Wilmar International

[greengiraffe]

Our sugar deal was sweeter: Wilmar
THE AUSTRALIAN JUNE 18, 2014 12:00AM

Sue Neales

Reporter - Rural/Regional Affairs
SINGAPORE-based agricultural trading giant Wilmar has claimed Australian canegrowers would have received 10 per cent higher incomes if they had sold their export sugar directly through Wilmar’s global channels instead of using the centralised Queensland Sugar Limited marketing body.

Wilmar marketing director David Burgess said its 1500 growers on average would have been paid $4 a tonne more for their cane, if the two million tonnes of sugar processed at Wilmar’s eight Queensland mills had not been channelled through QSL.

Wilmar will sever ties with QSL at the end of the 2016 cane harvest, taking 60 per cent of the 3.2 million tonnes of export sugar sold by QSL away from the single, although deregulated, marketing company.

Canegrowers are fearful of Wilmar’s decision to sell its sugar direct.

They worry they will lose control over the cane prices they are paid, will be forced to carry more risk and exposure to volatile global sugar price fluctuations, and that the 102-year old QSL — formerly the Sugar Board — will be gutted by the departure of dominant Wilmar.

But Mr Burgess believes farmers need to be made aware that QSL has not always achieved the best prices for farmers — who are essentially its shareholders — in recent global sugar trading deals.

Mr Burgess said that in 2012 and last year, based on the 900,000 tonnes of Australian sugar it did sell through its own trading arm, Wilmar could have achieved a sugar price for growers on global markets of $470 a tonne for its Australian sugar.

He said this was $45 a tonne higher than the average price QSL managed to sell its sugar for on export markets in the past two years. “We are not trying to overblow this, but we are saying to growers, we do think we will be able to achieve better prices for them,” Mr Burgess said.

“While the prices growers receive for their cane vary depending on sugar content, a weighted average price for cane of $4 a tonne above what they were paid would have translated into an increase of more than 50 per cent in average farm gross margins.”

Wilmar also said it achieved marketing premiums for Australian sugar that were 60 per cent higher than QSL’s, equivalent to a bonus $11 a tonne, because of its global sugar marketing expertise.

The figures were presented at a recent meeting to the Burdekin District Cane Growers, where Wilmar has monopoly ownership of all four local sugar mills.

Wilmar told local Burdekin growers, many of whom are not members of the outspoken Canegrowers Association, that the better returns achievable by Wilmar would have seen a farmer producing 10,000 tonnes of cane a year reap an additional $40,000 for each of the past two years.

The Canegrowers Association instantly accused Wilmar of telling only “half the story” and making “lofty, unsupported claims” in a bid to prove it had outperformed the QSL marketing system.

“We are disappointed that Wilmar is resorting to attacking the industry, rather than backing up its claims; if the proposal was beneficial for growers, tactics of divide and conquer would not be necessary,” Canegrowers chief executive Brendan Stewart said.

“We have always been clear that we are anti the proposal, not anti-Wilmar; (but) Wilmar is choosing to drive a wedge through the industry.

“Given this recent development, growers are right to question Wilmar motives. It’s certainly not the actions of someone seeking consensus.”

The Canegrowers Association said Wilmar appeared to be comparing two different pricing approaches — Wilmar’s long-term pricing with QSL’s in-season pool pricing, that have different risk profiles — in reaching its “better performance” figures.

[muns]

I think it is fairer to use a EBITDA multiple to assess reasonableness of acquisition. You may like to guess the P/E accretion/dilution with Wilmar and Indo food blended capital structure.

With regards to a consumer goods operation, what multiple would be reasonable from an EBITDA basis? For example for huge integrated entities like Wilmar and Indofood, it might be tough to actually break it as a separate segment.

Wilmar's mgmt seemed to be of the opinion that it should be viewed as a whole and not really as part as be it CPO, Oilseeds or Sugar would contribute to their consumer goods segment so I was wondering what would be a reasonable value to pay for this acquisition?

Additionally in your opinion, what would be a decent multiple to give to Wilmar's own consumer goods segment?

