East coast grains handler GrainCorp will tip $125 million into its Australian edible oils and spreads manufacturing operations in a bid to shore up the division’s competitiveness.
GrainCorp Oils group general manager Sam Tainsh said the investment is a “vote of confidence in Australian food manufacturing operations at a time of uncertainty for many manufacturers in the country.”
The announcement comes less than 24 hours after Toyota said it would follow GM Holden and Ford pull out of Australia, sealing the demise of car manufacturing in the country.
The investment will create a “strategic hub” within Victoria that is closer to oilseed growing regions and the expansion and upgrade of GrainCorp’s operations in Numurkah and its food’s facility in West Footscray.
GrainCorp Food’s Murarrie site in Queensland will be phased out and is set to close in 2016, and around 130 staff will lose their jobs.
Mr Tainsh said that 44 new roles will be created at the expanded plants and the investment is expected to generate 400 new indirect jobs.
“The priority for us is giving our people in Murarrie as much certainty and ability to plan ahead as possible. That’s why we have informed our people over two years in advance,” Mr Tainsh said.
“Where possible, we will seek to redeploy our affected staff to other parts of our business. Where redeployment is not possible we will provide comprehensive training and assistance to find new employment.”
The upgrade comes as the nation’s biggest listed agribusiness licks its wounds in the wake of the failed $3 billion takeover approach from US giant Archer Daniels Midland, which was blocked by Treasurer Joe Hockey in a surprise late last year.
The move saw GrainCorp shares tank and the company is facing earnings pressure due to adverse weather and weaker harvests.
In the wake of Mr Hockey’s decision, highly regarded GrainCorp chief executive Alison Watkins announced her departure to take up the top job at Coca-Cola Amatil.
GrainCorp is now being led by its chairman Don Taylor as the company undertakes an executive search.
The upgrade forms part of GrainCorp’s strategic initiatives to deliver an additional $110 million per annum of incremental underlying earnings by the end of fiscal 2016.
The investment in the oils manufacturing segment is expected to contribute around $22 million per year of underlying earnings once commissioned.
GrainCorp’s capital expenditure will be funded with existing cash and debt facilities. The grains giant will incur a restructuring cost of $20 million, which is expected to be reported as a significant item in its 2014 earnings.
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