Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — Shareholder Meeting (May 2010)
48 slides from Australian Agricultural's shareholder meeting presentation, May 19, 2010
Slide 1: A Revered Profitable International Agribusiness Enterprise
For personal use only Australian Agricultural Company Limited A Revered Profitable International Agribusiness Enterprise
Slide 2: Disclaimer
Disclaimer For personal use only While every care has been taken in the preparation of this presentation, Australian Agricultural Company Limited (“AAco”) and each of their respective related bodies corporate and associated entities and each of their respective officers, employees, associates, agent
Slide 3: Agenda
For personal use only Agenda 1. Management 2. Current Status 3. Host Industry 4. Strategic Review Process 5. Key Risks 6. Implementation of Initiatives 7. Summary 8. Appendix 3
Slide 4: 1. Management
For personal use only 1. Management 4
Slide 5: David Farley - CEO
David Farley - CEO eJackaroo 1975 ¢ Former Managing Director and CEO of Colly Cotton 1982 to 2000 *Built from 162 HA to 63,000 HA *Trading 10% of global cotton *ASX IPO 1984 Privatised 1990 *#ASX IPO 1995 ¢Takeover 1999 Director of Tandou Limited © Former CEO of Calcot Limited ¢Formerly, Chairman of
Slide 6: Kerrie Parker - CFO; Troy Setter - COO
co Kerrie Parker - CFO °20 years experience in Fast Moving Consumer Goods *Former Managing Director and CFO Sara Lee H&BC Australia (~ 130mil p.a. rev) #Former CFO Golden Circle Ltd (~$400mil p.a. rev) ¢Major turnaround delivering first profit in 6 years *NSX IPO 2008 ¢Take over by H.J. Heinz 2009 *
Slide 7: 2. Current Status
For personal use only 2. Current Status 7
Slide 8: Stations and Feedlots: Key Facts at December 2009
For personal use only Stations 19 Feedlots 2 Land Area 6.7mil HA (1% of continental Australia) Land Assets (incl. buildings) ~$660m Cattle Assets ~$350m (~610k head) Secured Debt ~$297m (Gearing ~32%) Employees ~420 At December 2009 8
Slide 9: Land holdings comparable to Ireland, West Virginia or Tasmania
AAco has land holdings approx. equivalent For personal use only in size to Ireland, West Virginia or Tasmania 9
Slide 10: 3. Host Industry
For personal use only 3. Host Industry 10
Slide 11: Beef Demand: UN / FAO Projections
Beef Demand For personal use only UN / FAO Projections • Global food production will need to increase 40% by 2030 and 70% by 2050; beef production will need to double by 2050 • Farming in 2050 will occupy only 13% more land than is used in 2008 • Beef consumption will increase by 8.5 million tonnes
Slide 12: Beef Demand: Population and GDP Growth in Customer Base
Beef Demand For personal use only Population Growth and GDP Growth 2010 to 2015 in AAco’s Current Customer Base Source: Bloomberg 12
Slide 13: Indonesian Demand for Live Cattle and Beef
Beef Demand For personal use only Indonesian Demand for Both Live Cattle & Beef Continues to Grow A$ million 600 beef exports live cattle 500 400 300 200 100 0 90 92 94 96 98 00 02 04 06 08 10f Source: Australian Bureau of Statistics 13
Slide 14: Beef Supply: Global Beef Cow Inventories
Beef Supply For personal use only Global Beef Cow Inventories are in Steady Decline 10% 8% 6% Percent Change from 1990 4% 2% U.S. 0% ROW ‐2% ‐4% ‐4% ‐5% ‐6% ‐8% 90 95 00 05 10F Source: Greg Doud, National Cattlemen’s Beef Association 2010 14
Slide 15: Beef Supply: US Ethanol Production Pressure
