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2015/IEG/WKSP/011 Session: 3

Sweet Business - COFCO Footprint in Australia Sugar Industry

Submitted by: COFCO

Workshop on the Best Practice of the Sustainable Investment in APEC Region

Beijing, China9 February 2015

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中澳甜蜜之旅 —中粮屯河Tully糖业

Sweet Business —COFCO Footprint in Australia Sugar Industry ——Sugar department of COFCO TUNHE

于作江 Yu Zuojiang

2015年2月9日 Feb 9,2015

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In 1960, China and Cuba signed an agreement of long-term import of sugar COFCO began its sugar business

China reformed the Sugar circulation system in 1991. Sugar was allowed to trade freely. Therefore, COFCO’s sugar business gained rapid development Since China joined the WTO, the sugar business of COFCO has grown rapidly. COFCO’s sugar imports have accounted for more than half of China's total imports

COFCO bought TUNHE in 2005, and began its beet sugar business COFCO acquired a 100% share in Australia Tully Sugary in 2011, and began its cane sugar business

COFCO acquired 51% share in Noble Sugar in 2014, and set up a joint venture A refined sugar project in Caofeidian was started in July 2014. The annual output is expected to be 500 thousands tons COFCO bought Huafu Trade & Development Group Corp in 2014

中粮食糖业务快速发展 The sugar business of COFCO has developed rapidly

1960 Sugar

cooperation with Cuba

1991-2004 Sugar

distribution system、 China

joint in the WTO

2005-2013 COFCO bought

TUNHE

2014年— a large-

scale acquired businesses

After 55 years of experience and accumulation, a value chain of processing-refining-trading has been formed in COFCO TUNHE.

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COFCO Sugar Platforms

Sugar department of COFCO TUNHE

HUAFU Sugar Noble Sugar

COFCO acquired the agribusiness of Noble Group and Huafu Trade & Development Group Corp, which has made the sugar supply capacity increase to 4.75 million in three years.

Holding 51%

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中粮屯河糖业版块迅速扩大 Remarkable growth of the sugar business scale in COFCO TUNHE

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把握商业时机，中粮收购澳洲Tully糖业 Catching a business opportunities, COFCO acquired Tully Sugar

1925

1990

2011

2014

Tully started crushing in 1925

Tully mill turned into a limited company in 1990

In 2011，COFCO acquired a 100 percent share in Tully Sugar

Achieve new record highs for both crushing and sugar production in 2014

Tully Sugar

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优化产业结构，扩大产能 Modifying the industrial structure, expanding capacity

Since Tully was acquired by COFCO, large amounts of capital investment and maintenance were taken for capital expansion. In 2014, new record highs were set for Tully’s raw sugar.

10,551,328

11,367,723

5,516,183

10,097,815

6,821,780 12,692,958 10,807,882 12,103,127

2011 2012 2013 2014

Capital expenditure and maintenance

costs of Tully（Australian Dollar）

资本性投资 CAPEX 维修维护费 Maintenance

1,158,077

1,773,537

2,338,000 2,436,800

2011 2012 2013 2014

Tully’s crushing amount in recent years

（ton）

6

建立平衡董事会，推行6S管理体系 Establishing a board of directors in balance, popularizing the 6S management system

Initially, COFCO appointed the sugar cane directors, the

COFCO director and independent directors as the board of

directors. The sugar cane directors were the chairman of

Tully sugar.

In August 2014, the COFCO director was elected by the

board of directors of Tully sugar as chairman. A board of

directors with a balanced "3 + 3 + 2" structure was formed.

Balanced Board of Directors

6S strategic control system

6S

Strategy

system

Budget

system

Management

reprot System

Internal Audit

system

Performance

assessment

system

Management

Assessment

system

7 7

依靠当地团队，开展日常工作 The performance of daily operations by the local team

Daily operations still performed by the local team

COFCO didn't adjust Tully’s management, it only sent two grass-roots workers to Tully sugar to help communicate with COFCO headquarters.

Build up risk control

COFCO established a risk control department to monitor global trade risks

Implementing the COFCO investment review system

The COFCO investment review system was implemented, to ensure that the factory capacity matched with the sugarcane crushing amount.

