[PPT] - UKRAINIAN AGRICULTURE OPPORTUNITIES INVESTMENTS AND ACQUISITIONS PowerPoint Presentation

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UKRAINIAN AGRICULTURE OPPORTUNITIES INVESTMENTS AND ACQUISITIONS

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Table of contents

I. Ukraine’s competitive advantages and potential II. Potential Targets

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Company Success factors Outlook Market cap Key figures

First mover advantage in eggs,
High-tech/high quality approach
Timing to financial markets
Growth story
Uncertain –

heavy debt load a major risk ~US$0.6 billion

#1 egg producer in Eurasia/#2

worldwide

Shell egg production: 6.0 billion in 2011
vs. 4.4 billion in 2010
US$246m EBITDA on US$553m

revenues in 2011

World class technology & marketing
High level of self-sustainability in feed

production and oil crushing

First mover advantage
Steady, organic growth
Timing to financial markets
Positive –

MHP should be the no. 1 chicken producer worldwide by 2016 ~US$2.0 billion

#1 Poultry producer in Eurasia/#12

worldwide

Poultry sales of 371,000 tons in 2011
vs. 331 in 2010
US$401m EBITDA on US$1,229m

revenues in 2011

Positive with

exports to Asia and Middle East increasing ~US$1.5billion

#1 sunflower oil producer in Eurasia/#1

worldwide

2.6 Mio tons/year sunflower seed

crushing capacity in 7 crushing plants

US$310m EBITDA on US$1,899m

revenues in 2011

Uncertain –

cost structure still not competitive with major Brazilian players

#1 producer of sugar from beets in

Ukraine/#1 in CIS

Processed 2.6m tons of sugar beet

(+65% y-o-y) and produced over 370,000 tons of sugar from beet.

US$154m EBITDA on US$423,572
First to begin large-scale consolidation of

large farms and crushers

Significant land banks contribute a large

percentage of feedstock to crushing units

Timing to financial markets
First mover advantage at time of increasing

global sugar prices

Timing to financial markets
High ratio of own production to procured

sugar beet feedstock

Conversion of gas-fired sugar plants to coal
Downstream activities such as milk

production via JV with Danone ~US$0.5 billion

Ukraine beginning to produce world class agricultural companies

Subsector

Source: Company reports

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50 000 100 000 150 000 200 000 250 000 300 000 2006 2007 2008 2009 2010 2011 Top 10 holdings Top 20 holdings

 Ukraine is the largest country in Europe (excluding Russia) by land area  The country has 41.6 million ha of agricultural land (71% of total land area) and 32.5 million ha of

arable land (53%) 89% Small players ready for consolidation 8% 3%

Massive scale (100K+ HA) is achievable

4 Average Ukrainian farm size is increasing…

Average size of ten largest agricultural holdings, ha

…but largest players still hold only a fraction of land…

Percent of total arable land held

10 largest holdings Next 10 largest holdings

Source: Dragon Capital

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Climate and Soil Make For Ideal Conditions

Soils Agro Climatic Zones

Steppe Forest Steppe Forest

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YIELD TONS PER HA HARVEST MMT COST PER HA RETURN PER HA

>4
3 - 4
< 3
> 1 mmt
0.5 – 1 mmt
< 0.5 mmt
> $300
$200 - $300
<$200
> $400
$250 - $400
<$250

WHEAT 2013 - PROFITABLE

BEST LOCATION

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YIELD TONS PER HA HARVEST MMT COST PER HA RETURN PER HA

>3
2.3 - 3
< 2.3
> 0.4 mmt
0.2 – 0.4 mmt
< 0.2 mmt
> $500
$275 - $500
<$200
> $170
$40 - $170
<$40

BARLEY 2013 - PROFITABLE

BEST LOCATION

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YIELD TONS PER HA HARVEST MMT COST PER HA RETURN PER HA

>7
5 - 7
< 5
> 2 mmt
0.5 – 2 mmt
< 0.5 mmt
> $500
$250 - $500
<$250
> $500
$300 - $500
<$300

CORN 2013 – MOST PROFITABLE

BEST LOCATION

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YIELD TONS PER HA HARVEST KMT COST PER HA RETURN PER HA

>2.5
2 – 2.5
< 2
> 150 kmt
60- 150 kmt
< 60 kmt
> $500
$200 - $500
<$200
> $700
$500 - $700
<$500

RAPESEED 2013 – MOST PROFITABLE

BEST LOCATION

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YIELD TONS PER HA HARVEST KMT COST PER HA RETURN PER HA

>2
1.5 – 2
< 1.5
> 200 kmt
50- 200 kmt
< 50 kmt
> $550
$375 - $550
<$375
> $500
$250 - $500
<$250

SOY 2013 - PROFITABLE

BEST LOCATION

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YIELD TONS PER HA HARVEST MMT COST PER HA RETURN PER HA

>2.4
2 – 2.4
< 2
> 0.7 mmt
0.1- 0.7 mmt
< 0.1 mmt
> $400
$340 - $400
<$340
> $590
$400 - $590
<$400

SUNSEED 2013 - PROFITABLE

BEST LOCATION

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I. Ukraine’s competitive advantages and potential II. Potential Targets