Thanks
___________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com

[mrEngineer]

Sorry muns, I did not do homework on this acquisition. But in general principle, you will have to look at comps of EV/EBITDA multiple. If you have access to dealogic database, you can even have e precedent transactions as comps. My personal yardstick is max 12x unless there is really some strategic synergy.

[greengiraffe]

Sugar industry awaits Wilmar decision
PUBLISHED: 29 JUN 2014 15:44:42 | UPDATED: 30 JUN 2014 00:05:42

Sugar industry awaits Wilmar decision
Wilmar Sugar has until Tuesday to decide whether it will negotiate with an industry working group or set up its own marketing company. Photo: Glenn Hunt
TIM BINSTED
Wilmar Sugar has until Tuesday to decide whether to participate in an industry working group that Queensland Sugar Limited chief executive Greg Beashel says will be critical for QSL and Australia’s canegrowers.

Wilmar sent the nation’s $2 billion sugar industry into turmoil in May when the Singapore-based agribusiness giant announced plans to undermine a century-old agreement and remove its sugar from the QSL ­collective export pool.

QSL is a member-owned non-profit organisation that has been the sole handler of the industry’s financing, pricing, marketing and logistics operations.

The Wilmar move sparked outrage from peak body Canegrowers and fuelled fears that cane farmers would be pushed into a sugar pricing system with minimal transparency.

Wilmar processes 2  million tonnes of sugar – or 60 per cent of the nation’s production – through its eight Queensland mills.

Last week Queensland Agriculture Minister John McVeigh offered to ­facilitate a working group to find a business model that is acceptable to the industry.

Wilmar has until Tuesday to decide whether it is willing to negotiate or will plough ahead with its decision to pull its sugar and set up its own joint marketing company to rival QSL from 2017.

Mr Beashel said that both QSL and Australia’s second-biggest miller, Mackay Sugar, had agreed to take part in Mr McVeigh’s working group, but Wilmar was “dragging its feet”.

“This is critical. Whether Wilmar decide to participate in the minister’s discussions will be key,” Mr Beashel said.

“In general the industry has been very co-operative between millers and growers. This is the first time anyone has moved away from working with growers, and it is a major challenge for the industry.

“Our constitution says we must act in the best interests of the industry. It is unusual for us to speak out against our members [of which Wilmar is the biggest], but they shouldn’t be able to force our growers into a system they don’t want,” he said.

Wilmar Sugar boss Jean-Luc Bohbot has flown from Singapore to Queensland several times in recent months to try and stem the tide of criticism and build support for Wilmar’s new marketing company.

But Mr Beashel, who says he is advocating a real choice for growers between Wilmar and QSL, said Wilmar’s top brass were disappointingly absent from last week’s talks with minister McVeigh.

“The Singapore guys have been amazingly absent from the whole debate,” he said.

A spokesperson for Wilmar Sugar declined to comment on Sunday. But Mr Bohbot told The ­Australian Financial Review two weeks ago that QSL was an outdated system, and that Wilmar has the capability to realise better prices for Wilmar and canegrowers by leveraging its huge global trading network.

Mr Beashel said he is waiting for Wilmar to prove it can generate better returns outside the QSL umbrella.

The situation intensified for QSL last week when Thai-owned MSF Sugar said it would follow Wilmar and exit the QSL system.

[greengiraffe]

Goodman Fielder bidders look to lower offer price
THE AUSTRALIAN JUNE 30, 2014 10:52AM

John Durie


Melbourne
WILMAR and First Pacific are attempting to negotiate a lower offer price for Goodman Fielder which has forced the target company into a trading halt.

The bidders had agreed to pay 71c a share subject to due diligence but are now arguing, after looking at the books, the bid is too high and they want to stick to a lower price of below 70c a share.

The move puts the Goodman board in a difficult position, because having agreed to accept a 71c a share bid the board knows if Wilmar walks away the stock price will slump to 40c a share.

It is understood the board has no plan to issue a profit downgrade but, as with Treasury Wine Estates, word of the offer would have increased retailer pressure on the company.

