FOR the second year in a row, the CBH Group will not deliver a rebate to growers, opting instead to divert surplus cash-flow from Operations into upgrading its network.
The announcement was made in an email to growers last Thursday by chairman Simon Stead.
The last time the co-operative delivered a rebate was in 2019, with just a $1 a tonne rebate for the 2018-19 season.
In other disclosures, the Marketing and Trading division will also not offer a rebate so it can retain a small buffer to mitigate market volatility into next year
On the Investments side of the business, Interflour, a joint venture between CBH and the Indonesian-based Salim Group, will return a small dividend to the co-operative this year, while the South Australian-based Blue Lake Milling will retain its surplus funds for capital requirements.
In his grower email, Mr Stead said the surplus cash-flow from Operations would be used to "continue to improve our ability to receive the harvest efficiently, sustain current assets and infrastructure, and increase our outloading facilities".
"Retaining this year's surplus is a prudent measure to allow us to continue this elevated level of capital expenditure while minimising the level of debt required to fund the spend," Mr Stead said.
When outlining the decision, the chairman said as they headed into a major harvest program, they were in finalising their end-of-year results, as well as reflecting on some significant supply chain challenges.
"The impact of these challenges has highlighted our exposure to external events and the labour market, impacting key transport pathways and getting grain to port efficiently," he said in the grower email.
"It is more important than ever to continue our elevated investment into the network so we can move tonnes to port more efficiently and in time meet our customer requirements and build in further flexibility to withstand future external shocks."
Mr Stead said given all their challenges and the "clear need to retain and reinvest surplus funds within the business" to deliver maximum value for growers, they made the decision not to offer a rebate.
This message was reinforced by Jason Craig late last week when he was the co-operative's acting chief executive officer.
"The real key is the business has been really focused on putting reinvestment into the network and we have been hearing from the growers," Mr Craig said.
"As a result we are keen for that reinvestment so we can increase the efficiency of the supply chain from the farmer through to the end customer."
When asked to respond to growers who may have been expecting a rebate this year, Mr Craig said reinvesting in their infrastructure was the strong feedback they had received.
He said growers wanted to spend less time on the grid at CBH facilities and it was important for the process to be streamlined which would benefit everyone in the supply chain.
Mr Craig also said, given the big harvest program that was slowly getting underway, they would require emergency storage which was part of the short and long-term investment improvements.
He said it was extremely important for CBH to have greater storage capacity, particularly in the first half of the year.
Mr Craig said they reviewed the rebate option on an annual basis and said it depended on the available surplus and how they were going.
CBH said its investments had performed well this year.
It said due to improved performance, Interflour was due to return a $4.1 million dividend to the co-operative.
"While the dividend does not formally constitute part payment of the shareholder loan paid to Interflour in 2018, it is welcomed and will be reinvested back into the network as capital expenditure," Mr Stead said.
Blue Lake Milling has also performed well this year, delivering its highest profit since its acquisition.
The facility turns oat husk into biogas which provides renewable energy to operate the mill.
Surplus funds are being retained to complete the biogas project.
Mr Stead said they were committed to the core business of grain storage and handling, their marketing and trading, and the growing fertiliser business.
He said they regularly assessed investment portfolios to decide whether to retain or divest them.
The co-operative will present its full annual results in mid-December.