CO-OPERATIVE RENEWAL -THE CBH STORY

TERRY CUNNINGHAM#1267882

CBH Group Linking Growers to Customers

CBH Storage and Handling network

CBH – Our Co-operative Supply Chain

Our Growers~4,500 grower members10mmt annual production95% exportedAustralia’s No.1 co-op - $1.5bn.

Storage & Handling197 sites4 panamax ports20m tonnes of storageEngineering - $85m capexRail fleet of 22 locos and 574 wagons

Marketing & TradingLargest grain exporter in AusWest & East Coast AccumulationAcquire &markets 50% WA Grain7 different Grain Types. Export - 25 Countries primarilyAsia, Middle East, Europe

ShippingLoad 10m tonnes/year

Stevedoring

Processing6 flour mills

Vietnam, Indonesia, Malaysia

1 million tonne demand70% from Australia

Our CustomersFlour millers, maltsters

feed manufacturersfood processors

How did we get here?

50 years of Regulation, 10 years of Deregulation

CBH Tax

Exemption

Corporate Restructure Proposal 1998-2000

“THE BURNING PLATFORM”

• Competition

• Capital raising

• Control and ownership

• Value/equity for members

• National Competition Review

• Deregulation

• Legislative change

THE RHETORIC

• Danger if we don’t change now

• Status quo not an option

• Not change for change’s sake

• We will be in limbo

• Proactive not reactive

• Member will lose plenty if they vote no

• Alliances and mergers only possible with a restructure

• You can have your cake and eat it too

2000 - Co-operative Bulk Handling Ltd

Corporate Restructure Proposal

34% voted(3438)

58.78% for

(2021)

Elig

ible

share

ho

lders

–10,0

70

34.14% against

(1417)

What did we learn: Post 2000 corporate restructure survey

We didn’t listen to our members…

No need for restructure

CBH provides a good service that meets growers’ needs

CBH is owned and run by growers

CBH is a progressive organisation

84%CBH is doing good job/efficient/happy with them

Yes, there is a need for a restructure 31%

59%

82%

90%

71%

22%

76%

85%

91%

71%

Non-voters

85%

“No” voters

* Other key issue….. New Director

CBH – The road to co-operative renewal

1999 2000 2001 2002 2004 2006 2008 2009 20101999 2000 2001 2002 2004 2006 2008 2009 2010

CBH Ltd

Corporatisation

proposal

Corporatisation

vote fails

Proposed alliance

of CBH, AWB and

Grain Pool WA fails

CBH merges with

Grain Pool of

Western Australia

CBH Group acquires

50% of SE Asian

flour mills

Project “Nadia”

– restructure project

stalled by tax issue

CBH international

co-op study tour

New CEO

Project “Dawn”

-structure investigation

New Co-ops Act

Structure…a different approach 10 years on

1. LISTENING 2. ASSESSING 3. SHARING 4. IMPLEMENTING

Project Dawn

Started by listening to our Grower members ...

81% Want storage and handling to remain 100% owned by Growers.

72% Believe CBH should operate under Co-operative principles.

24% Believe CBH should be publicly listed.

90% Believe it is important that Growers can elect Directors.

67% Willing to invest in CBH if provided acceptable return.

71%Prefer value returned through investment in the network than a direct financial return.

TRADITIONAL

CO-OPERATIVE

PROPINVESTMENTCO-OPERATIVE

PUBLIC LISTING

MEMBER-INVESTORCO-OPERATIVE

NEWGENERATIONCO-OPERATIVE

CO-OPS

W/CAPITAL

SEEKING ENTITIES

INVESTOR-SHARE

CO-OPERATIVE

OPTIONS

ASSESSMENT

ME

MB

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ST

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GIC

FIN

AN

CIA

L,

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GA

L,

TA

X

ENHANCED

CBHM

EM

BE

R

ST

RA

TE

GIC

FIN

AN

CIA

L, LE

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TA

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ASSESSMENT

NON-DIST CO-OP

DISTRIBUTING CO-OP

DUAL CO-OP

ASSESSMENT

ME

MB

ER

ST

RA

TE

GIC

$,

LE

GA

L, T

AX

…and continued with a rigorous assessment

From a survival / failure perspective, there is no evidence to support that the co-

operative is a less efficient organisation than the corporate.

““Fabio Chaddad

University of Missouri

Co-operatives are successful when:

• They are run commercially• They are competitive• They seek volume and reward patronage

But can a Co-op Cut it?

Can This Co-op Cut it?

