Australian agribusiness company Elders says it is "still committed to the live export trade" despite confirming it will sell its Indonesian feedlot and abattoir.
The announcement comes almost a year after the company sold its live shipping subsidiary, North Australian Cattle Company (NACC), citing poor profit margins.
An internal review by the company gave a similar assessment of its 8,200-head feedlot in Lampung and its abattoir in Bogor, finding the assets were underperforming.
Elders' Indonesian subsidiary is in the process of being bought by PT Pramana Austindo Mahardika (PAM), a conglomerate of Indonesians, a private equity component, and interests from Australia. The deal is set be finalised by the end of June.
Elders CEO Mark Allison said tough, long-running market conditions in Indonesia, coupled with changing Indonesian government policies, meant the assets were not providing a large enough return on capital.
"Northern Australia has experienced difficulties in Indonesia, first of all with some difficulties around quotas with 20 per cent of breeding cattle needing to be transported at the same time as [feeder] cattle," Mr Allison said.
"At the same time, the introduction of Indian buffalo meat has made the market quite difficult from a commercial viewpoint; it has put a cap on the sale price out of feedlots.
"The issues [plaguing the Indonesian markets] may be resolved in the short term — 18 months to two years — but it is hard to get a feel for that.
"From a long-term viewpoint [the industry] will return to a stronger position, but in the short term it is the right time to move the ownership to Indonesia."
Elders expects to move $10 million of working capital from its feedlot and abattoir into more high-return assets, including its Indonesian retail meat distribution business.
Elders 'still committed to live exports'
Mr Allison said today's ASX announcement was in no way tied to the recent criticism of the live export industry relating to the deaths of thousands of sheep on board a ship sailing from Western Australia to the Middle East.
"The sheep issues in Western Australia are quite distinct and I don't think Animals Australia or RSPCA have linked cattle live exports to the sheep issue; they are fundamentally different issues," he said.
"From an Elders viewpoint, we publicly talked about our divestment of our Indonesian assets six months ago, so there are coincidences of timing but there is no link at all."
Mr Allison said there had been no disruption to the company's supply agreement with the new owners of NACC.
"We continue to source cattle for that live export market and we continue to provide market opportunities for our markets up north," he said.
