AWB Limited - 2003 Annual Report

supply chain and
other investments
Domestic Investments
AWB continued to pursue investments in 2002/03 that reduce
supply chain costs for growers, strengthen AWB’s regional position
and achieve a commercial return to shareholders above the
weighted average cost of capital.
In January 2003, AWB launched its new grain logistics company,
AWB GrainFlow, which as a wholly owned subsidiary will operate
AWB’s growing supply chain and logistical services. AWB
GrainFlow provides a new, defined and separate identity for
business ventures, including AWB Grain Centres (and the
coordination of services such as on-farm pick-up), company owned
rail stock, the AWB investment in the Melbourne Port Terminal and
any future supply chain investments.
AWB GrainFlow
Grain Centres
AWB GrainFlow opened nine, state of the art greenfield sites in SA
and NSW in time for the 2002/03 harvest. AWB GrainFlow has
also constructed a further four new sites in NSW and QLD, and
upgraded the Beanbri site in NSW for the 2003/04 harvest, taking
total storage capacity to more than three million tonnes. The
drought, particularly in eastern Australia, directly impacted AWB
GrainFlow receivals for 2002/03, with total grain receipts of about
185,000 tonnes being down considerably from the previous year.
However, AWB improved its market share in the storage and
handling sector, and the investments contributed positive gross
margins over direct operating costs. With a considerably larger crop
in 2003/04, AWB GrainFlow’s Grain Centre business is well
positioned to attract significant tonnage, and achieve long term
commercial returns for shareholders over their investment life.
Rail Freight
AWB has committed about $5 million for 51 high capacity rail
wagons, to be operated in NSW to improve grain haulage services,
and provide a commercial return on investment. Grain volumes
hauled by the wagons in 2002/03 were down due to the drought,
but AWB anticipates the wagons will play an important part in the
grain haulage task for coming seasons. AWB’s Waratah train, which
was leased from Freight Australia in 1999, hauled its one millionth
tonne of grain during 2002/03.
Ports
Rental income on AWB’s 50% ownership of the Melbourne Port
grain terminal was impacted by reduced grain production and
exports. In total, approximately 450,000 tonnes were handled
through the facility in 2002/03.
AWB continues to investigate further opportunities for port
developments. Consistent with AWB's supply chain and investment
strategies, these are focussed on improving port services and
delivering reduced costs to growers, as well as providing long term
commercial returns to shareholders.
Offshore Investments
AWB’s offshore investments form a key platform in its strategy to
diversify its income in a manner that expands end user demand for
AWB products and services. The investments have extended
AWB’s stake in the grain value chain, in the areas of flour and feed
milling, food processing and grain trading, and have established a
foothold for AWB in some of the world’s biggest and fastest
growing grain markets. In 2003, AWB’s offshore investments
performed well in the difficult trading environment caused by
drought in Australia.
($m)
30
25
20
15
10
5
0
-5
Commercial strategies to realise efficiency.
2000 2001 2002 2003
NPBT – Supply Chain and Other Investments
21