Transcript O29mobile

Water Services Committee Conference
The Parklake Hotel, Shepparton
Thursday 31 July 2014
Market Trends
& The Future of Agriculture
Phil Ruthven AM, Chairman
WHERE KNOWLEDGE IS POWER
Topics
1. Brief Global Perspective
2. Australia’s Economy & Industries
3. The Agricultural Industry
4. Agribusiness
5. The Water Industry
6. Success in Rural Businesses
7. A Different Industry In The Future
1.
Brief Global
Perspective
The World’s Economic Regions In 2014
Share of World GDP (ppp basis)
Eastern
Europe
W&C Europe
North
America
4.0%
18.3%
Indian
21.9%
ME
5.3%
S-C
7.3%
Africa
C&S
3.9%
Asia
Pacific
33.0%
America
6.3%
2014 World GDP, $US 92.5 trillion
IMF/IBISWorld 09/02/14
Asia Pacific Economy
2014 (F)
Singapore
Vietnam
NZ
Myanmar
Cambodia
Laos
PNG
Other
1.3%
1.3%
0.5%
0.4%
0.1%
0.1%
0.1%
0.1%
Others
3.9%
*Korea
*North Korea
52.4%
6.8%
0.2%
South Korea 6.6%
China
25+ nations
$US 30.5 trillion
GDP (ppp terms)
Wikipedia/IBISWorld 12/03/14
Asia-Pacific Arable Land
% of total basis
Myanmar Cambodia
Vietnam Malaysia
Malaysia NZ
Laos
PNG
Other
Australia
53.2%
17.5%
Korea
1.5%
Japan
1.5%
China/HK
Philippines
1.2%
2.7 million sq.km
Source: CIA 04/02/12
Asia Pacific Renewable Water1
Singapore
Vietnam
NZ
Burma
Cambodia
Laos
PNG
Others
0%
7.3%
3.2%
8.6%
3.9%
2.7%
6.6%
0.65
Others
3.9%
Other
33.0%
23.2%
China
HK
Japan 3.5%
Korea 1.2%
Indonesia
3.4%
23.3%
3.3%
•North Korea 0.6%
•South Korea 0.6%
12.2 ckm total
Note: 1 Renewable water, essentially rainfall plus
neighbouring nations’ source, desalination
Source: CIA 30/6/11
Australia’s Exports Market
Merchandise goods
2014
Asia Pacific 78%
Asia
82%
Other
5.8%
40.3%
Other A-P 5.4%
Greater
China
China 36.6%
Taiwan 2.7%
H/K
1.0%
17.9%
Japan
Indonesia
1.8%
$274 billion
(year to March 2014)
IBISWorld: 22/05/14
Australia’s Exports Market
Year
Other
Services
1.1%
1.2%
Resources
57%
Services
17%
Business
Services
Freight/Postal
2013
Agriculture
Tourism
8.0%
10.8%
49.3%
Minerals
Manufacturing
26%
$319 billion
IBISWorld: 11/09/12
Australia’s Exports Market
By Category share of total (%)
1898
1972
1992
20141
Fiscal years
Rural
Mining
Manufactures
Freight
Other Services
Tourism
$ billion
Source: ABS & IBISWorld 2014 Note: 1 Year ending March 2014
Importance Of Rural Exports
Share Of Total Exports F1970-2013
False dawn
or new era?
“Rural exports” in this chart include processed
rural produce; otherwise < 5% of total exports
Year, ended June
Source: ABS 25/07/11
2.
