November 6, 2012

Consolidated Pastoral to work on expansion into China market

Consolidated Pastoral, which was purchased by private equity firm Terra Firma from James Packer in 2009 for US$450 million, has been hurt by restrictive Indonesian import quotas, poor prices due to the high Australian dollar, and a sagging rural property market.

Terra Firma's Fergal Leamy will take over the reins from Mark Irwin, who steered CPC through one of its worst periods of trading on record.

CPC sold half as many live cattle to Indonesia in the first half of this year as it did last year and export prices have dropped 20%.

Leamy said that the central focus of the five-year plan was about opening export links with China.

"We see big opportunities in the Asian market," Leamy said. "When Terra Firma bought the business, it was because it liked the macro factors. The original thesis was about providing protein into Asia."

The company has a new joint venture with Chinese group, Dantong.

"We have started selling in a supermarket chain called Ito Yokada - the trial has gone very well, with sales comfortably beating our expectations, which has given us the confidence to roll out to other stores," Leamy said.

"We will also look at assembling a portfolio of property that allows us to serve those markets."

CPC currently has about 370,000 head of cattle run over more than 5.8 million hectares in Australia.

Last year, the company bought another 40,000 hectares of land.

In its most recent financial accounts, the company said "a modest improvement in the real estate market" had allowed it to book US$5 million in property revaluations or a 1% increase on property values - reversing part of the US$24 million impairment that was booked in the previous year.