AWB Limited - 2003 Annual Report

finance and
risk management
Harvest Finance
In 2002, AWB introduced its new National Pool Payment Options
which provide growers a unique range of loan and payment options
for harvest finance. Despite the drought, the new products
achieved a strong uptake from participants in the 2002/03 AWB
National Pool.
In 2003, AWB responded to growers’ needs for greater cash flow
flexibility by enhancing its National Pool Payment Options. This
included removing the minimum drawdown amount for the Flexible
Drawdown Loan, and, for the Deferred Payment option, moving all
cash flow to the subsequent financial year. These enhancements
have been well received by growers, third party advisers and staff,
and highlight AWB’s responsiveness to growers’ changing financial
requirements.
Volumes through the loan book were lower this season, given that
new season Pool deliveries fell from 19.3 million tonnes in
2001/02, to 4.7 million in 2002/03. AWB’s loan book peaked at
$1.6 billion in December 2002, down from a record peak of $2.1
billion in the previous reporting year.
The acquisition of Landmark promises exciting opportunities in the
rural finance area, with access for AWB and farmers to a broader
range of lending, transaction, deposit and insurance products. AWB
will support this broader financial services platform through
investment in product development, recruitment of specialised staff
and the creation of solutions that meet the unique needs of
Australian farmers.
Risk Management Products
Basis Pool
AWB Basis Pool remained a popular risk management product for
growers seeking to manage their own commodity and foreign
exchange exposures. After strong growth in Basis Pool volumes
since 1998/99 when it was introduced, volumes assigned to the
Basis Pool were significantly lower in 2002/03 due to the drought.
About 180,000 tonnes were committed to the Basis Pool, although
a significant proportion of that tonnage was cancelled, or
“washed out”.
Although the drought has reduced the general grower appetite for
forward contracting, with increased crop production in 2003/04,
there will be more grain available for contracting through AWB
Basis Pool and AWB is expecting larger volumes as a result.
AWB RiskAssist
As a wholly owned subsidiary, AWB RiskAssist Limited was
established to provide specialised risk management service to
grower customers. After steady growth in its business, reduced
production impacted the uptake of risk management services
during 2003. However, AWB RiskAssist has expanded its offering
with a new Fixed Basis Contract, and with a significantly larger
crop for 2003/04, is anticipating a modest increase in the uptake
of risk management services among growers for the year ahead.
Partly offsetting the impact of reduced grower uptake has been
AWB RiskAssist’s continued diversification of its customer base.
($m)
100
80
60
40
20
0 INNOVATION FOCUS TO Improve DELIVER performance NEW OPPORTUNITIES
and returns.
2000 2001 2002 2003
NPBT – Finance and Risk Management
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