Australia Accounts For More Than Half of China’s Beef Imports

Posted: November 9, 2014 in Econ 101, Free Trade

SOURCE: http://www.theaustralian.com.au/business/companies/beef-producer-cpc-pursues-partnership-opportunities-in-asia/story-fn91v9q3-1227117601080

Beef producer CPC pursues partnership opportunities in Asia
Troy Setter

CPC chief Troy Setter is pursuing several potential land acquisitions in northern Australia and is ‘quite excited’ about the outlook for earnings Source: News Corp Australia

AUSTRALIA’S largest privately owned beef producer, Consolidated Pastoral Company, expects more than half its revenue to come from the Asian region within two years as it pursues partnership opportunities in China, Indonesia and new markets such as Vietnam.

In his first major interview since taking over in July, chief executive Troy Setter said the company was pursuing several potential land acquisitions in northern Australia and he was “quite excited” about the outlook for earnings this year.

CPC, which is backed by private equity group Terra Firma after it purchased the company from the Packer family in 2009, holds a 50 per cent interest in a joint venture that owns and operates two cattle feedlots in Indonesia and a partnership in China.

Mr Setter said the company was expanding one of the feedlots in Indonesia and was on the lookout for joint-venture partners in China.

“If we can find the right customer-focused partner that we can work with, we would be looking at opportunities for partnerships. We would prefer an industry player that is in the meat business,” Mr Setter told The ­Australian.

“There are a lot of companies out of China that are looking to do business with Australian firms.

“We plan to build off our Indonesia and Chinese businesses. The Asian business now represents 40 per cent of revenues. I think we will see that at least half of our revenue will come from Indonesia and greater Asia in the next couple of years.”

Australia accounts for more than half China’s beef imports, and ANZ’s director of agribusiness research, Michael Whitehead, has forecast Australia’s beef exports to China could be worth $130 billion by 2030.

China’s demand for beef has trebled in the past decade and Mr Setter said he had already spent time in the world’s fastest-growing economy since taking over at CPC and was “impressed by the opportunities”.

CPC has been hit hard in recent years by the cattle export ban to Indonesia, drought in northern Australia and the high dollar.

The company’s latest accounts filed with the Australian Securities & Investments Commission for the year to March 31 show it posted a $32 million loss struck on revenue of $51.75m.

The company recently altered its year-end from December 31 to align its reporting to the growing season in northern Australia.

It wrote down the value of its properties last year by $11.13m.

Mr Setter declined to comment on the company’s finances, but in general terms said the past year’s results were “impacted by the extreme drought in Queensland and the Northern Territory and the challenges of the market price”.

“We certainly saw cattle prices drop substantially in 2013 and that did have a negative impact upon the bottom line,” he said.

But with land prices in the Northern Territory and Queensland turning in the past six months, he said the future was positive.

Cattle prices in the north are as strong as they have been for several years.

“We are quite excited about the future with price but also the position that the company herd is in coming out a drought,” Mr Setter said.

He confirmed that the company’s gearing remained at about 40 per cent. Since taking over the business in 2009, Terra Firma has expanded CPC’s cattle capacity to 360,000 head, from 290,000, and increased its land portfolio to 19 stations.

It has also committed more than $32m of capital expenditure to improve stations and upgrade its supply chain.

Mr Setter said further development recently approved by the CPC board would position assets to be more productive, run more cattle with marginal additional cost and enable cattle to be marketed all year round.

The additional capital expenditure would be $2m.

“There is substantial opportunity to improve the production side of the beef cattle industry in Australia and build something of scale,” Mr Setter said.

The company made its last land acquisition in 2011 and Mr Setter said it was pursuing “a couple” of opportunities “very closely”.

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