Interest builds in Ravensdown

25 Jul, 2013 02:00 AM
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A MAJOR private multi-national commodity trading company could be the frontrunner for the takeover of fertiliser company, Ravensdown's WA facilities.

New Zealand based co-operative, Ravensdown announced earlier this month it was in negotiations with "interested parties for the sale of its fertiliser operations in WA as part of a wider strategy review".

So far, it is understood three companies are interested in the purchase of Ravensdown's Kwinana facilities with trading company Louis Dreyfus Commodities appearing to be a favourite.

The other two companies involved are Superfert Dongbu Pty Ltd and another unnamed company, a source says.

Superfert want to meeet with Ravensdown shareholders in Northam, Esperance, Albany and Geraldton this week to discuss the takeover bid.

Superfert advertised its interest last week urging Ravensdown WA shareholders to "take back the WA facilities into a co-operative structure and work with Superfert to obtain supply".

"We expect this will be a far better return to WA shareholders than a sale to a bidder that wants to pay the least amount as possible and the lack of clarity on any return to WA shareholders on shares," the full page advertisement said.

It has not been revealed how much the takeover bid was from either company but a source says Louis Dreyfus's bid was much stronger than Superfert's.

Ravensdown declined to comment on the proceedings and how much interest they have had on the WA facilities to this point.

Superfert Dongbu and Louise Dreyfus Commodities failed to respond to Farm Weekly prior to going to print.

Louis Dreyfus is Australia's oldest continually operating grain trading company.

The company became a major wheat exporter in Australia even before the foundation of the Australian Wheat Board.

The Melbourne-based company also has strong interests in feed mills, land, livestock, meat, wool, cotton and dairy.

In a media statement issued on July 9, Ravensdown chief executive Greg Campbell said the co-operative had had a tough time in WA since starting in 2008.

"We have started the early work with our WA shareholders, staff, agent network and suppliers across the State to ensure that there is continuity as any ownership transition takes place," Mr Campbell said.

The total year-end results are still being audited, but operationally the trading loss in WA was in the order of $7 million on the back of three previous years of smaller losses.

"This is clearly a disappointing result," he said.

"A clear action plan to turn around that business over the last year was implemented, but the business still made a loss.

"Any on-going losses are unsustainable because, as a co-operative, each part of our operation ultimately needs to stand on its own feet and contribute.

"Ravensdown has encountered its fair share of challenges since it entered WA in 2008.

"With the droughts, a global financial crisis and seesawing grain prices, a number of farmers in WA have had a grim time of it.

"With so many players competing for an increasingly scarce rural dollar, it's no surprise that volumes and margins have been constantly under pressure in WA.

"We will be doing all we can to keep communicating with shareholders, staff and agents during what is bound to be an unsettling time for all."

Ravensdown has about 4000 WA-based shareholders and employs about 39 staff and took over the United Farmers Co-operative business in WA.

Former CBH board member Rod Madden intimated in a letter to Farm Weekly this week (see page 10) that Ravensdown could be attractive to grain companies.

In his letter Mr Madden said in 2002, United Farmers Co-operative signed a 21-year lease with the Fremantle Port Authority for a 100,000 tonne storage facility within stone's throw of the Bulk Cargo Jetty (BCJ) and the CBH Kwinana port facility.

Mr Madden said a high speed, covered conveyor transfers fertiliser direct from the discharge auger at the BCJ into segregations within the store.

"There are both road train and rail access to the storage facility and about four hectares of vacant land adjacent ready for further expansion.

"With some modification, the current conveyor could be converted to food grade, reversed and used to load grain onto ships.

"Conversely a separate dedicated conveyor could be built and utilised.

"With ADM, Bunge, Cargill and Glencore already committed to infrastructure elsewhere in Australia, the suitor is probably Dreyfus as, apart from the purchase of a small South Australian fertiliser interest, they are yet to secure their position in Australia with a commitment of substance.

"It will give the purchaser the unique ability to swap fertiliser in the Kwinana zone and beyond for grain contracts, completing a back-to-back marketing loop", Mr Madden said in his letter.

In an interview with Farm Weekly, Mr Madden questioned CBH's ability to be able to deal with upcoming competition in the marketplace.

"The issue that we have got is that they are a big fat monopoly and big fat monopolies don't take easily to competition," Mr Madden said.

"They find it difficult to adjust.

"Now it is no good having flour mills, and malt plants and everything else propping up an inefficient storage and handling system.

"They can say it is the most efficient in the world but when you have 1000 full-time employees who they are basically feeding, once competition comes in and they start losing that full control they will find it extremely difficult to maintain their profit margin.

"Once their profit margin drops you will see infrastructure spending just plummet.

"And why is it that they have to subsidise inefficient systems with flour mills and malt plants?

"To prop up inefficiencies and cross subsidies within the system with overseas investment is a flawed strategy."

In an interview with Farm Weekly earlier this month, newly-instated CBH general manager of operations David Capper said the co-operative would always operate in a changing environment and it was up to the business to change with it.

He said competition from Bunge and Heilingjiang Feng Agricultural (HFA) at Bunbury and Albany had also driven a sharp CBH focus on the competitiveness of WA grain and its place in the international supply chain.

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READER COMMENTS

boris
26/07/2013 7:16:24 PM, on Farm Weekly

An announcement, every other week, of new competition in the grains logistic supply chain has caught CBH like a rabbit in a spot light. The directors respond by commissioning a grower survey where the questions are rigged like the Tour de France. Heaven help the grower shareholder, who painfully has to watch the inevitable decline of an organisation that has naively claimed supremacy. It's simple boys, let go of your delusions, lead CBH to a corporate structure. History will not judge kindly, those sitting in the ivory tower, enjoying the largesse while Rome burns.

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