8 8

Inviting Tully’s board to visit COFCO headquarters and domestic

mills

Coordinating the relationship with QSL

Storage expense decrease by A$11/tonne of sugar, A$3m annual savings

Organizing agricultural technology communication

Australian expert provided technical support in variety selection, soil testing, fertilizer and pest control

加强产业协同，组织技术交流 Strengthening industrial cooperation, and organizing technical communication

Synergy emerged through sugar industry communication

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加强相互了解，发挥资源优势 Deepening mutual understanding, making use of the resource advantage

Introducing the COFCO in detail and putting forward some initial ideas of an Australian sugar independent marketing system Understanding the ideas and expectation of cane growers.

Trade communication

Regularly organizing cane growers meetings and inviting agricultural experts to teach the cane growers.

Cane-growers meeting

International purchasing

Making full use of the advantages of the global purchasing network of COFCO, helping Tully reduce costs.

Offering loans to cane growers , ensuring the sugar cane planting.

Offering loans to cane growers

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利用中粮优势资源，协同发展 Making full use of the resource advantage, developing in coordination

Tully-Hongkong

COFCO HK

Trading advantages

Cooperative research

Tully

Full industry chain and resources

Mu

tual g

ran

tee

cooperation model With complementary advantages, establish win-win

cooperation, achieve common development

In order to reduce sales costs and provide growers with a cheaper and more efficient pricing system, the COFCO Hongkong trading team is fully utilized to reduce financing and pricing costs

Expending collaboration among Noble Agri, Hongkong, Australia and COFCO in international sugar trading, with the strength of Huafu domestic sugar production and storage, and the guild COFCO sugar integrated value chain

Tully-Hongkong-Noble-HuaFu

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发展生态友好型农业，强化研发力量 Developing ecological agriculture, enhancing research and development

TSL pays full attention to agricultural sustainable development ， including reducing pollution , developing a circular economical business model and improving product utilization

Cooperating with SRA, BSES and SRI to develop green agriculture. Supporting the research of ASMC and SRI.

Developing RD&E

78,210 91,358

107,642

2,941 4,232 5,500

-

20,000

40,000

60,000

80,000

100,000

120,000

2012 2013 2014

TSL RD&E expenses

（Australian Dollar）

ASMC SRI

Appropriate use of nitrogen and phosphorus

fertilizers. Protecting the Great Barrier Reef

coral areas.

Strengthening environmental protection

Developing a cyclical economy

Tully uses waste bagasse to generate

electricity. Ash will be used as land fertilizer and

waste water can be used for cyclic heating.

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支持当地就业，推劢人才培养 Supporting the local workforce, pushing forward personnel training

In 2013, TUNHE started an

“Overseas Talent Training Plan”.

Young employees are selected

to participate in the overseas

rotations internship.

Developing an international talent team

Permane

nt, 205 212 214

59 67 71 264 279 285

12/13 13/14 14/15

Tully permanent and seasonal

employee

Creating about 285 jobs for the

local workforce.

Supporting the local workforce

Providing opportunities for excellent staffs to travel in China. Improving employees' understanding of COFCO.

Selecting excellent staff

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劣力公益发展，提出社区共建 Commitment to the public good

Tully sugar is a major sponsor to promote local skills. Staff are selected to introduce agricultural knowledge to the local high school and nearby residents each year.

Tully sugar board pays $40000 per year to support the local community activities Provides medical equipment support to the local Red Cross and hospitals Funds $200 per year to the local high school to hold the school sports meeting Supports the local football Club

Providing technical information

Funding community activities Apprenticeship project

10 apprentices are selected by Tully to learn skills from experienced staff

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相互尊重文化，塑造良好企业氛围 Respecting cultural differences, cultivating a favorable work atmosphere

COFCO is devoted to establishing mutual cultural understanding.

Great differences exist between foreign countries and China. COFCO implements a people-oriented strategy, trying to strengthen communication with local people and fully understand the local customs.

In order to gain the recognition of the local community, TUNHE make efforts to promote COFCO culture, and support community activities.

Creating a good image

Respecting local culture

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践行社会责任，提高企业认可度 Fulfilling social responsibilities, increasing the company‘s reputation

protect the

interests of

sugar cane

comply with local

environmental

regulations and

health and safety

laws

Create jobs

and provide

training

opportunities

Make large

amounts of

capital

investment,

expand the sugar

supply capacity

Establish board of

directors in balance,

development in

coordination

By establishing an efficient management system, maintain good employee –

management relationship, COFCO fulfill corporate social responsibility and

maintain their enterprise image.

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Thank You

Welcome to Tully

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