Grower briefing A new marketing partnership between growers and - - PowerPoint PPT Presentation

Grower briefing

A new marketing partnership between growers and Wilmar

April / May 2014

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Welcome and session overview

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Session objectives

1. Provide an overview of the proposed marketing partnership to Growers to ensure you have a thorough understanding of the detail 2. Provide Growers with the opportunity to ask questions and gather further information to assist you in considering this proposal 3. Discuss the process for consulting with growers

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Background and context

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What growers want from the marketing system

• A genuine commercial partnership with Wilmar

– Formal contractual recognition in marketing arrangements – Security over cane payments – Greater involvement in RSSA – Removal of annual uncertainty surrounding RSSA termination

• Grower representation in marketing strategy and governance

– ‘Having a seat at the table’ – Flexible pricing and pooling options

• Transparency

– Growers receive fair share of sugar revenues – Growers are confident that they are getting the best possible physical premiums

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What Wilmar wants from the marketing system

• Leverage our capabilities to achieve best possible returns for

Wilmar and growers

– Joint marketing structure is better suited to changing global sugar market – A direct contractual relationship with customers

• More direct control over marketing and price risk management
• Constructive partnership between growers and Wilmar

– The right environment to encourage innovative commercial arrangements

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Overview of new marketing partnership

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Overview of the proposed marketing partnership

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Net Premium / (Cost) is very small element of net sugar price received by producers

ICE #11 price is hedged by growers (forward price) or by QSL in QSL managed pools selected by growers Customer Price (CIF) is based on ICE #11 plus premiums and freight costs under management of the marketer Net price to growers and millers is CIF price less costs including actual freight, storage and handling and marketing and finance expenses The ICE#11 price is ~95% to 99% of the net price!

Based on QSL 6 year average (2008 to 2013F)

Build up of Net Premium / (Cost), A$/t 9

450 15.9 30.0 495.9 17.2 513.2 28.5 21.6 10.4 452.7 2.7 450 100 200 300 400 500 600

QSL Net Premiums and Cost History

QSL Net Premiums and Costs have averaged $2.50/t sugar QSL net Premiums and Costs have ranged from -$1.00 to $6.5/t sugar

Build up of Net Premium / (Cost), A$/t 10

$(5) $(4) $(3) $(2) $(1) $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $(45) $(40) $(35) $(30) $(25) $(20) $(15) $(10) $(5) $- $5 $10 $15 $20 $25 $30 $35 $40 $45 2008 2009 2010 2011 2012 2013 (Forecast) Net Premium (Cost) - A$/tonne A$/tonne IPS Season

QSL Net Premiums and Costs 2008-2013 Seasons

Net Far East Premium (FEP) Polarisation Premium Storage & Handling QSL Marketing Services Costs Finance Costs Indirect Marketing Costs

Benefits of new marketing partnership

• 1. Genuine commercial partnership
• 2. Better returns for growers and Wilmar
• 3. Greater involvement in sugar marketing and pricing decisions
• 4. Better pricing options, including access to Wilmar Sugar Trading

managed pool

• 5. More flexibility on grower advances and greater security of cane

payments

• 6. Greater transparency of marketing premiums and costs

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Benefit 1. Genuine commercial partnership

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Benefit 1. Genuine commercial partnership

Appointment of JMC directors

• Grower directors elected by JMC members

– Candidates nominated by Grower Collectives and individual (non- collective) growers

• Grower directors elected on regional basis

– BKN 2 – HBT 1 – PRO/PCK (central) 1

• Independent directors appointed by grower and Wilmar directors

(one each)

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Benefit 2. Better returns for growers and Wilmar

• WST is one of the world’s largest sugar traders, trading over

5 million metric tonnes of sugar in 2013

– Sugar from Australia, Brazil, South and Central America and Thailand – 15.5% raw sugar world market share – Twice the volume traded by QSL

• Greater value can be shared with growers, including:

– higher net premiums – better pricing management – trading opportunities.

• WST’s specialist trading capabilities:

– global presence and reach – large trading volumes – ocean freight chartering experience – market intelligence – price risk management expertise.

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Wilmar Sugar’s global footprint

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Wilmar Sugar Trading’s global scale

16 Brazil Market Shares - 2011 Brazil Market Share - 2013 (~23Mt total exports)

WILMAR 2.7% VITOL 2.6% CARGILL 19.2% SUCDEN 13.7% EDFMAN 9.6% LOUIS DREYFUS 9.4% COPER- SUCAR 8.9% BUNGE 6.6% NOLIS 3.9% NOBLE 3.0% WILMAR 12.3% CARGILL 13.3% SUCDEN 12.5% EDFMAN 12.3%

AGROCORP 1.9%

LOUIS DREYFUS 12.3% COPER- SUCAR 12.5% BUNGE 9.0% NOLIS 3.7% REDPATH 2.0%

Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 3. Greater involvement in sugar marketing and pricing decisions

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Benefit 4. Better pricing options, including access to WST-managed pool

Potential JMC pricing options:

• Grower forward pricing
• Grower-nominated collective pools run by third party pool

managers

• JMC-managed committed tonnage pools that growers may

nominate tonnage into:

– Generic risk pools – WST-managed pricing pool – Daily cash price for current season in AUD/tonne cane

• Production risk pool

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Benefit 5. More flexibility on grower advances and greater security of cane payments

Potential payment options for growers:

• Pre-harvest payment with balance paid progressively

during July to June of the relevant season

• Daily cash price for current season in AUD/tonne cane
• Deferred advance payment option
• Existing advance payment options

Cane payments

• JMC receives payment for sugar sales from WST
• JMC makes cane payments directly to growers, on behalf
• f WSA

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Benefit 6. Greater transparency of marketing premiums and costs

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• Average net premium on

JMC sugar, including sale prices, CIF costs on a cargo, customer and destination basis

• Average net premiums

achieved by WST on all non- JMC sugar sold to the same destinations as JMC sugar including sale prices, CIF costs on a cargo and destination basis (not customer)

• ‘Net trading value’ gained as

a result of WST arbitrage activities using JMC supplied sugar, e.g. physical

• r futures position

substitution on a cargo-by- cargo basis

Auditor

JMC will have the right to appoint an auditor to review WST records related to calculation of net premiums and ‘net trading value’ from arbitrage activities

Audit and inspection Monthly reports JMC costs

JMC board and members JMC will directly manage and report to board and members in respect of:

• terminal storage and

handling charges

• sugar sampling and

analysis costs

• finance costs for hedging

margins and advances

• pricing and pooling

management and administration

• JMC operating costs (e.g.

board and staff costs)

JMC JMC JMC

Consulting with growers

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Grower consultation timeline

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Further information

Email: sugarmarketing@wilmar.com.au Web: www.wilmarsugarmills.com

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Summary and review

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Benefits of new marketing partnership

• 1. Genuine commercial partnership
• 2. Better returns for growers and Wilmar
• 3. Greater involvement in sugar marketing and pricing decisions
• 4. Better pricing options, including access to Wilmar Sugar Trading

managed pool

• 5. More flexibility on grower advances and greater security of cane

payments

• 6. Greater transparency of marketing premiums and costs

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Grower briefing

A new marketing partnership between growers and Wilmar

April / May 2014

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