COVID-19 shutdowns, worker shortages, a cyclone, fires and floods did not stop the CBH Group from recording an operating profit of $133.8 million in the year to September 30 - its best result for the past five years.
But the "challenges", as newly-appointed CBH chief executive officer Ben Macnamara described them last week, cost CBH $17.3m in demurrage and contract penalty payments for late loading and extended "turnaround" of ships in basically the two middle quarters of the year.
In 2020, a more typical year, it had only paid out $1.5m in demurrage and delay penalties, so a focus for "elevated" capital expenditure "for at least the foreseeable future - five plus years", according to Mr Macnamara, will be on "outloading" and getting more grain to port more quickly in the "vital first-half (of the year) window" before northern hemisphere grain and oilseed crops come onto international markets.
While other export businesses struggled over the past year with shipping schedule delays and last minute changes, CBH's problems were not availability of ships, but the capacity of its own operations to move the 13.4 million tonnes it shipped last year, to its four ports, plus the impact of nature and force majeure events beyond its control.
"(The $17.3m in demurrage and penalty payments) were due to a combination of factors," Mr Macnamara said.
"Train driver and truck driver availability, closed borders, significant weather events - Cyclone Seroja impacted the Geraldton port zone and in the Kwinana zone bushfires in the Perth hills closed the Avon Valley (rail line) for two weeks," he pointed out.
"Flooding in Northam impacted the supply chain for about a week, we had third-party derailments - nothing to do with CBH - which impacted access to rail and in the Albany zone wet weather events resulted in the rail lines being washed out."
Mr Macnamara said planning to prevent recurrence of significant demurrage costs was one factor behind CBH changing its grain rail contractor from Watco to Aurizon, which took effect in November and after the reported financial results.
Apart from its own 10 grain-train fleet, the new contract with Aurizon provided an extra three grain trains, or 30 per cent more for CBH operations, he pointed out.
Mr Macnamara said CBH was working with Aurizon and freight-rail network operator Arc Infrastructure to maximise the performance of its grain on rail operations, which accounted for about 60 per cent of grain transport across the network generally and up to 90pc in the Kwinana port zone.
He said increases in freight rates announced to growers recently were aimed to attract more trucks and drivers for the coming possible record 20mt grain harvest and enable CBH to compete more effectively for them against a "buoyant" resources industry.
CBH's focus in the latter part of the year had been on how it would deal with a record harvest this season and likely increased grain volumes into the future.
In preparation it had run grain stockpiles down to historic lows to accommodate this season's harvest.
The strong financial performance of all aspects of its operations last year enabled $254.2m to be invested in "expanding and improving" the network - up from $225.9m spent the previous year, but trailing the record spend of $285.3m in 2019.
Expansion projects to provide an extra 270,000t of new permanent storage had been completed at receival sites such as Hyden and Brookton, also a new weighbridge and sampling room at Dale, during the past year and more projects were due to be started to provide additional storage.
"We spent $35.8m on approvals and construction of what will likely see about 2.4mt of emergency storage at about 33 different sites across the network (to cope with a record harvest)," he said.
"That will give us something in the order of an additional 2.7mt (storage) this year which is a fair quantum, given the size of the network.
"The supply chain issues earlier this year I think highlighted the requirement to focus on the increased task and a lot of our focus will be on outloading projects.
"The task is obviously getting larger and (apart) from outloading improvements, we will also need additional storage in the network.
"Historically, we've been spending about 1pc of the total asset replacement value (each year on the network), industry normal is about 3pc.
"Historic underinvestment in the network has meant we are now playing some element of catchup to ensure the network can keep pace with crop size and that is why we are spending at elevated levels.
"We are trying to strike the right balance between receiving the crop and trying to out-turn the crop."
Mr Macnamara said apart from major projects, more than 180 projects designed to "sustain" the existing network rather than expand it, were carried out during the past year.
"Many of these were small and probably went unnoticed, but they are vital to the efficient operation of the network," he said.
The $110m spent on "sustaining" capital works was more than double what CBH had spent in any previous year since 2010, apart from 2020 when it spent $66m.
Mr Macnamara said works proposed to start at Moora during this financial year were a good example of CBH's network focus for the future.
It currently took 11 hours to load a shorter and lighter grain train there.
A new two-kilometre long siding and rapid-fill facility would load grain trains in three-four hours and enable two trains to be run a day from Moora, Mr Macnamara said.