Beef Supply For personal use only US Corn‐based ethanol production will continue to increase pressure on beef producers due to competition for cost of feed and land Source: FAPRI 2010 Agriculture Outlook 15
Slide 16: Beef Supply: Health of Global Beef Producers
Beef Supply For personal use only Health of Global Beef Producers (Forecasted Changes in 2010) Industry Country Beef Production Cows “Health” Brazil 4.0% 3.0% China ‐4.1% ‐0.8% U.S. ‐2.3% ‐1.5% EU‐27 ‐0.6% ‐0.4% Argentina ‐12.5% ‐7.6% Australia ‐1.2% 0.4% Mexico 0.3% ‐2.3% Canada ‐1.9% ‐2.7% Source:
Slide 17: Beef Supply: Heifer Slaughter Not Sustainable
Beef Supply For personal use only Heifer Slaughter Not Sustainable Decision made to Slaughter or Produce Slaughter Heifer Breeding and Growou Growou Nursing Calf Feedlot t Gestation t Breeding and Growou Nursing Calf t Feedlot Gestation Months 17
Slide 18: Price Dynamics: Beef Prices Continue to Increase
Price Dynamics For personal use only Beef Prices Continue to Increase Source: “The Land” 13 May 2010 18
Slide 19: Price Dynamics: US Imported 90CL Cow Price
Price Dynamics For personal use only US Imported 90CL Cow Price A¢/kg FAS 450 400 350 300 250 2008 2009 2010 200 J F M A M J J A S O N D Source: Steiner Consulting Group 19
Slide 20: Price Dynamics: Eastern Young Cattle Indicator
Price Dynamics For personal use only Eastern Young Cattle Indicator (EYCI) Source: MLA 20
Slide 21: Price Dynamics: AUD/USD
Price Dynamics For personal use only AUD/USD Source: RBA 21
Slide 22: Wholesale Pricing Chart
Wholesale Pricing Chart LOIN For personal use only Curr Prev Prev IMPS/ NAMP # Description Year Price Week Price Year Price ROUND RIB 174 Short Loin, Short Cut 5.65 5.78 5.39 Curr Prev Prev Curr Prev Prev 175 Strip Loin, Bone In 5.03 4.99 4.92 IMPS/ Description Year Week Year Prepared on behalf of t
Slide 23: Price Dynamics: US Value of Exports to Japan
Price Dynamics For personal use only US Value of Exports to Japan Short plates Short ribs Dom. Value Intestine Export Prem Tongues Skirt Export Premiums of $64 per head Hanging Tender Chuck roll $0 $20 $40 $60 $80 USD Source: USMEF, Cattle Fax, USDA 23
Slide 24: 4. Strategic Review Process
For personal use only 4. Strategic Review Process 24
Slide 25: For personal use only
~ 5 yrs Board/Ownership turmoil and limited management focus ~ 2007 — 2009 crippling seasonal conditions What does AA Co do ? How does it do it ? Review of global conditions What are the risks ? How should it change what it does? What else should it be doing? What physical and financial resources ar
Slide 26: Future
For personal use only Future Professional Management Skilled & Motivated Vertically Operations Integrated Price Price Maker Volume 1 mil+ head Costs Competitive
Slide 27: Key Findings / Opportunities
For personal use only Key Findings / Opportunities • Status quo offers variable/limited, seasonally dependant growth. • Risks and mitigants identified. • Operational opportunities: – Logistics – managing inventory movements better e.g. aligning inventory movements with markets, reducing the number o
Slide 28: Key Risks
For personal use only Key Risks Management have sought to identify and then mitigate the risks faced by operating a business dealing with live animals, and dependant on agronomic conditions. The key risks are essentially those which are not directly controllable by management but are capable of miti
Slide 29: 6. Implementation of Initiatives
For personal use only 6. Implementation of Initiatives 29
Slide 30: Cattle Production Cycle
