Annual Report - AWB Limited

We also made significant advances in rebuilding our reputationwith many stakeholders through constitutional reform and theaccreditation of AWB (Australia) Limited and AWB Harvest FinanceLimited as ‘fit and proper’ companies to export bulk wheat underthe new marketing arrangements.In September 2008, AWB Harvest Finance launched West Coastand East Coast pools for 2008-2009, both of which will have AWBHarvest Finance loan and payment products available to poolparticipants. To ensure the ring-fenced structure of AWB HarvestFinance is maintained, a new trust will be created for each season.This is designed to provide payment protection for both poolparticipants and financiers.I am confident that our 2008-2009 commercial offer will beattractive to Australian wheat growers as I believe we will deliveron the three priorities Australian wheat growers are looking forwhen marketing their wheat – the best price, excellent customerservice and security of payment.Operational performanceIn 2008, total revenue increased 47% to $6.84 billion, up from$4.67 billion in the pcp and EBITDA increased 32% to $228.5m,up from $173.2m in the pcp.Landmark Rural Services delivered its strongest result to date,with higher crop chemical and fertiliser sales and operatingmargins on the back of increased agricultural activity acrossAustralia. Landmark EBITDA was up 66% to $90m. The businessalso benefited from higher earnings from its investments in Hi-Fertand the RD1 rural merchandise joint venture with Fonterra.Landmark Financial Services sustained earnings, recording EBITDAof $27.6m despite an increasingly challenging credit environment.Deposit growth, fee income and insurance commission performedwell; however these were partially offset by increased fundingcosts. The business continued to focus on maintaining margins,a strong credit portfolio and prudently managing growth.Australian Commodity Management significantly improvedperformance on the back of strong origination and sales of wheat,canola and pulses. This was a pleasing result, given the ACM teamand business underwent extensive restructuring in the first halfof the financial year. It contributed EBITDA of $61.9m, up from$5.6m. International Commodity Management’s result was mixedwith an EBITDA contribution of $24m, down 66% against the pcp,after one-off gains in chartering and trading activities in 2007.OutlookIn 2008-2009, our focus will be on growing shareholder valuethrough sustainable returns and earnings growth.The globalisation of agribusiness and changing dynamics ofdemand and supply offer the business a range of opportunities.We will need to adapt our business model to global and domesticchanges in market conditions. However, Australian agricultureremains an attractive industry segment and the new deregulatedwheat market will see the business focus on margin, ratherthan volume.Landmark Rural Services is a key growth platform. In 2008-2009,the business will complete a range of strategic activities designedto increase productivity and further lift operational performance.Growth for the business will come from strategic initiativesfocused on increasing value from existing markets and increasingrevenue from new sources.In the prevailing economic climate, Landmark Financial Serviceswill seek to manage the cost of funds and maintain credit quality.Australian Commodity Management will seek to leverage itsstrong customer network and over 80 years of experience inmarketing Australian wheat. It will focus on maintaining ourproven pooling performance and ensuring competitive harvestfinance loans and payments, regular pool distributions andpayment incentives for grain quality. The focus for InternationalCommodity Management will be to build structural revenueflows and integrate activities with those of Australian CommodityManagement.Employee and customer safety is of paramount importance atAWB. We have not consistently delivered on our promise to sendall employees and customers home healthy from our workplacein the past and we will need to focus more on this objective inthe future.I would like to say thank you to the many employees whocontinued to work long and hard during the year. The strongbusiness result – both financially and operationally – is a positiveoutcome and a reflection of their efforts. It is a result that wecan all be proud of.I am pleased with the progress we are making on rebuilding thebusiness. We still have some way to go on this journey but weremain committed to success for employees, customersand shareholders.Gordon DavisManaging Directorwww.awb.com.au 9