AWB’S managing director Gordon Davis is confident the big shake-up at the company last week will put in good stead for the future.
The company made a series of big announcements last week, as it informed the market it would seek to lower its debt through a capital raising project and the sale of assets.
As part of the restructure, AWB will seek to offload its commodities business, AWB Geneva, and will also seek a joint venture with a global commodities player to strengthen its own grain marketing business in the deregulated environment.
Mr Davis said the decision to seek an alliance with another player on the world market was reflecting the trend in the Australian industry.
“We are a relatively small Australian company on the global market, and it is very difficult to do everything on our own,” Mr Davis said.
“We made the decision to try and find a partner to add value to our strengths.”
Mr Davis denied that the decision was made as AWB attempted to scale back its grain marketing business in favour of Landmark.
“We are not trying to exit the grains business: it is very difficult to grow on our own on the global scale.
“The business has some core strengths, such as our position in the Australian market and the strength of our relationships with customers overseas.
“Our challenge, now that statutory marketing is finished, is to find a way to capture value from that.”
Mr Davis pointed to existing alliances such as Elders and Toepfer’s joint venture or GrainCorp’s deal with American commodities business CHS to accumulate Australian durum wheat as examples of deals where the skills of Australian grain originators are paired with the international marketing strengths of large multi-national marketers.
“The principal reason to try and build a business through partnering is that trying to do it alone is not sustainable.”
Mr Davis would not be drawn further about to whom AWB was talking, other than to say they had an interest in the grains business, but said an announcement would be made soon.
He said the decision to try to divest the AWB Geneva business was based upon appetite for risk and capitalisation.
“The business has a strong record of profitability and is developing an exciting Black Sea business, but it is very difficult for AWB to support that growth.
“We feel that there is a more natural owner, with a bigger risk appetite to grow the business in that area.”
He dismissed suggestions that AWB was exposing itself to more seasonal variability by exiting another international business, following the proposed sale of AWB Brazil, announced earlier this year.
“In agribusiness, there is always a seasonal risk, and there is always a cyclical risk, such as that presented by declining grain prices at the moment," he said.
“However, you look at our separate income streams in Australia, combined with our presence in New Zealand and the regional presence we will maintain in India and we have a diverse spread.”
Mr Davis said he saw further opportunities in several areas.
“We are not well represented in downstream value-adding in the grains business, while we are also not that big in non-grain infrastructure yet," he said.
“There are plans to grow in these areas – you can see that with what we are doing with Landmark and saleyards infrastructure.
“The company is not light on for ideas and opportunities.”
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