CBH - a Real Competitive Advantage

Grower• Only grower owned S&H and marketing business

in Australia.• Returning margins made from grain to the grower.

Grain Exporter• Most secure grain export pathway in Australia.

Grain Buyer• Origination direct from the farm:

Quality - known quality/traceable.

Security - most direct way to secure supply.

Price - shortest/cost effective supply chain.

4%

35%

62%68%

47%

53%

32%

65%

38%96%

2011 (May)2011 (Feb)2010 (Mar)2009 (Sept)2005 (Sept)

Grower meetings to discuss structural options

Deregulation

New mindset

Increasing commercial focus

Growers seeking more value

“Project Dawn” begins

Grower Vote -EGM

Communication of “Enhanced Co-op”benefits

**EGM

20% vote

Support for Enhanced

Co-op

**Support / Retain / Enhance

Undecided / Oppose / Change

Trends and Key Events

Support for a Co-op – grower views

HOW VALUE IS

CREATED AND

RETURNED PROFITSPROFITSPROFITS

IFHLSHIPPING

PROFITS

SELL

GRAIN

STORE

GRAIN

CBH OPS CBH GRAIN

•RAIL INVEST

•QUAL OPT

•ON-FARM

SERVICES

•CO INVEST

INSTRMNTS

MAINTAIN

LOW FEES

MAINTAIN

WORLD

CLASS

NETWORK

CBH GRAIN

LOYALTY

PAYMENT

EXTEND

LOYALTY

PAYMENTS

GROWER

CBH GROUP

Value in use:Base S&H charges vs Competitors

Scenario: Standard Wheat, delivered on October 1st to a main/primary country storage, exported in July, railed to port and stored for one week prior

to ship loading. Outloading and inloading during normal working hours. Assumes use of cheapest product available. Freight excluded.

(18)

$60

$10

$50

$40

$30

$20

$0

$ p

er

ton

ne s

hip

ped

Distance to port by road (km)

0 100 200 300 400 500 600 700

Value in useLower Freight Rates

Rail Investment

• 17 Narrow Gauge Locomotives

• 5 Standard Gauge Locomotives

• 446 Narrow Gauge Wagons

• 128 Standard Gauge Wagons

Grower Value Statement

§ Initiated in 2011.§Annual statement of value returned by CBH.§Summary of value returned:§ For the industry§ For a grower’s zone § For a grower’s

business

83%81%

77%

67%

61%

71%

83%84% 85% 86%82%

85% 84%

0

20

40

60

80

100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Grower loyalty increasing again

Consolidation of the Australian Grain Industry

Sixteen into six

?

Glencore

?

CBH focus: Create and ReturnValue to Growers

Our Purpose:Create and ReturnValue to Growers

Questions

Financial and Operational Summary

6.4

8.5

12.3

11.1

6.5

15.1

27.7

40.1

119

-21.4

28.1

2007 2008 2009 2010 2011 2012

Tonnes Handled(million tonnes)

Net Profit (Loss) After Tax($m)

2007 2008 2009 2010

(21.4)

Financial and Operational Summary

Revenue($m)

2007 2008 2009 2010 2011

30.9

90.7

73.9

67.0

128.8

2007

Capital Reinvestment

($m)

2008 2009 2010 2011

581.5

1,102.9

1,541.3

1,304.2

1,951.3

63% (2898) of Members

80%

100%

60%

40%

20%

0%

80%

60%

40%

20%

0%

100%

25%

of Grain

25%

of Grain

19% (874) of Members

25%

of Grain

25%

of Grain

12% (552) of

Members

25%

of Grain

25%

of Grain

6% (276) of Members

Cumulative Grain Volume

Cumulative Member Numbers

Decreasing

size of

Members

6%

18%

37%

Delivered by:

Delivered by:

Delivered by:

Delivered by:

One Grower, One Vote

… this is

why we exist

We are proud to be a grower-owned co-operative

… this is

who we are

We are ‘One CBH’

… this is

how we will act

We have a clear focus … our growers

We are here tocreate & return

value to growers

Challenges for CBHBigger crops, fewer growers

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1931

/32

1935

/36

1939

/40

1943

/44

1947

/48

1951

/52

1955

/56

1959

/60

1963

/64

1967

/68

1971

/72

1975

/76

1979

/80

1983

/84

1987

/88

1991

/92

1995

/96

1999

/200

020

03/0

420

07/0

820

11/1

2

Th

ou

sa

nd

To

nn

es

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Nu

mb

er

of

Sh

are

s

Tonnes Shares held by Growers