Procal Dairies commenced business in 2003 and is a leading Australian and family owned dairy manufacturing and distribution business producing and selling milk, cream and yoghurt products. As a proud winner of the Australian CFO Top 25 – 2017’s Leading Beverage Manufacturing CFO award.
The business has been built largely upon a team of owner driver distributors who deliver daily to over 4,000 cafes, restaurants, food service outlets, catering companies and food manufacturers located in Australia’s two largest metropolitan markets – Melbourne and Sydney. It is the largest independent dairy supplier in these two markets. The company has a small but growing presence in both the local retail and export markets with the supply of more niche styled dairy products.
This award means a great deal for both Procal Dairies and myself and it is in no small part a recognition of all the hard work the company and its staff and distributors have put in where the business was established with just $150,000 in shareholder capital with turnover growing from zero to $65m over 14 years employing 120 staff and 45 distributors with a factory capable of producing 120 million litres annually.
In its first 6 years of existence, Procal Dairies operated solely as a distributor of dairy products which were manufactured by third parties. It did not commence manufacturing its own products until 2009 when brand new purpose built factory premises in the northern outskirts of Melbourne were completed. Funding for this investment was exclusively procured through the banks during the lead up to and in the aftermath of the GFC where the shareholders/directors were not required to pledge private assets as collateral.
The key for Procal in obtaining funding on favourable terms during that time was the experience of the directors and senior management team in being able to construct a robust business case and clearly present a fundamentally sound medium to long term P & L projection and cash flow model.
Starting off by supplying the food service and route business in Melbourne and Sydney, one of Procal’s critical success factors has been not to have an over reliance with any one customer with no one customer ever occupying more than 5 – 7% of the company’s total turnover. This is one of the reasons why the business has not had a major focus in grocery where, in Australia’s concentrated grocery market, the two largest supermarket chains account for over 70% of total grocery turnover.
Apart from having a deep understanding of the business’s figures, the main attributes of a CFO are to participate and contribute to the development of a business strategy as well as to manage the process and measure its progress against pre-determined milestones. Being a major contributor in maintaining strong relationships with key business stakeholders whether they be banks, suppliers, customers, distributors or shareholders is also extremely important. It is also about building a strong and committed administration and finance team who have a strong work ethic and are willing to learn and improve their skills.
Through the commitment, dedication and hard work of our people, Procal has won several prestigious industry awards in the past 12 months including the 2017 Victorian Manufacturer of the Year Award in the Food and Fibre category. In just the past week, Procal products were awarded the highest scoring winner in the both the Cultured Dairy Products and the Stirred Yoghurt categories in the 2017 Dairy Industry Australia Awards. This in addition to numerous highest scoring and gold medal winner awards over the past 5 years with our fresh milk, cream as well as the natural, smooth and Greek yoghurt products.
For me as CFO in the past 12 months, a significant personal achievement has centred around a role in cementing key supplier relationships in a clearly difficult Australian Dairy Industry, where overall national milk volume has diminished by between 10 – 15 % over the past twelve months following the collapse of questionable milk pricing practices by Australia’s two leading milk processors. This has led to severe shortages of not just milk, but also of cream and butter, with the entire industry having been affected. So far, we have managed this situation quite well and look forward to seeing improved industry conditions later in the year.
My early working life started with the Australian associate of BDO Chartered Accountants firstly in audit and then later in Business Services working as Senior Manager for 5 years. In 1989 I transferred to BDO’s London office in its Corporate Finance department where I was involved with the high-profile Sock Shop administration in 1990 as well doing numerous due diligence and investigating accountant’s reports for clients operating in the travel, textile and manufacturing industries.
In 1992, following my return to Australia, I joined The Original Juice Co. as its Finance Manager and Company Secretary. The Original Juice grew to be Australia’s biggest fresh juice manufacturer prior to its acquisition by Golden Circle in 2002 where I was appointed as Group Manager of Finance and Operations.
Deciding to focus on other projects, in 2004 I went out on my own and set up an Accounting Practice as well consult to smaller niche type fruit juice manufacturers. Prior to this I had already obtained both my Registered Company Auditor and Registered Tax Agent licences. Also during this time, I was fulfilling the external accountant’s role with Procal Dairies and was heavily involved with procuring bank finance for the factory construction. I joined the company as its CFO in mid 2010.
Being CFO allows you to play a significant role in setting business strategy, identifying
goals and milestone objectives and measuring and being accountable for its progress throughout the journey. You must be able to work closely with all departments in establishing business investment cases and ensuring that they strictly adhere to strong financial disciplines which must be clearly communicated and understood by everyone concerned.
Where possible, I believe it is vitally important for the CFO to join with other senior staff in developing relationships we have with our key suppliers, customers and distributors as this is the key to enduring business success.
Having been Procal’s CFO for 7 years now, the company has certainly had its fair share of significant challenges growing its turnover from $36m when I first joined in 2010 to $65m today in a highly competitive market.
As far as the remainder of 2017 is concerned, it is a matter of concentrating on the basics and our critical strengths and competencies within an industry which has, for the reasons outlined above, recently endured a great deal of turmoil.
In 2018, the company plans to expand into export markets, particularly South East Asia, with its range of yoghurt products and a proposed investment in new processing and packaging equipment capable of packing milk in either UHT or ESL (extended shelf life) formats. The company always remains on the lookout for other new product opportunities including alternative packaging formats and plant based beverages. With the key advantage of having an efficient and motivated distribution system servicing 4,000 customers, there are many other beverage styled products that can be introduced to complement Procal’s existing product range.
10 KEYS TO A CFO’S SUCCESS
1. Strategy – Be involved in understanding, setting and implementing key business strategies.
2. Business Relationships – Get to know your key stakeholders, suppliers, customers and distributors very well. Always work to improve these relationships.
3. Staff – Build a strong administration and finance team to support you. Engender enthusiastic performance and encourage them to improve their skill sets.
4. Corporate Risk – Understand the business’s critical risk profile and work to manage and improve it. Establish implementable disaster recovery plans.
5. Rolling Financial Forecasts – Without diminishing the importance of budgets, the trouble is that they can become quickly out of date. Focus equally or give more time to prepare rolling quarterly P & L forecasts out over the next 18 months to take account of updated business conditions at the end of every quarter.
6. Key Performance Indicators – Prepare yourself to be able to quote key daily, weekly and monthly performance indicators spontanteously.
7. Cash Generation – Understand how business performance and beneath the surface subtleties impacts on cash flow. Higher profits do not always translate to cash in the bank. Update your cash projections regularly.
8. EBITDA & EBIT – Understand your EBITDA performance and how new (and indeed existing business) and investment opportunities may or may not improve EBITDA by sale $ or by unit of production. Aim to grow EBIT at a faster rate than the rate of investment in Net Operating Assets year on year.
9. Power of One Sensitivity – Determine what impact a 1% change in price, volume, cost of sales and overheads has as well as a reduction of one day in debtor collections and stock turnover and one day increase in creditor payments.
10. Know your Limitations – Both business and yourself personally.
Company: Procal Dairies Pty Ltd
Name: Craig Pound
Email: [email protected]
Web Address: www.procal.com.au