Sydney - Tuesday - August 20: (RWE)...

Sydney - Tuesday - August 20: (RWE)
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GRAINCORP TIES UP WITH GLOBAL
PLAYER IN FLOUR MILLING


Overview
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GrainCorp, which specialises in wheat storage, and the big US
grains group Cargill, have successfully won the tender to purchase
Goodman Fielder's milling business.
This will make them the biggest flour miller in the country with
40 per cent of the total flour market.
GrainCorp managing director Mr Tom Keene says the acquisition
combines Cargill's international milling skills and GrainCorp's skills
in logistics and the grain supply chain.
"As a team, GrainCorp and Cargill possess the right mix of
skills and experience to ensure the growth and viability of the million
business," Mr Keene said.
"We combine specialisations in grain logistics, storage,
handling, milling and mixing and the expertise to improve processing
systems by introducing world-best practice and new technology."
GrainCorp and Cargill already work together through two
jointly-operated receival centres in NSW.
GrainCorp will have a 60 per cent stake in the new joint venture
and Cargill the balance, while the company will still be called Millers
Australia.
This looks a good strategic move for GrainCorp and should
significantly improve profitability.
However, the purchase has not been without some recriminations
from competitors and threats of legal action.
Manildra Group, a rival flour miller which was not even allowed
to tender, claims GrainCorp had "privileged" information in relation to
its grain harvest.
Dick Honan, who operates Manildra, says his company is
considering legal action to block the deal.
But this argument is unlikely to get very far because the sale
has been given unconditional approval by the Australian Competition and
Consumer Commission.
Goodman Fielder's corporate affairs director Rob Hadler says any
legal action would have little chance of success in the light of the
ACCC decision.
Other bidders were AWB and the South Australian grain handler,
Ausbulk.


Share Details
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Last price: $10.50
High/Low for year: $13.75/$9.60
P/E ratio: 8.8
Dividend yield: 6 per cent


Background
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Graincorp Ltd is one of the biggest handlers and marketers of
grain in Australia and was listed on the ASX in 1998.
The company provides handling, storage, marketing and agronomic
services to the NSW grain industry.
Graincorp services around 50 domestic and export grain buyers
including The Australian Wheat Board.
The company posted a 10 per cent rise in net profit to $37.7
million for the six months to March.
The result was boosted by a 36 per cent surge in revenues to
$382.7 million.
Grain receivals grew slightly to 11.6 million tonnes, of which
3.7 million tonnes had been exported.
The result was helped by the GrainCorp's merger with Vicgrain in
October 2000 as well as new capital works and cost-cutting measures.
Graincorp is focused on becoming a fully integrated agribusiness
and expanding its grain storage and handling facilities.
This has encompassed the establishment of central receival sites
and service centres.
Around 150 of the more than 300 silos receive 75 per cent of the
grain.
GrainCorp is also looking to expand non-grain activities.
More than 1 million tonnes of woodchips are now handled through
the Geelong and Portland terminals.
Cotton seed exports are also handled from the Newcastle
terminal.
ENDS