Australian Economy
& Industries
Australia’s Economic Growth
Annual real GDP growth (%) progressed in quarters to
March 2014
(and forecast to March 2019)
3.5% pa (52 years)
3.2% pa (since 1987)
Years, ended June
Source: IBISWorld: 05/06/14
Australia’s Economy & Population
F 2014
Population
GDP
NT
Tas ACT 1.0%
2.2%
ACT NT
Tas 2.3% 1.3%
1.6%
1.6%
SA
SA
7.2%
6.3%
NSW
NSW
32.0%
31.3%
Queensland
20.2%
Victoria
Victoria
24.9%
22.2%
$1.6 trillion
23.6 million
IBISWorld: 21/05/14
Victoria’s Economic Growth
Real GDP or GSP growth (% pa)
Real growth F1991-2013
Year, ended June
Source: ABS/IBISWorld 29/10/13
Ages Of Economic Progress
GDP @ Constant F2011 Prices
Australia 1788-2013 and onwards
2200
2000
1800
1400
1200
Agrarian
Age
Hunting,
trapping,
fishing,
crafts,
religion
Agriculture,
Mining,
Banking,
Commerce
An Industrial Age is when
Manufacturing and Construction
dominate the economy
(c. 30-50%+ of GDP)
Transport
the major
utility
Power the major utility
(electricity) and
telephony
1000
800
600
Industrial
Age
Infotronics
Age
Enlightenment
Age ?
Industrial
Age
Quaternary
service
industries
IC&T
Quinary
service
industries
Imbedded
intelligence,
neural network
Programs.
More electronic
“guardian
angels” and
other new
technologies
400
200
0
1780
1790
1800
1810
1820
1830
1840
1850
1860
1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
GDP $ billion
1600
Hunting
Age
Year, ended June
IBISWorld 24/09/13
Outsourcing Creates Most Industries

We outsourced the growing of things to create the
agriculture industry, aided by new technologies

We outsourced the making and building of things to
create the industrial age industries of manufacturing
and construction, aided by new technologies and
utilities.

We are outsourcing services (household services and
business functions) to create the current infotronics
age from 1965-2040s, aided by new systems &
technologies and a new utility sector. These created
$ 1.2 billion in extra revenue pa by 2014
Importance of Industries
2050
2020
2000
1980
1960
1940
1920
1900
1880
1860
1840
1820
1800
Shares of GDP by Industry Division, 1800-2050
Agriculture
Mining
Primary
Sector
Manufacturing
Utilities
Construction
Secondary
Sector
W’Sale Trade
Retail Trade
Transport, Postal
Tertiary
Sector
Media & Telecom
Finance & Insurance
Rental, Hiring. R Estate
Dwelling O’Ship
Prof & Tech Services
Quaternary
Sector
Admin Services
Public Admin/Safety
Ind taxes less subsidies
Education
Hospitality
Health & Social Assist
Quinary
Sector
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020
Arts & Recreation
Personal & Other Serv
2050
New Age Industries
1965 – 2040s+
Household Outsourcing










Hospitality (meals, accommodation)
Entertainment (clubs, casinos)
Household services (everything!)
Personal services (beauty, fitness)
Health (everything!)
Tourism (transport, agencies)
Education (pre-school, tertiary) services)
Child minding (pre-school, nanny services)
Finances (advice, management)
Other services (inc. unmentionables)
Overseas Outsourcing (To Us)








Mining (energy minerals)
Tourism (inbound)
New era in agriculture?
Education (mainly tertiary)
Health
Aquaculture (& crustaceans)
Manufacturing (smelted ores)
IP (royalty arrangements)
Business Outsourcing










Trucking
Facilities management
Business services (A/C. legal, computing)
Knowledge services (data, consulting)
Cleaning.
Catering
HR services (recruitment, staffing).
Security
Call Centres/CRM services
Operations (via franchising)
New Enabling Utilities (& technologies)





ICT
Nanotechnology
Biotechnology
Just-in-time systems
Self-service systems
IBISWorld
Australia’s Industry Mix
Shares of GDP, in F2012 price terms Year to March 2014
Hospitality
Pers. & Other Serv.
Cult & Rec. Serv.
