ELDERS Limited has signed an agreement with a joint venture company involving Indonesian companies and Australian exporter Austrex to buy Elders’ feedlot and processing assets in Indonesia.
Elders confirmed to the ASX on Tuesday it has signed a conditional agreement for the sale of the assets with PT Pramana Austindo Mahardika (PAM), for completion on 30 June.
The agreement is subject to completion of several conditions in the next three months.
A price for the reported sale has not been disclosed.
PAM is an Indonesian-led joint venture owned by Indonesian companies PT Labuan Mitra Tradatika and PT Rumpinary Agro Industry and AUSTREX Asia Limited, which owns a minority share in the JV.
The JV was established in 2015 to “participate and invest in the Indonesian beef supply chain through utilisation of the skills, experience and networks of the ownership group”, according to a statement.
Austrex’ chief executive officer and managing director, Justin Slaughter, said Austrex remained committed to its customer focused livestock export business and would provide the role as strategic supplier in the joint venture, whilst its Indonesian partners would manage day to day operations of the investment.
Elders’ chief executive officer and managing director Mark Allison said that exiting from the feedlot and processing facilities in Indonesia would allow Elders to redirect capital to its retail meat distribution business in Indonesia, as well as initiatives which are more aligned with the company’s acquisition strategy.
Elders said its decision to divest its PT Elders Indonesia business followed a comprehensive performance review of its Indonesian feed and processing business unit in line with the company’s strategic eight point plan. The assets were put on the market in November.
The company’s Lampung feedlot has a capacity of about 8200 head, and the company also operates a modern abattoir in Bogor plus a retail meat distribution business.
Mr Allison said within the company’s feed and processing portfolio, the Indonesian feedlot and processing assets had performed below the required return on capital.
“Elders prioritises investment in, and retention and growth of, business units which generate a consistent return on capital at a level which creates wealth for our shareholders,” he said.
“High cattle costs and changing Indonesian governmental policies have adversely affected the performance of our Indonesian business, making it appropriate to divest these assets.”
Mr Allison said Elders was committed to the live export and red meat industries in Australia and would continue to have a presence in Indonesia, China and Vietnam through its retail meat distribution businesses in those countries, which it intended to grow.