Treasury was under attack from the big retailers in the wake of the rejected KKR bid but the company has avoided any downgrade on the back of a big promotion planned for the start of next quarter.

Faced with the danger of running out of supplies, the retailers have boosted orders which in turn has meant Treasury has met its stated profit targets.

Coles and Woolworths are likely to have played the same game with Goodman.

But it seems the bidders have instead changed their minds, or more to the point, decided the board was on the ropes and they may be able to negotiate a lower bid.

The aim is to have a definitive agreement signed by Wednesday, but that will depend on whether Goodman chair Steven Gregg and his colleagues backdown.

[muns]

They could get it cheaper off the market today at 68c haha, that's a good A$59mil savings right there from 71c!!!
___________________________________________________________
Finding the Value in a Speculative World
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[ahyeh]

China’s COFCO joins Wilmar, MSF to sell Australian sugar in-house

The Australian unit of Chinese agribusiness COFCO Corp will stop selling sugar through an industry-owned marketing body from 2017, part of a shake up of the export model in the world’s third-largest shipper of raw sweetener.

The move by Tully Sugar Limited comes after Wilmar International and MSF Sugar, owned by Thai sugar giant Mitr Phol, announced they would terminate agreements with industry-owned marketing body Queensland Sugar Limited (QSL).

A move away from a single marketing desk is being resisted by the growers that supply exporters as they say pricing could become less transparent.

But Tully Sugar said that after Wilmar and MSF had announced their departures it had little choice but to follow.

“The recent decisions by Wilmar and MSF Sugar to terminate their agreements at the end of the 2016 sugar season means that QSL loses more than 70% of its critical export mass and its competitive marketing advantage,” said Alick Osborne, chief executive of Tully Sugar.

“This presents unacceptable risks to our business and our growers.”

Wilmar has said it decided to leave QSL as it should be able to achieve better pricing through its own marketing arm. MSF said it was concerned about the future of QSL without Wilmar.

The exit of the three largest sugar processors raises doubts about the future of the traditional single desk sales model.

QSL said it acknowledged a desire for a new marketing framework, but said a collaborative model was needed to avoid a collapse in the confidence of growers.

CaneGrowers, the industry body for Australian growers, described moves away from a single sales body as “farcical” because it would remove transparency for growers.

Australia is expected to produce 4.6 million tonnes of sugar during the 2014/15 marketing year, the Australian Bureau of Agriculture, Resource Economics and Sciences said earlier this month.

http://www.theedgesingapore.com/the-dail...house.html

[greengiraffe]

Sugar sours as marketer dumped
ANDREW FRASER THE AUSTRALIAN JULY 01, 2014 12:00AM

Sugarcane burning on farm in Bundaberg, Queensland 25 Aug 1998. qld farming sugar cane
Canegrowers fear the end of single-desk marketing could hurt the industry. Source: News Limited
QUEENSLAND’S sugar industry is set for another monumental shake-up with the long-running, single-desk marketing to finish in three years, when about 75 per cent of the total crop will be marketed outside of the grower-run Queensland Sugar.

Queensland, which grows about 85 per cent of the nation’s sugar, has long had a single-desk method of marketing the crop, which for many years was compulsorily acquired by the Queensland government and marketed as a block.

But under reforms in the industry, mill owners will have the capacity to market the output of their mills themselves, with yesterday being the deadline for owners to decide if they wanted to opt out of the current arrangements in three years’ time.

Last week, the Malaysian-owned Wilmar, which took over the sugar assets of the old CSR and now runs six of the largest mills in North Queensland, indicated it would be doing its own marketing, and Thai-owned MSF and the giant Chinese-owned Tully mill yesterday indicated they too would be opting out from the middle of 2017.

This means that 11 of the state’s 21 mills will not have their output marketed through Queensland Sugar. But these are the larger mills and represent about 75 per cent of the output of the Queensland sugar industry.

Consequently, Queensland Sugar, which was a state-run body but is now owned by cane growers, will lose the economies of scale it has traditionally enjoyed.