Agriculture
0.8%
2.2%
Mining
10.3%
Govt. Adm. 5.2%
Utilities
2.4%
7.6% Construction
2.9%
8.2%
Finance &
Insurance
2.7%
Admin. &
Support
Services
Rental,
Hiring &
Real Estate
GDP $1558 billion
Info Media &
Communications
Sectors
Primary
Secondary
Tertiary
Quaternary
Quinary
Note 1: includes stat. discrepancy (0.15%)
ABS 5206-26 IBISWorld 05/06/14
Importance of Industries
States & Territories Shares of GSP by Industry Division, F2013
100%
WA
NT
14.3
90%
29.4
80%
Qld
8.8
6.5
5.0
17.7
60%
12.9
50%
40%
3.5
4.8
3.1
30%
6.7
5.4
20%
10%
2.8
4.0
2.9
4.5
0%
SA
Tas
8.1
5.4
3.3
7.6
6.7
7.7
6.9
4.6
4.6
4.2
9.3
70%
Aust
6.1
4.7
4.8
4.3
2.2
6.8
6.2
2.3
6.5
5.6
2.7
4.3
3.4
8.1
8.1
5.1
2.5
8.3
7.8
7.7
5.8
3.3
6.8
5.2
6.0
6.5
4.5
6.7
7.0
5.1
7.0
7.1
6.4
2
3
4
Agriculture
Mining
9.7
6.0
5.1
2.8
4.5
4.3
4.3
4.7
4.0
9.9
11.9
2.6
2.8
8.3
9.3
4.5
7.5
Manufacturing
Utilities
Construction
3.9
2.5
Wholesale trade
7.9
Transport & Postal
9.8
Retail trade
Media & Telecom
Finance &insurance
Rental & Real Est
Dwell O'Ship
Prof & Tech
29.0
6.3
4.6
6.1
ACT
7.3
8.6
5.9
5.7
NSW
7.6
5.6
4.1
4.8
2.7
4.6
9.2
5.5
4.1
4.5
5.8
3.4
6.6
5.1
3.1
4.4
9.6
7.7
Vic
Adm. & Support
Govt admin
4.1
4.9
7.6
7.3
4.5
Education
5.4
4.6
6.7
Accom, cafes &rest
Ind taxes et al
Health &community
8.5
9.9
5
6
92
24
6.8
6.2
5.8
7
8
9
Cult &recreation
Other Services
1
239
19
284
1473
329
455
32
GSP $ billion
IBISWorld 09/03/14
Australia’s Three Geographic Zones
(population in equal land masses)
Top ⅓
4.4%
of population
82.9% of state
1.0 million
people
12.5% of state
5.4% of state
Middle ⅓
17.1% of state
4.1 million
people
86.3% of state
0.3% of state
17.9%
of population
1.3% of state
17.9 million
people
93.3% of state
99.7% of state
Bottom ⅓
77.7%
of population
Source: IBISWorld, ABS and mapsnworld.com 19.02.13
Importance of Industries By Zones
Shares of GSP by Industry Division, current prices
Australia
Bottom 1/3 Middle 1/3
Top 1/3
100%
3.2
90%
9.7
7.7
18.4
7.1
80%
70%
60%
7.2
7.2
4.4
4.3
4.6
4.5
4.9
11.6
9.8
40%
6.6
2.2
30%
20%
10%
0%
7.7
2.4
4.8
51.2
7.7
4.9
4.7
50%
6.4
4.6
5.0
7.4
5.7
2.3
5.1
2.2
7.9
2.7
5.0
6.6
7.2
4.3
4.7
5.9
6.2
7.8
1.9
4.6
5.7
3.7
5.7
3.6
5.9
2.5
2.9
2.9
5.1
3.2
3.1
2.1
3.3
$1.48 trillion $1.09 trillion $277 billion $111 billion
Agriculture
Mining
Manufacturing
Utilities
Construction
Wholesale trade
Retail trade
Transport &storage
Communication
Finance &insurance
Prop &business
Dwelling O'Ship
Govt admin
Ind taxes et al
Education
Hospitality
Health &community
Cult &recreation
Personal & Other
IBISWorld & ABS 21/02/13
3.