For personal use only Cattle Production Cycle Feedlot Grass fed/ Short Fed •100 – 400 days •14 days 30
Slide 31: Implementing 1. Cattle Merchandising
Implementing For personal use only 1. Cattle Merchandising 31
Slide 32: Implementing 2. Value Added Processing
Implementing For personal use only 2. Value Added Processing 32
Slide 33: Implementing 3. Breeder Alliance Program
Implementing For personal use only 3. Breeder Alliance Program 33
Slide 34: Implementing 4. Adjust Land Holdings
Implementing For personal use only 4. Adjust Land Holdings 34
Slide 35: Implementing 5. Philosophy and Approach
Implementing For personal use only 5. Philosophy and Approach 35
Slide 36: 7. Summary
For personal use only 7. Summary 36
Slide 37: Now, Goal, Changes
For personal use only NOW GOAL CHANGES 37
Slide 38: 8. Appendix
For personal use only 8. Appendix 38
Slide 39: Sensitivity Analysis (at Dec 2009)
For personal use only Sensitivity Analysis (at Dec 2009) Sensitivity on EBITDA Revenue Driver ±5% improvement ($m) ±20% Improvement ($m) Natural increase $1.2 $4.6 Kgs produced $4.6 $18.3 Mortalities $1.2 $4.8 Closing Heard valn ($) $12.3 $49.2 Totals $19.2 $76.9 39
Slide 40: NTA Analysis
a 4.00 3.50 5 January 2007 lf Other Cattle Land VN rain 5 January 2008 5 January 2009 = 5 January 2010 NTA Analysis 40% 20% 0% —— AAC Share Price a—— AAC NTA -20% ——_NTA Premium/(Discount) -40% -60% 40
Slide 41: Australian Cattle Grazing Property Index
For personal use only Australian Cattle Grazing Property Index Properties >2,000 Hectares Source: Herron Todd White 41
Slide 42: Growth in Net Beef Exports 2010-2015
For personal use only Growth in Net Beef Exports 2010 ‐ 2015 Source: FAPRI 2009 Agriculture Outlook 42
Slide 43: US Cow Numbers the Lowest on Record
For personal use only US Cow Numbers the Lowest on Record, Export Supply Constrained and Increased Demand for Imports Mil. lbs. 2010 2011 2012 2013 2014 2015 Total Production 25,612 25,317 24,998 25,178 25,376 25,742 Imports 2,795 2,851 2,908 2,966 3,025 3,096 Total Supply 28,997 28,628 28,366 28,60
Slide 44: EU-25 Beef Trade Surplus / Deficit
For personal use only EU‐25 Beef Trade Surplus / Deficit 1,200 1,000 thousand metric tons 800 600 400 200 0 -200 -400 1990 1992 1994 1996 1998 2000 2002 2004 Source: Greg Doud, National Cattlemen’s Beef Association 2010 44
Slide 45: Beef Exports as a % of Production
For personal use only Beef Exports as a % of Production N. Zealand 83% Uruguay 70% Australia 65% Canada 70% India 29% Brazil 21% Argentina 15% U.S. 7% 0% 50% 100% Source: Greg Doud, National Cattlemen’s Beef Association 2010 45
Slide 46: Wholesale Beef Prices in Japan
For personal use only Wholesale Beef Prices in Japan, ¥kg Wholesale Beef Prices in Japan, ¥/kg Current Price vs. Year Ago AUS longfed fullsets -2.0% AUS grassfed fullsets 4.9% U.S. frz short plates -24.0% U.S. chilled short ribs -12.9% -30% -25% -20% -15% -10% -5% 0% 5% 10% Source: Greg Doud, Nation
Slide 47: Wholesale Beef Prices in S. Korea
For personal use only Wholesale Beef Prices in S. Korea, won/kg Wholesale Beef Prices in S. Korea, won/kg Current Price vs. Year Ago AUS short rib 36.7% AUS chuck roll 10.3% U.S. short rib -4.8% U.S. chuck roll 13.3% -10% 0% 10% 20% 30% 40% Source: Greg Doud, National Cattlemen’s Beef Association 20
Slide 48: Projected Dietary Changes in Developing Countries
For personal use only Projected Dietary Changes in Developing Countries Source: FAO Data 48
Australian Agricultural Company — Shareholder Meeting (May 2010) on 6ix