The 1999 - 2000 financial year has been an especially strong one for the company, both in terms of profitability as well as the development of longer -term initiatives to ensure the company's continued growth.
We achieved a solid profit of $63.30 million after tax for the twelve months to 30 September 2000. This enabled us to achieve a respectable 10.10% return on shareholders' equity for the period and confirms that the company operated successfully in its first full year as a public unlisted company.
The $63.30 million profit can largely be attributed to the uptake of AWB's financial services and risk management products as well as grains trading by our subsidiary company AWB (Australia) Limited.
Dividend
The profit equates to basic earnings per share of 26 cents, which enabled the company to pay a final fully franked dividend of 22 cents per share.
The total dividend payout of $53.10 million was paid earlier than originally planned to assist with what was a difficult harvest in many parts of the country.
A Stronger Company
The first dividend payment is a key step in our preparation for listing on the Australian Stock Exchange (ASX) in the third quarter of 2001. There is a strong need for AWB to list on the ASX to provide shareholders with fair value and liquidity for their shares in the company. We are now clearly focused on the successful listing of AWB.
Operational Highlights
Grower Services, which provides the competitive and contestable financing and underwriting products for the National Pool as well as cash, Multigrade and Basis Pool products, contributed 68% to profit.
Over 20% of profit was generated by domestic grain trading, offshore investments and interest earned by investing our capital base in the operating divisions to fund their working capital requirements.
AWB charges an arm's length pool service fee to the National Pool for commercial services provided by AWB. These services include all administrative, human resources, marketing, risk management, funding and treasury. Of AWB's profit, 10% was derived from the pool service charge.
Revenue of $3.79 billion was generated through our international pooling activities. These were conducted by AWB (International) Limited. This is not consolidated in AWB Limited's accounts. AWB Limited's revenue for the period was $1.76 billion.
Export Program
Over the past four years we have seen wheat exports exceed 15 million tonnes. The 99/00 export program was the second largest in the past decade with sales to 30 September 2000 of 18 million tonnes.
Single Desk Review
The review of the Single Desk by the National Competition Committee is a major issue and a reminder of the importance of the Single Desk system to Australian growers, their families and rural communities.
Through the Single Desk, AWB is able to sell Australia's wheat crop at premium prices into a world market which is distorted by the high levels of subsidies by the governments of other exporting nations.
We have demonstrated, by our performance, the benefits of the current Single Desk system.
Strategic Direction
To build on our financial performance, a new strategic direction has been developed to provide a platform for future growth.
Maximising value to growers, customers and shareholders is the objective that will drive our business strategy for the next three years. A key driver for our future direction will be a target of 15% return on equity (ROE) by 2003. We outperformed our targeted 9% ROE for 99/00 by 1.10%.
Our strategic direction is based on the following drivers:
Increased value for growers by increasing average sales premiums and reducing average grower costs along the supply chain.
We will achieve this by:
- increasing value in grain marketing, finance and risk management products; and
- extracting costs along the supply chain through
- arrangements with bulk handling companies,
- increasing contestability in individual markets,
- co-operative joint ventures,
- long term supply arrangements and strategic alliances.
We have established an e-Business division to utilise e-commerce technologies to achieve greater efficiencies in the supply chain management area to eliminate inefficiencies, reduce costs and maximise returns to growers.
Increased value for customers by increasing the downstream value of premium wheat sales and reducing supply chain costs for customers.
This will be achieved by:
- adding value to customers through product quality, consistency and reliability;
- equity participation and long term supply contracts;
- technical advice and support services, differentiation, branding and marketing services;
- superior trading performance via position management, risk management, inventory control and effective shipping programs.
Increased value for shareholders by achieving a 15% return on equity by 2003 and achieving growth and diversification.
This will be achieved by:
- diversifying AWB's earnings via investments along the grain value chain from seed to food processing and in non-wheat grains;
- establishing a global trading presence in other origin grains;
- expanding the core wheat business by increasing marketing, finance and risk management opportunities; and
- achieving profitable growth of existing businesses.
Implementation of our strategic direction has already begun in many areas, most notably our work in storage and handling in Victoria with the Dimboola Grain Centre and the opening of the Melbourne Port Terminal.
New Directors
We formally welcome our newly elected directors to the AWB Limited Board Ian Cush, Michael Shanahan and Brendan Stewart, and also welcome Wayne Gibson who was elected to the AWB (International) Limited Board.
Outlook - 2000 - 2001
Despite very difficult conditions in some regions of the wheat belt, we expect strong revenue and earnings in the 2000-2001 financial year.
We would like to thank all employees for the contribution they have made to achieve our solid performance.
We have the potential and commitment to make a good Australian company into a major international business over the coming years.
Trevor Flügge A.O.
Chairman
Andrew Lindberg
Chief Executive
Back to 1999-2000 Annual Report