Download Slide 0 - KSG Agro

KSG Agro
Management presentation
June 2012
Content
KSG Agro highlights
2
Key financials 2011
3
Revenue breakdown
4
COGS breakdown
5
Financial results for 1Q 2012
6
Strategy
7
Available sources of financing
8
Equity arrangements with GEM
9
Outlook for 2012
10
Main segment: farming
11
Focus: pig breeding
12
Focus: fuel agro-pellet production
13
Annexes
14
Legal structure
15
Income statement summary
16
Balance sheet summary
17
Gain on companies’ acquisition
18
UAH devaluation risk analysis
19
1
KSG Agro highlights
Land bank expansion
Revenue diversification and vertical integration
• Over 2011 KSG doubled land bank under control to
• In November 2011 the Group acquired 50 per cent
61 ths ha and harvest volumes to 107 ths tones, the
Group’s revenues increased more than twice yoy, to
USD 35 mln
• In 2012 additional 9 ths ha of land has been acquired
by the Group in their target region
stake in pig breeding complex which after
modernization and reconstruction will reach 240 ths
heads per year. It will allow the Company to realize
its pig breeding segment development stately
• The Group entered into new business segments of
capacities from about 30 ths tonnes to about 120
ths tonnes and machinery park from 334 units to 584
units
producing fuel agro-pellets. As of now the Group has
installed two production units with total capacity of 7
thousand tonnes of pellets per year and started
construction of production plant of 60 ths tonnes per
year
• The Group constructed vegetable storage facility with
• Over 2011 year turnover of the Group’s food
• Since IPO the Group increased its grain storage
capacities of 2.8 ths tonnes which increased total
vegetable storage capacities to 4.0 ths tonnes
production segment increased by a few times. In
particular, sales of wheat flour reached about 9 ths
tonnes
2
Key financials 2011
USD thousand
Income Statement summary
For 12 months ended / As of 31 December*
2011
2010
2009
Income
34,665
15,628
13,785
EBITDA
30,767
12,207
5,810
Profit for the period
28,156
10,047
2,526
Property, plant and equipment
53,982
5,013
4,821
Total non-current assets
73,510
10,846
10,605
1,122
30
2,564
Balance Sheet summary
Cash and cash equivalents
4,380
-
-
Inventories
14,800
5,149
4,589
Current biological assets
13,363
7,621
2,728
Total current assets
49,206
15,484
15,528
Total assets
122,716
26,330
26,133
Total equity
90,771
11,662
4,998
Loans and borrowings
5,201
2,367
2,904
Total non-current liabilities
6,345
2,367
2,904
17,189
5,414
11,008
Deposit pledged
Loans and borrowings
Total current liabilities
25,600
12,301
18,231
122,716
26,330
26,133
Net debt/EBITDA
0.69
0.63
1.95
Return on equity
0.55
1.21
0.72
Current ratio
1.92
1.26
0.85
Total equity and liabilities
*
Audited Consolidated Financial Statements of KSG Agro S.A.
3
Revenue breakdown
Revenue breakdown by segments, 2010
Vegetables
(USD 0.3 mln)
2% 1%
1%
Revenue breakdown by segments, 2011
Food production
(USD 8.2 mln)
Food
production
(USD 0.2 mln)
24%
Pig breeding
(USD 0.2 mln)
9%
87%
Other
(USD 1.4 mln)
3%
2%
3%
68%
Pig breeding
(USD 1.1 mln)
Vegetables
(USD 0.7 mln)
Other
(USD 1.1 mln)
Farming
(USD 13.5 mln)
Source: Company’s data
Farming
(USD 23.6 mln)
Source: Company’s data
Farming revenue breakdown by main crops, 2010-2011
2011
2010
Diff,%
Sales, USD mln
19,719
11,846
66%
Sales, tonnes
47,803
29,761
61%
413
398
4%
2,893
633
357%
19,541
6,037
224%
148
105
41%
Other
960
1,035
(7)%
Total
23,572
13,514
74%
Sunflower
Average price, USD/tonne
Wheat
Sales, USD mln
Sales, tonnes
Average price, USD/tonne
4
COGS breakdown
Breakdown of COGS by components, USD ths
2010
USD ths
USD ths
Fertilizers
2,710
13%
1,081
19%
Plant & animals protectors
1,225
6%
316
6%
Fuels and lubricants
2,956
14%
895
16%
Seeds
2,231
11%
872
15%
Wages
1,129
5%
577
10%
Land lease payments
1,936
9%
930
16%
Third parties services (transportation, processing)
2,617
13%
-
-
Primary meat products
1,911
9%
-
-
Feeds
536
3%
-
-
Other
3,322
17%
1,023
18%
Total costs included in the COGS
20,574
100%
5,694
100%
Fair value adjustment
14,055
14,762
34,629
20,456
Total
•
2011
Costs related to crop farming remain the major
part of the Group’s COGS as farming stays the
most important business segment
•
Third parties services, primary meat products and
feed expenses reflect the Group’s expansion in
food processing, and pig breeding segments
5
Financial results for 1Q 2012
Financial results for 1Q 2012, mln USD
• The Group’s revenue has increased six times
4.6
for the three-month period ended March 31,
2012 comparably to the respective period in
2011. The sales growth is the result of
successful implementation of the Group’s
diversification strategy and increase of share
of food processing segments sales in total
revenues
2.4
1.7
1.1
0.7
Revenue
1.8
EBITDA
2012
Net income
• Nevertheless, farming segment remains the
core business segment for KSG Agro and the
financial result for the first quarter is
influenced by seasonality factor implying that
