CEO's Report 2008

This year has been a real milestone for Genetics Australia Cooperative as the hard decisions made last year have seen the business recover from five years of significant operating profit losses. Our cost reduction programs and focusing of the business has resulted in running costs that are now some $2 million lower than two year ago.

But as well as cost reduction we have concentrated heavily on driving our sales and marketing programs to increase market share, and these programs have been very successful. During 2007/08 we recorded a strong growth in semen sales in all the major dairy regions of Australia. In Victoria our semen sales were over 25% above those of the previous year, an excellent result. We also developed and implemented a Customer Relationship Management (CRM) system that will greatly assist our sales team to continue selling the best genetics in the world to Australian dairy farmers.

The changes made to the business of the Cooperative over the past two years has dramatically changed the underlying trading performance of the business, with earnings before interest and tax (EBIT) the best result since the drought hit in 2002/03, as shown in the graph.

There has been a turn-around of $2.2 million in EBIT between 2006/07 to 2007/08. This is very significant given that the dairy industry has only just started to recover from one of the worst drought periods in history.

I am also pleased to report that the performance of our retail service business units has been significantly improved, and these are now making an excellent contribution to the profitability of the organisation. The strategy of moving firmly into the distribution sector of the supply chain which was commenced back in 2000/01 is now showing success. Our plans are to continue increasing our distribution and direct servicing of our customers.

In conjunction with the improved profitability of the cooperative we have reduced the debt structure by around 30% from last financial year through increased focus on the collection of outstanding debt and also the sale of four little blocks of land around our office at Bacchus Marsh, which were not required for our farming operations. During the forthcoming year we intend to continue our focus on retiring our debt and readying the business for strong growth into the future.

There are a range of operational areas of the business that have been significantly improved over the last year, including our bull health and monitoring systems, information technology, communications and progeny test data systems. In addition there has been a strong focus on developing the culture of the organisation through a cultural change program called “The Way We Work”. This program is having a major impact on cultural change throughout the organisation.

During the year we also introduced a unique staff achievement award named after former Chairman John Harlock, who had such an outstanding influence on Genetics Australia over many years. This award is called the Harlock Staff Achievement Award in which there are four quarterly winners during the year and then an overall annual award for outstanding staff performance. There are many worthy recipients and this award has once again highlighted the exceptional quality of people working for Genetics Australia.

We continue to develop our staff to lay the foundation for our future growth. Two of our staff members travelled overseas during the year, Peter Thurn (Breeding and Genetics Manager) visited one of our major export markets and then a number of breeding organisations in Europe, and Tim van der Poel (Export Manager) visited South-East Asia to meet potential customers.

One of our staff members, Anthony Shelly, is being funded by Genetics Australia and has been accepted into the Australian Rural Leadership Program (ARLP). This is an intensive 18-month program that involves periods of intense activity and study, including international travel to look at other agricultural industries around the world. This should be a tremendous experience and will provide the organisation with expert managers into the future, one which will be increasingly complex in a global environment.

There has been a strong focus on our Occupational Health and Safety (OH&S) systems and processes, and we did not record any major injuries throughout the year. WorkSafe conducted a number of audits on our premises during the year and I am very pleased to report on our complete compliance.

During the year we continued to focus heavily on implementing genetic marker technology into our genetic selection programs. A real milestone for the Cooperative was in securing the commercial license, in conjunction with our partners Dairy Australia and Australian Dairy Farmers, for the CRC genetic marker technology for the dairy and beef industries. As this technology will form the backbone of our future genetic selection programs, the importance of this cannot be over-stated.

The breeding programs continue to deliver outstanding results. 2008 was a fantastic year with a number of new graduates from our progeny test program added to an already strong line up of proven sires. New Holsteins YUKON and NINESCAPE entered the top twenty APR available bull list, while PARTLUCK and QUIDDITCH are among the best type bulls ever to graduate at Genetics Australia. There are currently nine Genetics Australia bulls in the top twenty APR Holstein list as published by ADHIS. Our nearest competitor has just five.

In the Jerseys, BARTPOWER is the best new graduate and is the breeds premier total performance sire. He joins an already strong line up including the number one APR sire, VALERIAN and eleven other bulls in the ADHIS top twenty available Jerseys. The Aussie Red program continues to produce outstanding results given its size. The best new graduate was ARBBLAIR who is the most popular Red bull in Australia today.

Our 2008 progeny test teams lead by our genomically-selected Holstein Team, are the highest teams available for profit (APR). The breeding goal of profit and type has been applied to the selection of our progeny test teams ensuring that bulls that meet the needs of the Australian Dairy farmer will be met into the future.

This year we announced a major strategic alliance with World Wide Sires (WWS) in order to source the best sires globally for the Australian dairy industry. We have called this new range our “Global Sires” range. The Global Sires range continues our focus on APR as we have sourced the highest APR bulls from around the world while still delivering global diverse genetics to Australian dairy farmers. In doing so we have in fact proven that it is possible to introduce highly diverse global genetics into Australia without compromising our approach to the APR/ABV system, which is a great result for Australian dairy farmers.

As always our staff remains committed to the organisation and all are working very hard on your behalf. We will continue to ensure that the cooperative responds to both climate and market conditions.

Dr Ray Johnson,
Chief Executive Officer