Elders quits Indonesian abattoir and feedlot

Elders buys ag chem supplier, sells Indo beef feedlot and meatworks


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Elders' Indonesian feedlot at Lampung which fattened about 12,700 feeder steers last financial year, has been sold to Indonesian-Australian company Pramana Austindo Mahardika.

Elders' Indonesian feedlot at Lampung which fattened about 12,700 feeder steers last financial year, has been sold to Indonesian-Australian company Pramana Austindo Mahardika.

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Elders to cut its last investment ties with Indonesia's live export scene, selling its 8200-head feedlot and abattoir, near Jakarta.

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Poor returns and frustrating business conditions have convinced Elders to cut its last investment ties with the live export sector in Indonesia, selling its 8200-head feedlot and abattoir near Jakarta.

However, the farm services business will retain cattle supply relationships to source northern Australian steers for the new Indonesia-Australian joint venture owners.

The abattoir, at Bogor on Java, will also continue to supply Bos indicus beef cuts for Elders Fine Foods’ Indonesian hotel and restaurant customers.

No price details have been released, but the sale to the agribusiness and resources sector consortium, PT Pramana Austindo Mahardika (PAM), is expected by concluded by June 30.

It also frees up about $10 million a year in working capital which Elders has had tied to livestock held in its Lampung feedlot on Sumatra, plus running costs associated with its Indonesian interests.  

“As with our decision to sell the live export business, return on capital was the primary driver, but we’ve also have found it increasingly difficult to do business in Indonesia - Mark Allison, Elders

Back in Australia, meanwhile, Elders has moved to absorb the farm chemical and animal health products business of its house brand supplier, Titan Ag.

Titan purchase

By the end of this month Titan Ag will be 70 per cent owned by Elders, with two more payments to be made in the next two years.

Titan is owned by one-time Elders ag chemical buyer, Andrew  Ericsson, and Martin Cayzer, whose agricultural scientist father, Paul, was one of the early players in the generic farm chemical market.

He teamed up with Mr Ericsson in 2006 to establish Titan specifically to build a house brand line for Elders, initially sourcing product from China.

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Hot performing Elders looks at Indo options

It’s been a busy start to the year for Elders, which recently bought independent Victorian Western District stock and station agency company, Kerr and Company Livestock, and expanded its West Australian footprint in Bunbury, and has been mooted as a possible interested party in any ownership restructure of New Zealand’s big PGG Wrightson agribusiness network.

The Indonesian asset sale follows Elders quitting the live export shipping game mid last year, selling its North Australia Cattle Company to a management-led partnership with Chinese investors.

Elders still has commercial arrangements to supply cattle to NACC’s export trade, which includes the Lampung feedlot.

Managing director, Mark Allison, confirmed the high cost of sourcing Australian cattle, combined with government-enforced beef price ceilings and changing Indonesian government policies for livestock imports had “adversely affected the performance of our Indonesian business”.

While its PT Elders Indonesia business was profitable, return on capital invested was less than five per cent compared with the Australian company’s overall return of 26pc last year.

Titan Ag directors, Andrew Ericsson and Martin Cayzer, will join Elders after selling 70 per cent of their business by May 1.

Titan Ag directors, Andrew Ericsson and Martin Cayzer, will join Elders after selling 70 per cent of their business by May 1.

“As with our decision to sell the live export business, return on capital was the primary driver, but we’ve also found it increasingly difficult to do business in Indonesia,” he said.

“Competition from buffalo beef imports from India, changing rules on livestock imports and the beef price cap mean that if your costs rise there aren’t many options to protect your margins from being squeezed,” he said.

“Elders puts priority on investing and growing business units which generate a consistent return on capital at a level which creates wealth for our shareholders.

“It became appropriate last year to look at divesting these assets.”

The new ownership group, Pramana Austindo Mahardika, includes private Indonesian investors, financial investors and an Australian livestock exporter, the Brisbane-based, Austrex.

Retail focus in Indo

Elders will continue to have a presence in Indonesia through its retail meat distribution businesses which it established in China and has since expanded to service high end restaurants and hotels in Vietnam and Indonesia.

The Indonesian operation supplies imported red meat cuts under it Killara and Kooyong beef and Marlee lamb brands to restaurants in Jakarta and Bali.

Kooyong branded lot-fed Bos indicus beef is sourced via the Indonesian feedlot and meatworks and will continue to be supplied by the new owners, although Elders will move its meat portion processing operations to new premises after the sale.

Mr Allison said the food service business in Indonesia, Vietnam and China continued to expand and would be the focus of future business growth.

We now have a solid and stable platform to capitalise on the many opportunities that lie ahead for Elders - Mark Allison, Elders

Exiting the feedlot and processing facilities in Indonesia would allow Elders to direct more attention and capital to its retail meat distribution business in Indonesia, and other initiatives.

“We have a clear resolve to realise our objective of continuing the consistent and high quality growth which has underpinned Elders’ achievements,” he said. 

“We now have a solid and stable platform to capitalise on the many opportunities that lie ahead for Elders and Australian agribusiness.”

Immediate opportunities include the Titan Ag deal, which Elders expects to generate an extra $6.5m to $7.5m in earnings before interest and tax next financial year.

What’s Tigan Ag?

Titan is an Australian-based producer and supplier of crop protection and animal health chemicals and fertiliser, with product formulated locally in Australia through toll manufacturers.

It also sources from China and India.

The Titan acquisition, which includes products spanning 163 Australian-registered lines, is expected to grow to absorb Elders own private label, the Agsure crop protection and fertiliser range.

Current Titan Ag principals, Mr Ericsson and Mr Cayzer will join the Elders business next month, with Mr Allison “looking forward to them being long-term employees with our business”.

“They’ve built up a strong supply business with good credentials and relationships in China and elsewhere,” he said.

The Titan product range has achieved good market recognition and acceptance, initially in southern Australia, and more recently particularly in Western Australia and northern NSW.”

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