the major part of crops is harvested and sold
during the second half of the year
2011
Source: The Group’s management accounts for the 3 months ended as of 31 March
6
Strategy
• Almost threefold increase of land bank under control from current 70.0 ths to 200 ths
hectares by the end of 2015
Land bank expansion
• Strengthening further its dominant position in the Central Ukrainian regions, which is rich
in black soils and has favorable geographic location due to proximity to Dnipro River, main
railways and Black Sea ports
• Improvement of fertilization and cultivation approaches, accompanied by higher
penetration of modern agricultural technologies will lead to further increase in efficiency of
main crops harvesting
Improvement of land bank
usage efficiency
• Deeper vertical integration via development of food processing segment, in order to
increase profitability and mitigate risks from crops’ prices volatility
• Modernization of existing irrigation infrastructure across more than 2,000 ha and expansion
of irrigated land up to 5,000 ha by 2016
• Further development of new business segments, in particular, fuel agro-pellet production
and pig breeding and bring their share in the Group’s revenues to about 30% by 2015
Revenue diversification
• Diversification of operations also helps to maintain liquidity at sufficient level through the
whole financial year, consequently contributes to solving problems of seasonal cash flow,
which is attributable to companies of agricultural sector
7
Available sources of financing
During 1H of 2012 the Company has attracted the following banking financing to cover its
current needs:
• USD 3 mln from Credit Agricole and USD 6.3 mln from Alfa Bank were used for working
Banking financing
capital needs mainly related to sowing campaign
• USD 5.6 mln from Bank Cambio were borrowed to finance purchase of three bakeries with
annual production capacity of 36 ths tonnes of bread and bakery products, flour-mill with
annual processing capacity of 150 ths tonnes of wheat, elevator with storage capacities of
60 ths tonnes and animal food factory with annual production capacity of 24 ths tonnes
The Company acquires foreign machinery and equipment via trade-export financing schemes:
• In January 2012 the Company signed a loan agreement with Deere Credit INC on provision
of a debt financing amounting to USD 11 mln at the effective rate of around 5.0%, secured
by US Export-Import Bank guarantee, to acquire machinery from John Deere
Trade-export financing
• In June 2012 French Export-Credit Agency COFACE made a decision, by which it will
guarantee the deal amounting to EUR 17.6 mln between KSG and I-TEK on supply of
equipment and genetic material for pig breeding complex, as well as equipment for the
energy pellets production and for animal food factory. Currently, KSG is in negotiations with
banks regarding receiving loan under this guarantee which are expected to be finalized by
the end of June, 2012
Reinvestment of income
• The Company plans to finance further land bank expansion using cash flows generated by its
operational activities
8
Equity arrangements with GEM
In April 2012 the Company concluded an agreement with GEM Global Yield Fund on providing of an
equity financing at the maximum amount of PLN 75 mln (USD 22 mln)
• The agreement provides KSG with the option to attract financing by issuing new shares in return for
cash contributions to the capital, where GEM’s commitment to subscribe for the shares is irrevocable
Structure
• KSG option shall be valid until April 2015 with unlimited number of draw downs
• The Company controls timing and the amount of any drawdown
• The Company has a right to issue one draw down notice each 20 trading days
• The number of shares to be offered to GEM is calculated as the average daily trading volume for the
Draw down
15 trading days multiplied by 10
• GEM is not obliged to subscribe for more than ½ of the offered number of shares and may choose to
subscribe for up to 200% of the offered number of shares
• GEM agrees to honor the Company drawn down request based upon a per share subscription price
equal to 90% of the average closing bid price for the preceding 20 trading days
Pricing
• The minimum subscription price was set at the level of the initial IPO price amounting to PLN 22
• GEM is prohibited to do short selling
• The only obligation of the Company is to issue in favor of GEM 1.5 mln of warrants convertible into
shares at ratio 1:1 during the period of three years
Warrants
• The conversion prices are PLN 35 for 750 ths of warrants and PLN 40 for the remaining 750 ths of
warrants
• The warrants are not transferrable; the Company may choose to buy-out unrealized warrants
starting from the third year
9
Outlook for 2012
Revenue breakdown by segments, 2011
Revenue breakdown by segments, 2012
Food production
(USD 8.2 mln)
Food production
(USD 11.3 mln)
24%
68%
17%
3%
2%
3%
Pig breeding
