly do everything you want with a cooperative that you can do with a corporate structure," he said.

Mr Williams said more could be gained from the cooperative by using corporate principles in budgetary controls, expenditure and manpower efficiencies.

"Look for a fair day's work for a fair day's pay," he said.

Mr Williams said if a reason to corporatise was to raise money to carry out infrastructure upgrades he could not understand why $72m was spent in South East Asian flour mills.

"I find it amazing that they can spend $72m on an overseas flour mill project and now say they need to corporatise because they have not got money to upgrade their facilities in WA," he said.

"I would assume their borrowing capability would have been greater if they had not made that expenditure."



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