Futuris Asia alliance key for wheat ambitions

Futuris Asia alliance key for wheat ambitions

Dow Jones, Melbourne

Australian agricultural company Futuris Corp.'s new alliance with Indonesia's Salim Group and Japan's Nissho Iwai Corp. is key for developing a grain export business to complement its wool, horticulture, meat and livestock operations, Chief Operating Officer Les Wozniczka said on Tuesday.

But Wozniczka told Dow Jones Newswires in an interview that Futuris' plans for a grains exporting business shouldn't be seen as an attack on Australia's monopoly wheat exporter AWB Ltd. And neither, he said, is the alliance with Salim and Nissho Iwai an attempt to frustrate AWB's ambitions to secure a strategic alliance with Futuris, in which AWB has built a 14.9 percent stake.

Under the alliance with Salim, Futuris has issued the Indonesian company a 5 percent stake. The terms of the Nissho Iwai alliance are yet to be finalized, but Wozniczka said it is too early to comment on whether the final deal will include a similar Futuris share issue.

But while Wozniczka said he is prepared to approach alliance talks with AWB in a positive frame of mind, he admits it isn't easy to see what an alliance with AWB would offer Futuris and its agricultural services unit Elders. He also still doesn't know what AWB's agenda is.

"We haven't had any real communication with AWB so I don't know what their plans and intentions for Futuris and Elders are," he said.

Only last month AWB increased its stake in Futuris in a move to gain greater leverage in planned talks to secure an alliance over Elders.

AWB is the legislated monopoly exporter of Australian wheat, but Wozniczka said Futuris can apply for an export license from the Australian Wheat Export Authority. Alternatively, Futuris could export through the AWB system, he said.

"There is a mechanism there we could use, if we wanted to do it ourselves," Wozniczka said. "It may actually suit us to do it through the Wheat Board (AWB). I don't know," he added.

Wozniczka said Futuris' Asian alliances are the culmination of years of work, and should come as now no surprise to AWB. He said it reflects a desire on the part of Futuris' customers to source all their agricultural needs through Elders. Salim's Bogasari Flour Mills business is a major buyer of Australian wheat.

"Taking food to Asia is the life blood of Elders' business," Wozniczka said.

"We aren't seeking to threaten or comment on the efficacy of existing (wheat exporting) models," he said.

Futuris' existing wheat distribution business is limited to supplying the local market. Wozniczka said the company handles about 500,000 metric tons a year and that "it is growing quite nicely."