Broomehill, Brookton and Cranbrook were the other "priority" sites for rapid outloading projects next year, he said.
Mr Macnamara said strong demand for Australian grains and an "unexpected" 15.1mt harvest handled last season - the fifth largest harvest, a 54pc increase on the previous harvest and also with 54pc of the crop accumulated by CBH - had driven the "excellent results".
He paid tribute to CBH staff and casual labour, growers and contractors for helping achieve them and in doing so, breaking 14 daily receival records and 15 site season records.
"We have pulled together to overcome supply chain challenges, managed the uncertainty of COVID-19, delivered a large network investment program and contended with ongoing global market volatility to find new markets for Western Australian grain," Mr Macnamara said.
Group revenue increased 23 per cent to $4 billion, with earnings before interest, tax, depreciation and amortisation (EBITDA) jumping 95.8pc to $309.9m and resulting in a net profit after tax of $133.8m - compared to $11m the previous year.
Mr Macnamara pointed to the performance of CBH's Marketing & Trading business unit and its fertiliser division as highlights of the year.
"I cannot understate the strong result delivered by Marketing & Trading, who have worked hard to replace the loss of the China barley market last year," Mr Macnamara said.
"The team used their extensive network and long-term customer relationships to open brand-new markets and access re-emerging markets, delivering great value to WA growers."
As a separate unit, Marketing & Trading traded 8.4mt of grains, a 21.4pc increase despite the loss of a major market.
Revenue earned increased 18pc to $3.3b compared to the previous year, taking EBITA to $112m - a jump of 71.7pc.
Net profit after tax was $76.6m, the biggest profit the unit has ever recorded.
Apart from an 84pc increase on the previous year's profit, it was a spectacular turnaround from the $119.3m loss of 2019.
A profit of $13.9m from the $15.4m proceeds from sale of CBH's share of the Newcastle Agri Terminal during the year added to Marketing & Trading's performance because it was the unit's asset.
Importantly, Mr Macnamara pointed out, on the back of its results, Marketing & Trading's equity had increased from $207.8m to $283.2m.
"Marketing & Trading have now reached their targeted level of equity, leaving them in a strong position to finance future accumulations and balance the risk of future market volatility," he said.
Mr Macnamara said new markets for malting barley had been established in South America and with strong demand for feed barley in South East Asian markets, plus feed barley trade had been re-established with Saudi Arabia.
As well, Eastern African countries such as Kenya, Mozambique and South Africa had re-emerged as destinations for Australian grains, he said.
CBH's fertiliser division also recorded its best result yet, with 184,000t delivered to farmers, a 47pc increase on the previous year and with a 41pc growth in new customers.
The fertiliser division was launched in 2016 and sold 50,000t in its first year.
"There was strong demand for fertiliser all through the State, given the good growing conditions for crops," Mr Macnamara said.
On the strength of the fertiliser division's performance, CBH has announced expansion plans with a dedicated UAN (urea and ammonium nitrate formulation) fertiliser facility to be built in Kwinana.
"This is all about lowering farm input costs which remains part of our strategy," Mr Macnamara said.
"We look forward to offering more WA graingrowers the benefit of access to secure supply and competitive pricing as we continue to grow our fertiliser business."
CBH's investments in the Interflour Group and Blue Lake Milling, which have in the past have been the subject of critical questions asked of directors at annual general meetings, also performed well.
With product demand relatively unaffected by the COVID-19 pandemic and supported by proactive management decisions, the turnaround plan for Interflour resulted in CBH's share of profit in 2021 adding $7.8m to its balance sheet.
Similarly, growing export demand for processed oat products saw Blue Lake Milling return a net profit after tax of $6.2m on the back of export tonnages increased 40pc and with production at the Forrestfield plant now at capacity.
Mr Macnamara said the only area of CBH's operations that did not achieve a good result last year was its safety performance.
"Safety over (the 2020) harvest did not meet expectations, however improved through the rest of the year," he said.
Over the year the all injury frequency rate (AIFR) was 7.3, similar to the previous year.
Mr Macnamara said while the AIFR was a long way short of the 27, 29 and 28 levels recorded in 2011, 2012 and 2014, CBH would continued to simplify its processes, improve training and field leadership and align capital expenditure to improve critical risk areas with the aim of reducing injury incidents further.
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