Annual Report - AWB Limited

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Highlights• Sustained earnings in a challenging globalfinancial environment• Increase in insurance commission of 17%• Controlled asset growth of 10% in LandmarkFinancial Services• Increased tonnage and higher commodityprices benefited Harvest FinanceInsurance commission was up 17%, following an increase in overallgross written premiums in conjunction with higher crop insurancelevels in Western Australia and South Australia.During the year, the business continued to diversify its financialservices offering. In June, it formed an alliance with E*TRADE tofacilitate access to online share trading services.In July, the business acquired 100% of livestock leasing business,Stocklease Pty Limited. Stocklease is a niche provider of finance,focusing on established operators who are looking to free uppart of the working capital in their business. Livestock leasingis a good option for farmers in a strong financial position withwell established industry experience and will be a key area forgrowth in the short to medium term.Landmark Financial Services has grown conservatively during2007-2008 and is focused on further developing relationshipswith viable and sustainable customers. The business will continueto utilise the strength of the Landmark network for cross-sellingand referral opportunities.AWB Harvest Finance LimitedLandmark Financial ServicesLandmark Financial Services sustained earnings in an increasinglychallenging credit environment. Deposit growth, fee income andinsurance commission performed well; however, these activitieswere partially offset by increased funding costs. A focus onmaintaining margins, a strong credit portfolio and prudentlymanaging growth resulted in an increased EBITDA contributionof $27.6m, up 2% vs. the pcp.Loan balances grew to $2.3 billion (as at 30 September 2008),with controlled asset growth of 10%. Despite tightening ofthe financial credit market, and prolonged drought in partsof regional Australia, the loan portfolio continues to showstrong credit quality.The net interest margin on the loan portfolio was 2.02%, downslightly on last year’s result. This was mainly due to an increasein funding costs following the extension of funding in the ratedcommercial paper trust.In its final season providing pool products to the AWB NationalPool under the old wheat marketing arrangements, AWB HarvestFinance Limited benefited from increased tonnage and highercommodity prices, compared to drought conditions of the pcp.An increase in EBITDA of 164% to $14.5m resulted from thefinalisation of both the 2005-2006 and the 2006-2007 pools inthis financial year. Harvest Finance’s average loan book was also6% higher at $461.7m and its operating expenses decreased by55% to $3.3m. This reflected the reduction in scale of the businessas it prepared for the deregulation of the export wheat market.AWB Harvest Finance’s short term credit rating is A1 and it has along term credit rating of A from Standard & Poor’s.From 1 October 2008, AWB Harvest Finance will be managedand reported as part of Australian Commodity Management.www.awb.com.au 15
Commodity ManagementCommodity Management (EBITDA)Commodity Management had a solid year, with the operating environment less volatile 2004 in the second 156.6half of the financial year.International grain prices reached an all-time high in the first half of the year, due to 2005 limited global 136.1 supply and concerns about northernhemisphere crop prospects. Volatility eased in the second half with improved global 2006 supplies of 100.8 wheat and coarse grains and the exit ofhedge funds from global commodities markets.2007 88.42008 100.9ACM’s performance rebounded with strong results from origination and sales of wheat, canola and pulses. There was also continuedrevenue growth from trading activity across a broader range of crops. The performance of Geneva returned to more sustainable levels,after one-off gains in chartering and trading activities during 2007.In August 2008, ACM announced a rail freight agreement with El Zorro and thecommissioning of 84 new rail wagons. The agreement ensures that AWB GrainFlowcan provide its customers with an integrated storage, handling and freight serviceon the east coast of Australia.In September 2008, AWB subsidiaries, AWB Harvest Finance and AWB Australia,were accredited to export wheat under new wheat marketing arrangements.200Commodity Management (EBITDA)A master trust structure was created to ensure the ring-fenced structure of AWBHarvest Finance is maintained. A new trust will be created each season to providepayment protection for both pool participants and financiers.150156.6136.1AWB Harvest Finance subsequently launched West Coast and East Coast pools for2008-2009, both of which will have Harvest Finance loan and payment productsavailable to pool participants.100100.8 100.988.4The 2008-2009 commercial offer focused on the three priorities of Australian wheatgrowers when marketing their wheat – best possible price, excellent customerservice and security of payment. The pre-commitment campaign for the 2008-2009pools generated an encouraging take up of in excess of 800,000 tonnes for the $10pre-commitment offer. This offer closed in mid-October.50016 www.awb.com.au
Page 7 and 8: 6 www.awb.com.auFrom Peter Polson,C
Page 9 and 10: From Gordon Davis,Managing Director
Page 11 and 12: AWB todayOur client base extends to
Page 13 and 14: Landmark Rural ServicesRural Servic
Page 15: Financial Services (EBITDA)2004 44.
Page 19 and 20: CorporateCredit ratingsAWB maintain
Page 21 and 22: People and communityPeopleThe busin
Page 23 and 24: 22 www.awb.com.auManagement team
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Page 27 and 28: Governance at AWBAWB’s Board and
Page 29 and 30: process was conducted within the co
Page 31 and 32: Information is regularly communicat
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AWB LIMITED Notes to and forming pa
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120 www.awb.com.auAWB LIMITED Indep
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AWB LIMITED Australian Securities E
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AWB LIMITED Notes124 www.awb.com.au
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AWB Limited ABN 99 081 890 459380 L
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