Our Agricultural
Industry
Agriculture’s Importance
100
90
90
80
80
70
70
60
50
Economic Importance
(contribution to GDP, %)
Revenue
(constant 2004 prices)
60
50
40
40
30
30
20
20
10
10
0
0
Revenue ($billion, F2004 prices)
100
1800
1810
1820
1830
1840
1850
1860
1870
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
Share of GDP (%)
Agriculture, Fishing & Forestry Industry, share of GDP (%)
Australia’s Broad Population Shift
% of total
1901
2001
2051(F)
19%
25%
Coastal
66%
Capital Cities
7%
32%
64%
61%
5%
12%
4%
5%
Rural (cities >30,000 )
Rural (towns & shires)
Source: ABS & IBISWorld
Agriculture’s Continuing Volatility
% annual change in real value added 1976 to March 2014
50
Collapses average 3+ years apart,
serious ones average 7-8 years apart
40
30
20
10
0
-10
-30
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
-20
Source: ABS5206-16
Agricultural Output and Net Profit
4-qtr.moving change to March 2014
$ million (current prices)
Output is volatile
Gross Output
Net
Profit
ABS and IBISWorld 26/07/14
Farm Income
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Income is volatile
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Income ( $ million)
Realised Agricultural Income, 1960- March 2014, $ millions
Source: ABS5206-23
Agricultural Assets
Total Assets and Debt
Total Assets
Debt
Year, ended June
Source: IBISWorld 14/02/14
Agricultural Returns
NPAT & Capital Gains return on equity (%)
Clearly Agriculture, in business terms,
is a property speculation asset rather
than an economic production asset
Average Net profit/equity
2.3% pa
Average Capital gain/equity 3.6% pa
Average Total Return/equity 5.9% pa
Capital gain
(% of Net Assets)
Net Profit
(% of Net Assets)
Year, ended June
Source: IBISWorld 14/02/14
Agriculture’s Productivity Growth
Real GDP or GSP growth (% pa)
F1996-2013
Year, ended June
Source: ABS/IBISWorld 15/02/14
The challenges for Agriculture and its rural
operators is not productivity - which is the best
of all the nation’s industries - but massively
overpriced land, insulation from droughts and
floods, competitive product selection, financial
structuring, and economies-of-scale
Importance of States
Rural Land Value, % by states: 1989 and 2013
1990
2013
100%
Qld
90%
8.6
13.0
9.9
80%
SA
11.0
70%
WA
10.9
8.0
2.6
2.9
60%
Tasmania
29.7
50%
24.9
Victoria
40%
30%
NSW
20%
NT
10%
ACT
0%
1
40.9
36.9
NT 0.7
ACT 0.1
NT 0.3
ACT 0.0
2
Land Value $ bn. (current prices)
3
62.3
4
5
261.0
IBISWorld 15/02/14
Importance of States
Gross Output, % by states: 1990 and 2013
1990
2013
100%
WA
90%
13.5
16.2
NT
80%
21.0
70%
Qld
60%
Victoria
22.6
22.3
50%
23.9
SA
40%
30%
ACT
20%
Tasmania
11.7
29.1
10%
0%
10.9
22.6
NSW
1
2
Gross Output $ bn. (current prices)
3
34.5
4
5
67.7
IBISWorld 15/02/14
Importance of Product Groups
The Changing Mix: 1990 and 2013
1990
100%
90%
2013
Wool
Sheep, cattle
70%
50%
40%
20%
10%
22.8
5.8
1.1
Milk
Wheat
Barley, oats, sorghum
5.2
12.3
Other grains, oilseeds
6.4
3.2
5.1
3.8
2.2
9.9
Fruit, nuts, vegetables
Other agriculture
Other Livestock prod.
0.0
1
2.3
1.3
2.3
2.9
16.3
10.3
2.8
4.5
2
Output $ bn. (current prices)
3
34.5
4
Poultry, pigs etc
Milk
2.1
Plants. Flowers
Other animals
Sugar Cane
6.6
Wheat
Non-agriculture
0%
Sheep, cattle
1.4
Pigs, poultry, deer
Fodder, grass
30%
20.3
Sugar cane
Eggs, honey
60%
Wool
19.7
Other live animals, pets
80%
4.1
Barley, oats etc
Other (oil seeds etc)
Fodder, grass
Plants, flowers
Fruit, Nuts,
Vegetables
5.3
Other agriculture
5.3
Non-agriculture
5
67.8
IBISWorld 15/02/14
So, just what is happening
as we head down the
21st Century?
