CPC is the largest privately owned beef producer in Australia
Consolidated Pastoral Company (‘CPC’) is the largest privately owned beef producer in Australia. Its operations include breeding, grass- and grain-feeding cattle, domestic and live export sales across 19 stations in Australia and two feedlots in Indonesia. Today CPC has capacity to hold 375,000 head of cattle across its 5.6 million hectares of land, which is almost 1.5 times the size of Switzerland.
Asset-Backed: At acquisition in 2009, CPC had nearly 280,000 head of cattle. The acquisition was driven by global macroeconomic themes, with the demand for protein supported by an increasing population and changing diets in developing Asian economies. In addition, Australia is one of the few major disease-free beef exporters in the world, allowing it access to markets which are restricted to other international suppliers.
Requiring Fundamental Change: CPC had the characteristics of an undermanaged and under-invested business. This presented a unique opportunity to acquire assets with attractive fundamental attributes and to assemble a robust management team to reposition the business into a well-capitalised, commercially focused organisation.
- Upon acquisition Terra Firma introduced a more commercial mindset to the business along with an analytical capability to identify investment opportunities to develop existing assets, explore new geographical markets and make add-on acquisitions. Having undertaken a major strategic review, the business is focused on repositioning itself to be a customer-focused marketer of beef, as well as a cattle producer. CPC is driving to be the industry leader in operations and genetics, as well as financial and administrative management.
- The existing operational team, which had detailed knowledge of the herd and the properties, was supplemented by a number of senior hires including a new Chairman, CEO and CFO.
Developing through capital expenditure
- CPC has undertaken a significant capital investment programme to improve its cattle stations and increase their cattle carrying capacity. The business has invested in improving watering points, building yards and laneways, adding fencing, bringing more land into production and improving all-weather access.
Building through mergers and acquisitions
- The industry in Australia is fragmented, with approximately 67 per cent of cattle farms running fewer than 400 head of cattle and only a small percentage of farms running herds of 800 or more. These station owners lack the resources to benefit from the changes in the sector, which provides an opportunity to grow the business through acquisitions.
- CPC has acquired six additional properties since Terra Firma’s original investment, bringing additional breeding and grazing capacity to support an increase in the size of the herd. They also provide greater flexibility in the way in which cattle are bred, grown and marketed, and offer defensive possibilities in times of adverse climatic conditions.
- In 2015 CPC increased its stake in its Indonesian joint venture, JJAA, from 50 per cent to 80 per cent to improve CPC’s portfolio performance and its position in the beef supply chain.
Lowering the cost of capital to create extra upside
- Risk has been reduced through the establishment of a forward-looking management team, the creation of integrated systems and processes, and a more diversified geographical exposure for both production and sales markets. The latter is being further supported through partnerships and further involvement along the supply chain.
Status of Investment: The CPC investment is unrealised.