(USD 1.1 mln)
Vegetables
(USD 0.7 mln)
9%
67%
Source: Company’s data
Pig breeding
(USD 3.3 mln)
5%
Other
(USD 1.1 mln)
Farming
(USD 23.6 mln)
Agro-pellets
production
(USD 6.0 mln)
2%
Vegetables
(USD 1.3 mln)
Farming
(USD 44.8 mln)
Source: Company’s forecasts
Key operational and financial data
• In 2012 9 ths ha of land has already been
Land bank under control, ths ha
Harvested land bank, ths ha
Grain harvest, ths t
Grain storage capacities, ths t
• Moreover, the Company surpassed its previous
Revenue, USD mln
EBITDA, USD mln
Net Income, USD mln
acquired. In addition to that 11 ths ha are
expected to be purchased by the end of the
summer with the remaining 30 ths ha followed
in fall 2012
forecast regarding grain storage capacities of
76.0 ths tonnes in 2012, as the level of 120 ths
tonnes has been already reached
2011
61.0
45.6
106.4
60.0
2012
110.0
80.0
232.0
120.0
34.7
30.8
28.1
66.7
42.3
31.8
Source: Company’s data and forecasts
10
Main segment: farming
Location of land holdings
• The Group plans to expand land bank in the region of
its operations. Land plots of 11 ths ha are expected to
be purchased by the end of the summer
• Starting from 2012, the management plans to expand
3.8
1.5
the share of cultivated land under wheat, barley and
corn in order to diversify revenues and increase land
usage efficiency
54.1
KSG Agro land holdings,
• The Group plans to maintain crop rotation as of 2012
ths ha/region
in further periods
1.6
Priority regions for
land bank growth
Crop rotation, ths hectares
Crops production, tonnes
2012
2011
Sunflower
62,669
51,359
Wheat
97,486
35,837
5.4
Barley *
31,673
10,356
6.4
1.5
Corn
29,922
6,519
Other
6.7
2.8
Other
10,505
2,288
Total
80.0
44.8
Total
232,254
106,359
2012
2011
Sunflower
27.9
23.4
Wheat
27.9
11.7
Barley *
11.1
Corn
* Mixed – winter and spring barley
* Mixed – winter and spring barley
Source: Company’s data
Source: Company’s data
11
Focus: pig breeding
• The Group has been engaged in pig breeding segment since 2008 and starting from
2011 has focused on its development which is justified by strong marginality, the
pig meat market growth potential and availability of own fodder base
• During 2011 the Group increased its pig herd from 1 ths heads to 8 ths heads,
resulting in growth of annual sales to about USD 1.1 mln. Planned segment revenue
for 2012 amounts to USD 3.3 mln
• The Group benefits from synergies in combination of farming and pig breeding
segments. In particular, farming segment provides feed crops for pig breeding,
which on return supplies farming with organic fertilizers
• The Group is in process of reconstruction of the pig breeding complex acquired in
2011. The project team has been organized within the Company. Currently design
works and tenders among leading European equipment and sow suppliers are
performed
• The work on dismantlement of obsolete equipment and preparation of infrastructure
of reconstruction area has been already started
• Till the end of 2012 the Group expects to finalize the first stage of pig breeding
complex reconstruction and acquire 4.4 ths sows
• In June 2012 French Export-Credit Agency COFACE made a decision, by which it will
guarantee the deal amounting to EUR 17.6 mln between KSG and I-TEK on supply
of equipment and genetic material as well as reconstruction works of pig breeding
complex. Currently, KSG is in negotiations with banks regarding receiving loan
under this guarantee which are expected to be finalized by the end of June, 2012
• The Group is planning to reach full production capacity of 19 ths tonnes of pork per
year by 2016
12
Focus: fuel agro-pellet production
• The main driver of European pellet market is renewable energy oriented policy of
the EU which is being targeted by the Group. In 2011 European demand surpassed
its domestic production by about 30%
• The Group produces pellets from agricultural residues – by-products of own farming
operations, which are available in high volumes. In particular, about 80 ths tonnes
will be available in 2012
• The Group has signed two contracts with Polish Energy Partners S.A., which
stipulate the following:
• Know-how transferring and assistance in construction of production plant of
at least 60 ths tonnes per year (with ability to increase to 90 ths tonnes)
• Acquisition of at least 50 ths tones of production per year (during seven
years) that will allow the Group to receive PLN denominated revenue of
above PLN 20 mln annually
• The Group has also signed an agreement with CPM for supply of pellet production
equipment and is in negotiations with Aniro and Cedrus on the same issue
• The Group has installed two production units with total capacity of 7 ths tonnes per
year and started construction of production plant of 60 ths tonnes per year
• The Company plans to increase pellets production capacities in line with land bank
growth and increase sales volumes up to 15% of total Group’s revenue
13
Annexes
14
Legal structure
KSG Agro S.A.