What is Happening to Agriculture
in the 21st Century
1.
2.
3.
4.
5.
5.
6.
It is growing in volume and dollars, but its growth is much
slower than new age industries.
Average revenues per holding need to move from c. $460,000
to well over $1 million, and ROSFs from <3% to 15%+ to match
other SMEs in the economy.
The industry is integrating into an agribusiness input-output
chain with greater discipline.
The industry is moving into a more professional and
businesslike status.
Many Gen X offspring and most Gen Y offspring don’t want to
inherit or follow their father (or parents) into the business
World best practice and technology transfer is a condition of
survival.
The industry is changing its markets, its products, its locations,
its systems & technology and its ownership.
The Big Changes in Agriculture
New markets:
Shift from Europe and North America to the Asia Pacific.
New products:
Shift from livestock products (esp.wool and dairy) into beef, horticulture, cotton, oil
seeds, grain legumes, aquaculture, crustaceans & molluscs, floriculture and
outsourced services.
New systems & technologies:
Water husbandry, dry land farming, hydroponics, fish farming, dominance of man
made forests (over native), laser levelling, varietal development, biotechnology(
genetic engineering, tissue culturing, hybridisation etc).
New locations:
Shift northward with Western Australia, Queensland, Northern Territory emerging as
the key growth areas.
New ownership and corporate structure:
Shift from land ownership to leasing/rental (from specialised property trusts); subcontracting of agricultural services; contract supply of agricultural produce to local
and overseas manufacturers; development of franchising. Growing foreign
investment and ownership (esp. China) due to food security concern.
New Markets
2010
1901
Other
Countries
12.8%
Asia
Pacific
Indian S-C
0.8%
Other
Nations
8.4 %
10.7%
Other EU
18.7%
Asia Pacific
69.5%
UK
53.5%
Merchandise Exports
$A 67 million
Source: IBISWorld
Merchandise Exports
$A 201 billion
New Products
1910
2010
Fishing, Hunting,
Forestry
4.0%
Livestock
Products
9.6%
Crops &
Horticulture
Livestock
Products
40.3%
Livestock
23.7%
Wool, Hides
Milk, Eggs
Honey
33.4%
Crops &
Horticulture
Livestock
45.3%
22.3%
Revenue $A 56 billion
Revenue $A 0.24 billion
(c. 20% of national revenue)
(1.5% of national revenue)
Source: IBISWorld
New Systems & Technologies
 Land laser levelling/watering systems/cultivation methods.
 Hydroponics/aquaculture (horticulture/fishing).
 Satellite technology (ground preparation, forecasting, harvesting)
 Biotechnology (genetic engineering, hortmones, hybridisation,
tissue culturing, hormones, varietal selection
 Large scale technology.
 Intensive agriculture (poultry, pigs etc).
 Outsourcing (services), such as ploughing, seeding, harvesting etc.)
 Corporate/franchised operating systems.
New Locations
1910
2010
Tas
Tas
4%
WA
SA
2%
SA
NT 1.2%
12.2%
10%
NSW/ACT
14.7%
NSW
Qld.
47%
13%
WA
Victoria
17.8%
Victoria
24.5%
Qld.
25%
25.0%
Shares of Factor Incomes
Source: IBISWorld 25/07/11
New Ownership
(Sectors going Corporate/Agribusiness)









Poultry (Inghams, Steggles)
Grapes/Wine (Treasury etc)
Cotton (Kahlbetzer)
Olives
Aquaculture (Tassal)
Some Vegetables (incl. hydroponics)
Some Beef Cattle & Feedlots/Abattoirs
Some Pig Farming
Some Grain/oilseeds
4.
