TESTERS PURSUE GREENER PASTURES OFFSHORE
Written on the 12 April 2012
CAMPBELL Brothers (CPB) hopes to capitalise on its existing exposure to the food sector by pursuing greener pastures offshore.
CEO Greg Kilmister (pictured) recognises that from an analytical perspective, there is increasingly more trade in food.
“Beans sold in Australia may come from countries like Peru, where different (untested) pesticides are used. There is also a growing need to confirm product labelling is accurate,” he says.
“The rise in private branding will drive demand for more third-party testing. For example, a packet of Kellogg’s Cornflakes already has quality controls in place, but Coles-branded cornflakes are not controlled by Coles – they just package it.”
CPB sees the bulk of opportunities in the European market, which has strict guidelines for meeting genetically modified organism (GMO) standards.
“We already do GMO testing for crops. The European debt crisis does not concern us. This work will be driven by regulators or people complying with authorities instead of discretionary consumer spending.”
The group recorded a $102.3 million net profit after tax for the six months to September 2011, representing a 54 per cent jump on the previous corresponding period. Revenue rose by 22 per cent to $667.5 million in the same half-year.
Kilmister credits strong global mineral exploration activity for boosting demand for the analytical testing services provided by the ALS Minerals division in the Australian and North American regions.
“All divisions within the ALS laboratory services business recorded increased profit contributions and margins over the previous corresponding period because they are exposed to the booming resources sector, which will be a focus for our next 12 months,” he says.
“Demand for technical services has been strong. Because we are exposed to the resources sector, we are benefiting from increased exploration. We have increased our market share in the last 12 to 24 months.”
The Reward Distribution hospitality supplies division has returned to profitability while increased earnings from Ammtec (acquired in November 2010) and Stewart Group (bought in July 2011) also brought a 79 per cent surge in segment profit contribution.
“When we acquired the businesses, we branded them as ours and people recognised what they stood for,” says Kilmister.
“People recognise the strength of the Campbell Brothers brand, which has always stood for client innovation and service. We are very focused on providing good client service, technology and best practice services.”
However, the dwindling US dollar has negatively impacted on the business.
“Because a lot of our profits are in US dollars we are receiving fewer returns here in Australia after currency conversion,” says Kilmister.
“The Australian dollar is strong when resources are strong. It takes a little cream off at a peak operating period. This is a reality of operating internationally.
“We tend not to do currency hedging against the US dollar. If a company needs to, it is probably not operating at the right margins in the first place.”
CPB has spent $70 million on equipment acquisitions and owes $400 million in US private placements, long-term fixed interest notes to offshore investors.
“This type of debt finance costs less to repay and you can borrow money for seven to 12 years without establishment fees,” says Kilmister.
“The people are willing to lend and invest in our company since we also have operations based in North America.”
Kilmister’s total remuneration package increased 50.1 per cent to $2.09 million during the 2011 financial year.
“Most of the pay rise depends on bonus incentives based on delivering certain growth and objectives for the organisation. If the company does well so do I,” he says.
“I am happy with the result of the company and believe I am fairly paid for what I do. I am very passionate about the business and have worked here for 30 years, seeing staff numbers grow from 38 to over 11,000.”
The board declared a half-franked interim dividend of 95 cents a share that was paid on December 19, 2011. Full-year results are expected to be released on May 21.
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