Soul Pattinson chair discusses company's success

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Australian Broadcasting Corporation

Broadcast: 24/09/2009

Reporter: Ali Moore

The diversified investor Washington H Soul Pattinson hit the billion dollar profit mark last year, largely thanks to the proceed of a mine sale by New Hope Coal, which is majority owned by Soul Patts. But even without the benefit of the sale proceeds, profit rose 99 per cent to $225 million. The company's chairman Rob Millner joined Lateline Business in the studio earlier.


ALI MOORE, PRESENTER: Staying on profit results, and the diversified investor Washington H Soul Pattinson hit the billion dollar profit mark last year, largely thanks to the proceeds of a mine sale by New Hope Coal, which is majority owned by Soul Patts.

But even without the benefits of sale proceeds, profit rose 99 per cent to $225 million.

Soul Pattinson has major stakes in seven businesses from building material groups Brickworks, communications group SP Telemedia, and pharmaceuticals to the New Hope Cole business. It's been listed for 105 years and today was trumpeting the fact it's never asked shareholders for more capital.

The company's chairman Rob Millner joined me in the studio.

Rob Millner, welcome to Lateline Business.


ALI MOORE: You've cracked the billion profit club, which is an achievement. Without the big one off, your profit doubled, what were the key drivers?

ROBERT MILNER: Obviously, and I talk operationally here, the coal business had an outstanding year, coal prices went up from $54 US to $125 US a ton. We had increased production, we also had a massive benefit from the sale of the new Serage, earning $80 million in cash on interest. And the pleasing aspect was also the performance of our pharmaceutical investment in API and also the telecommunications business.

ALI MOORE: If we look at the future and those things that have been the drivers for the current year, coal and the outlook, you had high prices, but high prices no more. Is that going to be the theme for this year?

ROBERT MILNER: They are still the second highest prices ever. When I talk coal, I talk thermal coal, $70 US a ton. Also the other problem we've got is the currency is going up against us. A lot of the time last year when we got the high prices the dollar was lower, there's no doubt that our profits will be reduced, but we still have a tax bill to pay in January, $725 million, earning 7 and 8 per cent, plus we have $600 million from a dividend that's going to be paid out. We have the use of that money until November, so there'll be a bit of interest in the next year.

ALI MOORE: Another key investment for you is the building sector, with 50 per cent of Brickworks. Now they reported a profit today up 5 per cent. What is the outlook for Brickworks, particularly with the new home buyers grant and school buildings program?

ROBERT MILNER: Obviously we have seven listed companies that we invest, six of them did very well, and unfortunately Brickworks was the one that dragged the chain a bit this year. As you mentioned with the schools program and the first home owners, we are now just starting to see some good orders starting to flow through, so we are hoping to see a turnaround in that business next year.

ALI MOORE: Looking across all the portfolios and all the various sectors that you do have an interest in, what is your reading of the economy right now? It seems - and we've heard from David Jones' head Mark McInnes, that all the signs are good, but it's too earlier to say whether we are over the worst.

ROBERT MILNER: It is too early, but there's no doubt the share market's had a good spike. It does, historically when it rebounds.

The other interesting thing is that interest rates after we have had these big downturns, interest rates have been high this time they are low, so people are looking to invest money rather than have them sitting in the bank when it's not earning much.

ALI MOORE: So it's a good time go into the market do you think?

ROBERT MILNER: The markets had a big run, you would think historically it could have another sort of downturn of 5 or 10 per cent, just have a bit of a breather for a while.

ALI MOORE: Are you having a breather, are you sitting on the sidelines for the moment?

ROBERT MILNER: We have done well. We have a very big equity portfolio ourselves of $400 million, and we've participated in a lot of these placements and raisings and doubled our money on a lot of things like Wesfarmers, Commonwealth Bank, Macquarie Bank, so anyone that had a bit of money has done very well if they participated in these various issues.

ALI MOORE: Your company is in many respects a rare breed these days. You are the ultimate conglomerate, you have interests in everything from agricultural products to building products to telecommunications, to pharmaceuticals. Does it always make sense to you?

ROBERT MILNER: I guess when you have as many businesses as we have you probably have two or three that are doing well, two or three that are muddling, and a couple going through a cycle like we are going through at the moment with Brickworks, not doing as well as others. I guess they even themselves out over the span of the cycles.

I can remember in the middle '90, when New Hope was developing its coalmine in Indonesia, coal was worth $US25 a ton, and the only reason Soul Pattinson owned 61 per cent was the banks wouldn't lend us money to develop the mine. So 12 years later you have coal at $125 a ton, so these things certainly change over periods of time.

ALI MOORE: Anything else on your plate, any other sector you could potentially go into?

ROBERT MILNER: As I mentioned today Souls, after we get the special dividend from New Hope, we'll sit on $400 million in cash, we have a $400 millio0 equity, so if we put our hands on $700 $800 million pretty quickly, and we can also use scrip because our share prices is looking up. We are looking to grow the company again.

ALI MOORE: What area, one of those you are already in or would you go somewhere new?

ROBERT MILNER: We have to find that out over time.

ALI MOORE: You are not looking at anything?


ALI MOORE: Can you give me a hint?


ALI MOORE: Resources, do you favour certain sectors?

ROBERT MILNER: Not really. Obviously we have cash, we can move quickly, New Hope is trying to buy assets at the moment to keep themselves going, they are sitting - after we pay tax and the special dividend New Hope is sitting on about $1.1 billion in cash, and we have an investment in Arrow Energy, we have unrealised profits of over $400 in that as well.

ALI MOORE: Are prices good at the moment?

ROBERT MILNER: I think there's still some bargains to be had out there, yes.

ALI MOORE: But you are not giving me a hint.

ROBERT MILNER: No. I've been asked that about four times today.

ALI MOORE: Rob Millner, thanks for joining us

ROBERT MILNER: Thank you very much.

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Soul Pattinson chair discusses company's success

Soul Pattinson chair discusses company's success

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