AWB Limited facts for kids

Quick facts for kids
Formerly	Australian Wheat Board
Traded as	ASX: AWB
Industry	Grain
Founded	1939
Founder	Government of Australia
Defunct	2010
Headquarters	Melbourne , Australia
Revenue	$5.5 billion (2010)
Operating income	$407 million (2010)
Net income	$13 million (2010)
Number of employees	2,200

AWB Limited was a major grain marketing organisation based in Australia. Founded in 1939 by the Government of Australia as the Australian Wheat Board, in 1999 it was sold off by the government, initially to be owned by wheat growers. It was acquired by Agrium in 2010.

History

The AWB was founded in 1939 to regulate the wheat market after the excesses of the Great Depression. The single desk dates to this period. This type of arrangement was not unique to Australia, as the Canadian Wheat Board was created in 1935 in a similar fashion (but its history dates back to an earlier wheat marketing board created during World War I, and also includes the experience of cooperative wheat pools during the 1920s).

For much of its early history, it was a government-run and owned company. In July 1999, it was restructured by the Howard regime as a private company. It offered "class A" shares to those who met its definition of growers and who had the ability to elect the majority of its board and chairperson, and from August 2001, 'class B' were publicly traded on the Australian Securities Exchange. In 2008, constitutional amendments were passed. Despite resistance from several wheat lobbies and industry groups, it consolidated ownership of AWB into one type of share, giving growers no special consideration. This change was proposed by the AWB management as necessarily to having a simpler, lower-risk business model.

After privatisation, AWB grew to incorporate a number of subsidiaries to diversify its income away from its wheat exports. Its subsidiary businesses include GrainFlow to manage collection of grain from farmers to ports, companies to ship the grain overseas to customers, and Landmark rural services.

Corporate structure

AWB Limited was a holding company owning a number of subsidiaries. Its shares were freely traded on the Australian Securities Exchange.

AWB Limited had a number of subsidiaries. Some of these subsidiaries existed due to legislative requirements relating to the operation of the single desk; others exist for the purpose of controlling credit risk. As of early 2006, they were:

• AWB Limited - the holding company
• AWB (International) Limited - the corporation authorised by federal legislation to export wheat under the monopsony
• AWB (Australia) Limited - domestic wheat trading and export of non-wheat grains
• AWB Services Limited - provides services (e.g. financial services, IT services, asset management) to the rest of the AWB group
• AWB Harvest Finance Limited, AWB Commercial Funding Limited, and AWB Riskassist Limited - provide finance and financial risk management for wheat export transactions
• AWB GrainFlow Pty Ltd - provides bulk grain handling and transport facilities
• Landmark (comprised Landmark Operations Limited and Landmark (Qld) Limited) provides finance, insurance, real estate, commodities trading, farming equipment sales, etc. to Australian farmers (including other agricultural sectors such as wool and livestock)

AWB announced a new strategy in 2009 to simplify and de-risk the business. This resulted in the divestment of the financial services loan book to the ANZ Bank in December 2009.

In March 2010, AWB announced the signing of a memorandum of understanding to sell the Geneva business and to joint venture the local grain trading business.

Business performance post Cole Inquiry

In the years immediately following the Cole Inquiry, AWB continued to be dogged by bad performance.

Following the publication of the Cole Inquiry, a new management team was installed under the leadership of Gordon Davis who was recruited from Orica in August 2006. Davis successfully reformed the constitution and the shareholder structure to consolidate into 1 class of shareholder.

This new management team has not been entirely without controversy. On 26 April 2007, Yahoo News reported that AWB also breached US sanctions on Iran. These sanctions prohibit American citizens and companies using American currency from trading with Iran. In 2006, AWB's US subsidiary attempted to pay an Iranian transport company approximately $1 million, in clear breach of the US sanctions.

In 2009, the company faced difficulties in another new market, when it was forced to recapitalise the balance sheet after the company produced significant losses from the expansion of trading activities into Brazil under Davis.

Despite making a small profit in 2009, in March 2010, the company announced a profit downgrade from domestic trading activities. In May 2010, it reported a half-year loss of $64.8 million, which it claimed due to the cost of settling the shareholder class action for $39.5m, and a loss of $65.4m on restructuring costs associated with its sale of the Landmark Financial Services loan and deposit books.

Sale

In July 2010, AWB entered into an agreement to merge with GrainCorp. This did not proceed, after Agrium made a successful takeover offer that was completed in December 2010, with the company delisted from the Australian Securities Exchange. In 2011, Cargill acquired the AWB Commodity Management business from Agrium.