Agribusiness
(input-output flows & power shifts)
The Agribusiness Input-Output Chain
Revenue F2014 (E)
Imports*
Revenue $460 billion
(10.5% of nation)
Value of final goods $191 bn
(!2.3% of GDP)
$11 billion
Food
Agriculture
& Fishing
$56.5 billion
Input-Output Chain
Food
Manufacturing
Food
Wholesaling
Food
Retail
Consumer
$100 billion1
$58 billion2
$138 billion3
$154 billion
Hospitality
& Institutional
Packaging, Utilities,
Transport/ Other Costs
$59 billion
Exports*
$37billion
Power Points In The Agribusiness Chain
Least Power
New Infotronics Age (1965-2040s)
Vertical Integration/alliances
Most
MostPower
Power
Vertical Integration/alliances
Final
Hospitality
Markets
Imports
Manufactg.
Agriculture
Crude
Moderate
Elaborate
W’saling
Retailing
&
Final
Resellers
Consumer
Exports
In the Industrial Age, each link in the chain usually owned and operated independently
Most Power
Industrial Age (1865-1964)
Least Power
Agriculture, Fishing, Forestry & Services
Shares of industry revenue F2014(F)
Food Agriculture
73.6%
12.9%
4.5%
Fishing &
Aquaculture
Forestry &
Logging
Revenue
$A 73.5 billion
IBISWorld 20/01/12
Agriculture, Forestry & Fishing Industry
F2014 (F)
Industry
Firms
(‘000)
Vegetable Growing (outdoor)
Vegetable Growing (indoor)`
Grape Growing
Apple, Pear, Stonefruit
Other Fruit Growing
Grain Growing
Sugar Cane
Rice Growing
Sheep
Beef
Beef Feedlots
Sheep-Beef
Grain + Livestock
Poultry (meat)
Poultry (eggs)
Other Livestock
Pig Farming
Dairy Cattle
Hay & Other Crops
Food Based
Revenue Agg. Growth Ave. Rev.
($ billion)
3.27
0.94
7.98
2.06
4.34
11.96
2.55
0.30
12.81
30.02
0.52
6.93
20.92
1.10
0.15
3.60
1.16
6.69
2.49
3.20
0.80
1.14
1.06
2.26
12.80
1.03
0.69
3.33
5.54
2.79
2.13
9.84
0.46
0.58
0.81
1.01
3.97
1.27
119.79
54.71
5 yrs, %
0.3
0.8
4.5
3.6
7.8
9.5
6.9
5.4
4.8
4.0
7.3
5.2
2.1
7.4
5.2
0.5
9.3
5.6
6.9
( pa)
per firm ($m)
0.978
0.851
0.143
0.515
0.520
1.070
0.402
2.281
0.260
0.185
5.363
0.306
0.470
0.418
3.867
0.225
0.871
0.593
0.510
0.457
IBISWorld: 23/06/14
Industry
(ANZSIC Class)
Ocean Fishing
Seafood Farming
Seafood
Total (all food)
Firms
Revenue Agg. Growth Ave. Rev.
(‘000)
$ Billion
5.52
1.44
6.96
1.33
1.16
2.49
126.75
57.20
5 years (real)
5.3
3.0
($’milln.)
0.241
0.805
0.358
0.451
.
IBISWorld: 23/06/14
Industry
Firms
(ANZSIC Class)
(‘000)
Revenue Agg. Growth Ave. Rev.
$ billion
5 years (real)
($’milln.)
Non-food
Plant Nurseries
Cut Flowers
Horse breeding
Cotton Growing
Turf Growing
Sub-total
1.06
0.94
3.60
0.70
0.27
6.57
0.76
0.33
0.81
2.11
0.23
4.24
0.717
0.351
0.225
3.000
0.873
0.645
Forestry
Logging
Forestry
1.34
0.53
1.40
1.49
1.045
3.489
Sub-total
1.87
2.89
1.545
10.16
0.03
5.68
3.43
0.559
114.333
1.39
0.65
0.468
11.58
9.76
0.843
Services
Shearing (+ other outsourcing)
Cotton Ginning
Services to Forestry
Sub-total
5.
The Water Industry
Water Supply
ANZSIC D2811
Australia F2014(E)
Revenue
$ 9.5 billion
Growth, F2013-F2018 (real)
5.4% p.a (nearly double GDP)
Value Added
Enterprises
Employment
Wages
$ 4.76 billion (0.3% of GDP)
263
c. 15,900
$ 1.4 billion
Key Players (F2013 est.)