Luxemburg
100,0%
KSG Agricultural and
Industrial Holding Limited
Cyprus
0,1%
0,1%
SPE Promvok LLC
Ukraine
0,1%
SOUZ-3 LTD
Ukraine
99,9%
0,1%
99,5%
0,1%
0,1%
Unirem Agro
Plus LLC
Ukraine
Agrofirm Vesna LLC
Ukraine
99,9%
Rantie LLC
Ukraine
99,9%
0,1%
Goncharovo
Agricultural LLC
Ukraine
99,9%
UAIH LLC
Ukraine
99%
Parisifia LTD
Cyprus
0,1%
Kovbasna Liga LLC
Ukraine
99,9%
Dniproagrostandard
LLC Ukraine
50,0%
99,9%
0,5%
Factor D LLC
Ukraine
99,9%
100,0%
0,5%
0,1%
0,1%
Agro-Trade House
Dniprovsky LLC
Ukraine
Dniproagroprogress
LLC Ukraine
99,9%
99,5%
0,1%
Agro LLC
Ukraine
99,9%
99,9%
0,1%
100,0%
TH UAIH LLC
Ukraine
99,9%
0,1%
Pivdenne
Agricultural LLC
Ukraine
Meat plant
Dnipro LLC
Ukraine
Agrotrade LLC
Ukraine
99,54%
0,1%
Dnipro LLC
Ukraine
99,9%
Askoninteks LLC
Ukraine
99,9%
0,1%
Scorpio Agro LLC
Ukraine
0,46%
Agro-Dnister LLC
Ukraine
99,9%
0,1%
99,9%
0,1%
0,1%
Vidrodzhennya LLC
Ukraine
99,9%
Agro Golden LLC
Ukraine
99,9%
PUAIH-2 LLC
Ukraine
100,0%
Luxembourg holding company
Cyprus holding companies
Ukrainian subsidiaries of the Group
15
Income statement summary
USD thousand
For the 3 months ended
31 March**
For the 12 months ended
31 December*
2012
2011
2011
2010
2009
Income
4,597
743
34,665
15,628
13,785
Net gain on initial recognition of agricultural produce
and on change in fair value of biological assets less
estimated point-of-sale costs
1,703
1,457
14,834
16,919
4,251
(3,312)
(424)
(34,629)
(20,456)
(12,102)
(876)
(174)
(14,055)
(14,762)
(4,465)
Gross profit
2,988
1,776
14,870
12,091
5,934
General and administrative expenses
(995)
(285)
(4,092)
(787)
(1,158)
402
(16)
18,460
303
464
Result from operating activities
2,395
1,475
29,238
11,607
5,240
Finance expenses, net
(572)
(388)
(1,143)
(1,558)
(2,144)
-
-
-
-
(565)
1,823
1,087
28,095
10,049
2,531
(29)
(1)
61
(2)
(5)
1,794
1,086
28,156
10,047
2,526
Cost of sales
incl. Fair value adjustment
Other operating income (expense), net
Losses from impairment of financial instruments
Profit before tax
Income tax expenses
Profit for the period
USD thousand
Result from operating activities
+ Depreciation and amortisation
EBITDA
For the 3 months ended
31 March**
For the 12 months ended
31 December*
2012
2011
2011
2010
2009
2,395
1,475
29,238
11,607
5,240
276
204
1,529
600
570
2,671
1,679
30,767
12,207
5,810
* Audited Consolidated Financial Statements of KSG Agro S.A.