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TARGETS – INDEPENDENT BROKERS

Set your criteria and contact Brokers, investment bankers, or agro consulting companies. Gather the information and then go forward. Number 2 Sumy 11,000 Ha Chernihiv 14,000 Ha Vinnytsia 30,000 Ha Poltava 11,200 Ha Kharkiv 3,460, r 15,000 Ha Odesa 12,000, 8,000 Kyiv 4,000 HA Khmelnytsky 12,000 Number 1 Poltava 7,500, 4,300 6,600 Ha Ternopil 6,000 Ha Zhytomir 5,800, 2,700 Khmelnytsky 9,000 Ha

Mr. Mykola Korol

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26,000 ha farm in Central Ukraine

Source: Company info, public information, team analysis

Locally-owned farm with operations in two oblasts in

central Ukraine.  Produces primarily corn.  Business consistently delivers high yields and margins.  Production grew from 52K tons in 2008 to a forecasted 125K tons in 2011, generating a CAGR of 34%.  Company also has small animal husbandry business with 1,500-2,000 heads of cattle for diary and meat.  90% of company’s production is sold through Glencore.  Company was founded in 2002 and is currently

wned 100% by its founders.

 Company employs roughly180 people.

Company is prepared to discuss the sale of a majority stake to a strategic

investor.

Company’s financial statements are audited by an international

accounting firm.

Operations

in Cherkassy and Zhytomyr Oblasts.  Good access to rail.  Storage and drying capacity for 50% of production. USD m 2008 2009 2010 2011E EBITDA 2.6 4.8 8.9 11.1 EBITDA/ha 281 455 539 566 Opportunity description Land holdings

Financials, 2009-2011 Location and infrastructure Investment overview

Company had 26,000 ha of land under lease at the

beginning of 2012.

Company intends to grow its holdings by another

5,000 has by 2013.

1.9 6.5 2.3 8.9 1.3 4.8 20 68 56

7

20 59 56 Soy 7.8% Sunflower 14% Wheat 14% Corn 57% Total = 19,592 tons

Crop structure 2011, ha Yields 2010, ton/ha 8.7 3.2 4.4 4.4

Other 7.7%

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The following are initial queries to guide the evaluation and valuation process. The list is not complete and is only a guide to initial questions that potential investors need to ask. The list does not include financial or legal audit questions.

Does the company have a crop plan? If not how does it plan its cropping pattern?

If yes how old is the current plan and when was it last updated?

How does the company plan crop rotation?
Does crop rotation depend on field size, soil types in particular parts of the

holding, prior years crop, market indicators, or other factors? Please list the factors used in developing the crop plan.

Does the crop plan set out indicative dates for each field operation?
Does the crop plan have indicative targets – inputs, outputs?
Does the crop plan include results from soil tests? If not when was the last soil

test?

How does the company monitor performance of crop plan objectives?
What are the internal penalties – bonuses for meeting or failing to meet crop plan
bjectives?
Can the company show crop plan implementation records for the last year, two

years, three years?

AGRO EVALUATION CHECKLIST

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Does the company have a purchasing program? If not how does it plan purchasing?
Does the company use input financing from suppliers?
Does the company conduct tenders?
How does the company decide which input suppliers to use?
Does the company have physical stores for inputs or does it expect on time delivery?

Do physical stores meet requirements for seed, fertilizer, fuel and agro chemicals? What form of security system does the company use to safeguard inputs?

How is inventory accepted and monitored?
How far in advance before use does the company acquire inputs?
What is the average holding period of inputs?
Can the company show its inventory records, purchasing records?
Does the company have an equipment maintenance schedule? If not how does it

perform routine maintenance?

Who is responsible for the equipment maintenance schedule – developing, monitoring

and implementing?

Does the company perform equipment maintenance or does it hire third parties?
Is company staff certified to perform equipment maintenance? What training or

certification does company staff have for equipment maintenance or repair?

Can we see the documents proving that staff is certified to maintain equipment?

AGRO EVALUATION CHECKLIST - CONTINUED

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Does the company fit the investor strategy? If so what is the plan to use the acquisition? If not what changes need to made? What are the priorities?

THE REALLY REALLY BIG QUESTION

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WHAT IS TO BE DONE

1. To obtain real information from operating entities requires signing an NDA and

making a commitment to issue a non binding offer.

2. Light Due Diligence
3. Making a non binding offer
4. Intensive due diligence
5. Negotiation

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–
nancial decisions made in the company?
and how do they control expenditures?
who to go to when there are problems?
duction/operation problems resolved?
ear organizational structure and do people know where they fit in that organization?
various parts of the organization meet? Are there common social and business events?
now why and how they are compensated? Are positive actions rewarded in the company?
r conferences has each group in the company attended in the last year? Is there a training program?
pany have its own field maps?
pany measured its own fields?
ent fitted with GPS devices?
pany have an IT department/person? If so what are their responsibilities?
pany have its own crop storage? Is it safe and secure?
pany use third party services? If so what?
company growth plans?
mpany fit the investor strategy? If so what is the plan to use the acquisition? If not what changes need to made? What are the