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Under siege CBH flags financial benefits of go-it-alone strategy

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CBH Group, facing a bid backed by rival GrainCorp which would hand a windfall to growers, flagged financial fillips, totalling more than Aus$200m this season, from keeping the group as co-operative too.

The group, Australia's biggest grain exporter, said that its 4,200 member farmers paid about Aus$14.50 a tonne less in storage and handling costs than peers in the rest of the country.

That equated to Aus$195m for 2015-16, said CBH, which handles the great majority of grains output in Western Australia, the country's top wheat-producing state.

"When comparing transport costs, Western Australia growers using the CBH network pay a total of Aus$85m less than their counterparts in eastern Australia," said Andy Crane, the CBH chief executive.

Windfall vs savings

The comments come days after Sydney-based rival GrainCorp – which has a big share of grains handling in eastern Australia – revealed it had joined the Australian Grains Champion consortium bid which is attempting to take over CBH, before floating in on the Sydney stock exchange.

The deal would hand CBH members an initial Aus$600m, equivalent to an average of more than Aus$140,000 each, besides leaving them with a substantial shareholding in the group, which is estimated to have a value of about Aus$3bn.

However, CBH added that, besides its savings on transport costs, it also handed its members Aus$14m in rebates for the latest harvest, after rebates totalling Aus$71m in the previous two years.

"These results indicate that the business is not just matching other providers but offering millions of dollars in annual savings to Western Australia growers," Dr Crane said

Control question

He added: "In an industry where margins are tight, grower control of their own supply chain is critical.

"We have a sole focus on the grower to lower the costs of the supply chain, improve service and generate rebates."

A stockmarket flotation would bring different shareholders for CBH to look after, Barnaby Joyce, the Australian deputy prime minister, said separately.

After a listing, "they then do what is in their commercial interests, which is screw you down,'' he told The Australian newspaper.

"Here is my salutary warning - if you turn into a corporatised entity and then sell, don't come back and ask for special treatment.''


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