** The Group’s management accounts
16
Balance sheet summary
USD thousand
As of 31 March**
As of 31 December*
2012
2011
2011
2010
2009
Property, plant and equipment
52,615
5,509
53,982
5,013
4,821
Goodwill
17,944
7,514
17,936
5,586
5,569
Total non-current assets
71,963
13,249
73,510
10,846
10,605
Current biological assets
17,829
10,933
13,363
7,621
2,728
Inventories
14,937
6,071
14,800
5,149
4,589
Trade and other accounts receivable
11,980
3,397
14,141
1,662
4,019
Taxes prepaid
1,836
1,221
1,400
1,022
1,628
Deposit pledged
4,380
-
4,380
-
-
Cash and cash equivalents
1,087
797
1,122
30
2,564
52,049
22,419
49,206
15,484
15,528
124,012
35,668
122,716
26,330
26,133
Total equity attributable to owners of the Company
74,240
11,507
72,426
10,299
4,320
Non-controlling interest
18,357
1,826
18,345
1,363
678
Total equity
92,597
13,333
90,771
11,662
4,998
5,596
8,199
5,201
2,367
2,904
393
-
579
-
-
6,554
8,199
6,345
2,367
2,904
Loans and borrowings
13,907
7,606
17,189
5,414
11,008
Trade and other accounts payable
10,552
6,335
7,860
6,681
7,008
Promissory notes issued
288
-
313
188
188
Tax liabilities
114
195
238
18
27
Total current liabilities
24,861
14,136
25,600
12,301
18,231
Total liabilities
31,415
22,335
31,945
14,668
21,135
124,012
35,668
122,716
26,330
26,133
Total current assets
Total assets
Loans and borrowings
Long-term promissory notes issued
Total non-current liabilities
Total equity and liabilities
* Audited Consolidated Financial Statements of KSG Agro S.A.
** The Group’s 2011 management accounts
17
Gain on companies’ acquisition
Breakdown of gain on companies’ acquisition
USD thousand
• In
Cows
804
Pigs
944
Biological assets
1,772
Inventories and agricultural stock
1,533
Cash
90
PPE
25,056
Diff. between accounts payables and receivables
(2,301)
Deferred tax liabilities
Bad debts
Total net assets at fair value
(575)
(62)
27,262
2011
purchase
of
companies
with
underestimated assets on favorable terms
resulted in gain on companies’ acquisition
amounting to USD 15.6 mln
• Revaluation of assets was conducted by certified
appraiser and approved by auditors
• Gain on properties, plants and equipment (PPE) is
composed of a gain on purchase of:
 A pig breeding complex with total area of 152
ths m2 that has only 4 analogues in Ukraine
 Cow breeding facility
 Other agricultural production premises
Purchase price
Legal expenses
Gain on companies’ acquisition
(10,992)
(633)
 Agricultural machinery and equipment
15,637
18
UAH devaluation risk analysis
• Taking into account concerns regarding hryvnia
Sensitivity analysis summary
2011*
USD thousand
Scenarios
10%
30%
devaluation in the 4th Q 2012 after parliamentary
elections, the Company has conducted sensitivity
analysis to identify potential negative effect of
devaluation on its financial results for 2012
• The analysis is based on audited Consolidated Financial
Statements for 2011 to show potential effect as if
devaluation takes place during three last months of
2011
Income
34,665
34,458
34,140
Net gain on initial recognition of
agricultural produce and on
change in fair value of biological
assets less estimated point-ofsale costs
14,834
14,822
14,804
Cost of sales
34,629
34,516
34,341
Gross profit
14,870
14,765
14,602
4,092
4,032
3,939
18,460
18,421
18,360
29,238
29,153
29,023
1,143
1,153
1,169
28,095
28,000
27,854
61
60
57
production and partly some other segments is
denominated in USD
28,156
28,060
27,912
 Cost of sales, excluding wages, land lease
General and administrative
expenses
Other operating income
(expense), net
Result from operating activities
Finance expenses, net
Profit before tax
Income tax expenses/benefits
Profit for the period
• Two scenarios of UAH devaluation in respect of USD
were considered: for 10% and 30% respectively
• The results of the test has shown that dependence of
financial results on hryvnia devaluation is insignificant,
and even in case 30% devaluation in 4Q 2012, the
Company’s profit for the period is not expected to
decrease for more than 1%
• The main reasons behind such positive forecast are:
 Revenue from main segments, excluding food
payments and some other items is either directly
or indirectly linked to USD
 Impact of those PLN items which are linked to
*
Audited Consolidated Financial Statements of KSG Agro S.A.
hryvnia is immaterial
19