CPC loss 'due to live ex ban'

20 May, 2013 10:30 AM
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AUSTRALIA'S largest live cattle exporter and one of the country's biggest landholders, Consolidated Pastoral, has taken a $34 million hit on the value of its property portfolio, tipping total property writedowns for the industry's top cattle companies to more than $100 million in the last few months.

Consolidated Pastoral, which was purchased by London-based private equity firm Terra Firma from James Packer in 2009 for $450 million, has been the centre of attention in the industry because of its live export trade to Indonesia.

The company's chief executive, Fergal Leamy, told The Australian Financial Review in an exclusive interview that the property writedown was almost exclusively due to the live export ban, which has more than halved the industry's live exports and created a glut of cattle in Australia at a time of drought and a strong local currency.

"Clearly what you are seeing is the short-term impact of the live export ban," Mr Leamy said. "But we are not distracted by short-term things like many others in the industry [are]. We look at the long-term."

The result equates to a 7.5 per cent reduction in the company's ­$450 million property portfolio, which includes 19 cattle stations covering more than 5.6 million hectares.

The result follows writedowns from Macquarie's Paraway Pastoral with $27 million, the listed Australian ­Agricultural Company with $40.8 million and about $10 million from the North Australian Pastoral Company, which is currently up for sale.

Despite the writedown, Consolidated Pastoral has proved to be remarkably resilient during one of the worst periods of Australia's cattle industry since the 1974 crisis.

The company delivered operating earnings before interest, tax, depreciation and amortisation of $15 million for the year to December 2012, up 78 per cent on the previous corresponding period. The company sold about 70,000 head of cattle during the year – much lower than expected because of continued import restrictions in Indonesia, which have reduced export volumes and resulted in lower prices and excess supply.

Mr Leamy, who came to the company just last year after a string of chief executives including former GrainCorp managing director Mark Irwin and long-serving cattleman Ken Warriner, said he was still optimistic that the industry would turn around. "Overall we are positive on the outlook for the industry. We think this will be a blip and prices for cattle will recover, and that will result in improving values in the long term."

Mr Leamy also gave a strong indication that the timing was perfect for a major player such as Consolidated Pastoral to look at opportunities in the market, including the purchase of properties.

"The industry is fragmented, with many station owners lacking the resources to benefit from the changes in the sector. This provides an opportunity to grow the business through acquisitions," he said.

"We are still more likely to be acquirers than sellers, and we believe there are many opportunities in Australia."

"We have always had plans to grow this business."

The company has committed $125 million in capital expenditure since 2009. Much of that has come in the form of property acquisitions such as the failed managed investment scheme company Great Southern's Wrotham Park Station, in far north Queensland, for more than $45 million, and the 23,000-hectare Comely-Mapala Station, south-west of Rockhampton, for around $30 million.

The company will look at acquisitions, but it will still need to share in the pain that many operators are experiencing. Consolidated Pastoral branded a record 99,600 calves during 2012, up 17 per cent on the previous year. The company now expects that cattle earmarked for export to Indonesia will continue to be moved to its Queensland properties for domestic sale in the next 12 months.

"The government needs to do what it does best, and that is to facilitate trading relationships," he said. "It's about how they can help us sell Australian food to Asian countries. An incoming government should focus on mending bridges in Indonesia and opening up markets in China and South Korea."

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