Canegrowers chairman Paul Schembri said the state’s 4500 cane farmers were angry at the millers’ moves to abandon the arrangements, which had served the industry well for 100 years, and would now leave them at the mercy of the overseas-owned millers. “The big change in the industry has been at the milling end, where foreign ownership has gone up from 10 per cent to about 85 per cent.

“We’ve had that certainty for so long, but the new overseas owners of the mills have different drivers.

“These changes mean that farmers, who after all have most at risk here, will be cut out of any say in what happens in the future.”

Australian Cane Farmers Association chairman Don Murday said that both state and federal governments needed to intervene and insist on a marketing model that was mutually profitable for both millers and farmers.

“State and federal governments need to clearly understand that there is a heck of a lot more votes in 4500 cane farmers than there are in three multinational sugar traders,” Mr Murday said.

“Our 100 year-old brand and system that farmers trust and have confidence in is being ripped apart by sugar traders serving only their own interest.”

Queensland Agriculture Minister John McVeigh said his preferred position was for growers to be offered a real choice in sugar marketing arrangements.

“But the industry has been deregulated since 2006, and the fate of industry is in the hands of industry,” he said.

[greengiraffe]

Goodman Fielder to accept lower offer from First Pacific, Wilmar
BUSINESS SPECTATOR JULY 02, 2014 9:42AM

Mitchell Neems

Business Spectator Reporter
Melbourne
GOODMAN Fielder has agreed to a takeover bid from persistent suitors First Pacific and Wilmar which values the food ingredients maker at 2.5c less per share than its most recent offer.

First Pacific and Wilmar will pay 67.5c per Goodman Fielder share, which will allow the target to pay a 1c final dividend. This represents a 3.6 per cent discount on the previous offer of 70c, or a 2.1 per cent discount including dividend.

Calculations by Business Spectator estimate the value of the deal at $1.32 billion, excluding the dividend, or $1.34 billion, including the dividend. However, the First Pacific-Wilmar consortium already owns 19.9 per cent of Goodman Fielder’s share registry.

The agreement comes as Goodman Fielder also announced it expects to record a full-year non-cash impairment charge of between $300 million and $400m.

The group said the impairment charge was the result of challenging trading conditions and outlook in its core Australian and New Zealand baking and grocery businesses, and would predominantly be recorded against those businesses in the group’s full-year results.

In April, Goodman Fielder warned that difficult trading conditions were likely to affect its full-year result and that manufacturing and supply chain cost savings had been delayed.

The group said it expected normalised earnings before interest and taxation (EBIT) for fiscal 2014 to be between 10 per cent and 15 per cent below analysts’ consensus of approximately $180 million.

The Goodman Fielder board has unanimously recommended the reduced proposal in the absence of a superior offer.

Goodman Fielder chairman Steve Gregg said in reaching a decision to unanimously recommend that shareholders vote in favour of the revised offer scheme, the board concluded that the proposal represented an attractive value outcome for shareholders.

“I believe it also represents a positive outcome for our employees, our customers and our consumers,” he said.

It provides an opportunity to further leverage our strong consumer food brands in Australia and New Zealand to grow our business across the Asian region.”

The deal will require shareholder approval and an independent expert will be appointed to determine if the proposed deal is fair and reasonable. Regulatory approval is also required from the Foreign Investment Review Board and the Overseas Investment Office in New Zealand.

Goodman Fielder shares have been in a trading halt since Monday ahead of this announcement and last traded at 68c.

In February, Goodman Fielder forecast normalised annual earnings to be “broadly in line” with the previous year’s $185.6m as soaring milk prices and intense competition in baking goods eroded profitability.

The maker of household brands including Vogel’s bread, Meadowfresh milk and yoghurt, and Meadowlea butter and margarine, has been cost cutting, restructuring and divesting over the past three years, to focus on its core brands and reduce debt.

[muns]

Woah an expected 26% write down of Goodman's assets! That's no joke.

The offer price just keeps getting lower and lower! But still a fair bit more from their low of 48 cents in Apr!
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