Watercorp (WA)
Sydney Water
SA Water
Melbourne Water
Qld Urban Facilities
Yarra Valley
SE Water
GMW
11.9%
11.5%
9.4%
6.0%
5.2%
3.8%
3.5%
1.8%
The Water Market
Share of total basis c. 2013 estimate
Products
Markets
$9.5 billion
(F2014 forecast)
Utilities
Other
Industries
Water
gathering
& Supply
2.5%
12.5%
Agriculture
26%
37%
Water supply,
drainage,
sewerage
21%
Distribution
22%
74%
Households
IBISWorld: 16/02/14
The Water Market
Locations of operation, % of total basis
NT
1.3%
SA
38.1%
Queensland
NSW
22.2%
Source: BEA/IBISWorld 8/6/13
Distribution of Water Consumption vs Population
Water Consumption
Population
Percent
Source: IBISWorld 28/07/14
Water Industry
Major Players F2013
Enterprise
Assets
Revenue
($ bn)
($ billion)
ROSF1
Staffing
(5 yr ave) (empl/$bn. Asset)
Melbourne Water
14.48
1.286
4.0
60
Sydney Water
14.45
2.521
6.2
188
SA Water
13.83
1.436
2.8
111
Water Corp (WA)
9.48
2.184
5.7
313
Qld. Urban Utilities
5.20
0.951
4.7
213
Goulburn Murray Water
4.33
0.257
-1.6
159
Yarra Valley
4.01
0.763
6.5
144
SE Water Corp
3.30
0.706
4.6
166
ACTEW
2.81
0.323
7.9
142
Hunter Water
2.68
0.318
2.2
178
City West Water
1.95
0.477
0.8
228
76.52
11.222
4.0
152
Total/Average
Note: 1 Return on Shareholder Funds after tax,
net profit (after tax) on net assets
GMW Profitability
GMW has virtually the same number of employees per
$ billion assets under management (159) as the industry
average (152), so is clearly as efficient. However, being a NFP
enterprise, it is not intended to match industry profitability.
If that exemption ceased, GMW might need to raise prices for
its services by $204 milion (79%) to earn the industry’s low
average ROSF of 4.0%. Whether it could do that with the
already-low profitability of farmers is another matter.
The GMW 5-year Financial Plan shows a reduction in the
losses but does mean customers will have been subsidized by
some $400 million over a 10-year period from 2009? A state
government, one day, might change the rules; suggesting a
contingency plan in a drawer somewhere could be handy.
6.
Success In Rural
Businesses
Success in any
business
Australian Profitability By Major Industries
Return on Shareholder Funds (after tax), Top
555 businesses 5 years to F2013
Wholesale Trade
includes multinational
importers/marketers
8.8
Includes private and
government enterprises
Percent
Source: IBISWorld 13/11/12
Australian Profitability By Major Industries
Return on Shareholder Funds (after tax),
Best 100 5 years to F2013
2 company
2 companies
Includes multinational importers/marketers
19 companies
21 companies
16 companies
100 companies
9 companies
5 companies
8 companies
7 companies
5 company
1 company
2 companies
1 company
1 company
1 comp.
40.7
40.7
Includes GBE &
private enterprises
ROSF Percent
Source: IBISWorld 20/11/13
The 100 Best Companies
ROSF after tax (%), 5-Year Average to F2013
By Focus
Focused (mainly single industry class)
Theme Conglomerates
Classic Conglomerates
Number of
companies
97 1
3
0
ROSF
(%)
49.3%
51.0%
-
100
49.4%
44
56
43.5%
54.0%
100
49.4%
38
59
3
46.5%
51.3%
48.7%
100
49.4%
By Ownership
Local Owned
Foreign Owned
By Ownership
Public Company
Proprietary Company
Government Body
Note: 1 This is highlighted to show that the majority of companies
are in onebusiness only, even if slightly lower in ROSF
Source: IBISWorld 20/11/13
20 Best Performing Australian Enterprises
5 years average ROSF, after tax, (%) to 2013
Enterprise
ROSF
Industry
(Local/Foreign)
(%)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Rondo
Bechtel
Phillips Electronics
Hatch Associates
John Deere
Phillip Morris
Federal Express
Shindlers Lifts
Tcorp
British Tobacco
Revlon Australia
WorkPac
Reed Elsevier
Mars
Pandora
Schroder Investment
Jardine Lolyd
Novo Nordisk Pharm
Wotif.com
Cliffs Natural Res.
152
148
139
119
117
114
94
89
87
80
72
72
69
68
66
64
63
59
58
58
Ownership
Manufacturing
Prof. & Tech. Services
Wholesaling
Prof. & Tech. Services
Wholesaling
Manufacturing
Transport
Manufacturing
Finance & Insurance
Manufacturing
Wholesaling
Admin. & Support Serv
Info. Media & Comm.
Manufacturing
Retailing
Finance & Insurance
Finance & Insurance
Wholesaling
Admin. & Support Serv
Mining
L
F
F
F
F
F
F
F
L
F
F
L
F
F
F
F
F
F
L
F
Revenue
($mill)
155
4277
364
691
932
984
209
331
8197
1961
95
432
209
1315
134
101
194
188
147
1411
Source: IBISWorld 29/01/14
What the Best Enterprises Are Doing
1. They stick to one business at a time and do not diversify
2. They aim to dominate some segment (s) of their market
3. They are forever innovative, valuing the business’ IP.
4. They outsource non-core activities to enable growth.
5. They don’t own “hard” assets.
6. They have good and professional financial management.
7. They plan from the outside-in not the inside-out
8. They anticipate any new industry lifecycle changes.
9. They follow world best practice for their own type of business.
10. They develop strategic alliances.
11. They develop unique organisational cultures.
12. They value leadership first and management second.
Success in
agriculture
The Agricultural industry
had assets of $425 billion in 2013 to
produce just $68 billion revenue and
earn a trading profit of 3% on net assets
(equity). One fifth of the national allindustries SME average, and well below
WBP of 20-25% ROSF!
Most farmers are in the property
business (for capital gain) more than
being in an operating business (for
trading profits)
Very Profitable Farmers
I.
Become a business,
not a way of life.
II.
Don’t blame other countries,
play a different game.
III.
Grow what the market wants,
not what have always done
IV.
Don’t pray for rain,
make sure you have got water.
V.
Outsource everything you can
get cheaper & better than DIY
(ploughing, seeding, harvesting etc).
VI.
Do not own land,
buildings, equipment,
stock or debtors.
VII.
Work the brain (intellectual property)
harder than the body.
VIII.
Add value at the farm not factory
(ie. high quality fresh is often better
than processed).
IX.
Have long term contracts &
relationships, not spot markets.
X.
Franchise or be a franchisee,
wherever possible.
7.
A Different Industry
In The Future
Some Issues
1. Our agricultural industry will be expected to make a
contribution to the food security issue in Asia in this
Century, even though we cannot be a major supplier.
2. Nevertheless, we could probably increase output by
some 5-fold, as we did in the 20th Century, but with
different products, systems, localities and types of
businesses.
3. High-density/intensive production (hydroponics, undercover, aquaculture etc) - where water costs are not an
issue - is already emerging as corporate endeavours,
sometimes including franchising.
4. Also likely to emerge are mega-buck investments (a la
mining scale) especially in the top end of Australia, with
many being over a billion dollars. Some mining
companies are thinking this way already
5. The current methods of agriculture do not earn a
proper income and return on equity, and the
younger generation are reluctant to take on “the
family farm”.
6. New financial structures will emerge to focus on
passive agricultural assets (land, buildings, general
infrastructure) with modest returns and some capital
gain to match the (low) Bond returns in super and
other funds.
7. The outsourcing of many farming functions (as as
happens in mining – eg contract mining - and other
industries) will lead to other big agricultural service
organisations
So?
8. What products should be grown in the GMW zone for
best growth and a profitable future?
9. How can GMW go about helping agricultural
customers know the future, enjoy growth and
become more profitable?
10. Which other sectors within the GMW zone of
influence can also benefit from advise and help
(tourism, other industries)?
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