Elders Limited · ASX:ELD
Elders — Investor Presentation (December 2009)
119 slides from Elders's investor presentation, Dec 2, 2009
Slide 1: Elders Field Days 2009
For personal use only Elders Field Days 2009 | December 2-3 2009 1
Slide 2: Elders Ltd - Malcolm Jackman, CEO
For personal use only Speaker: Malcolm Jackman - Chief Executive Officer Subject: Elders Ltd 2 Elders Field Days 2009
Slide 3: Income streams concentrated on agribusiness
Income streams concentrated on agribusiness For personal use only Sales EBITDA (Underlying) EBIT (Underlying) $2,336 million $117 million $84 million Agribusiness Agribusiness Agribusiness Forestry Forestry Forestry Automotive Automotive Automotive Sales* EBITDA* EBIT* Agribusiness^ $1,983 Agribusin
Slide 4: Elders' strategic position is at the farm gate
Elders’ strategic position is at the farm gate ….where farm production intersects with local and global markets For personal use only Concentration on rural distribution and associated leverage points… – Built around linkages and relationship with our clients – Maximisation of inherent value within
Slide 5: Aligned Partnership Model
Aligned Partnership Model For personal use only Shift from control and ownership to focus on capital efficiency and leveraging the value of the Elders network Grain – Elders Toepfer Grain joint venture Financial Services – Banking: Rural Bank (40% shareholding) with Bendigo and Adelaide Bank – Insur
Slide 6: Managing the business
Managing the business Elders Limited For personal use only CEO Malcolm Jackman GM HR & GM Investor & GM Legal & Futuris ITC COO CFO CIO Support Public Corporate Automotive Mike Guerin Mark Hosking Shaun Hughes MD Services Relations Development MD Vince Erasmus Rob Tanti Don Murchland Michael Sadlon
Slide 7: 2010 Management imperatives
2010 Management imperatives Meet prospectus forecasts For personal use only Complete asset divestments – ITC Timber (December 2010) – Hi Fert – Aquaculture De-leveraging Cash and balance sheet management Margin improvement - Elders business transformation Ongoing management values… Returns Cash Stra
Slide 8: Rural Services - Mike Guerin, COO
For personal use only Speaker: Mike Guerin – Chief Operating Officer Subject: Rural Services 8 Elders Field Days 2009
Slide 9: Rural Services at a glance
Rural Services at a glance, serving supply and demand needs of primary producers in chosen markets For personal use only Rural Services Sales: $2,147m Margin: $340m AUSTRALIAN NETWORK NEW ZEALAND NETWORK LIVESTOCK TRADING NETWORK RELATED FY2009 Sales: $1,475m FY2009 Sales: $135m FY2009 Sales: $428m
Slide 10: Rural Services sources of Sales and Gross Margin
Rural Services sources of Sales and Gross Margin For personal use only Sales Gross Margin $2,147m $340m Network Network Related Livestock Related Trading Livestock Trading NZ Network NZ Network Australian Australian Network Network Sales* Gross Margin* Australian Network $1,475 Australian Network $2
Slide 11: Our business is structured for our new orientation
Our business is structured for our new orientation For personal use only Chief Operating Officer Mike Guerin Geographic Leadership Support to GTM Integrated Support (Supply Side) (Demand Side) Functions Australia Livestock Trading Supply Chain (John Molenaar) (Hamish Browning) (Jim Lynch) New Zealan
Slide 12: The path to margin improvement
The path to margin improvement For personal use only 5 key factors to advance our margin objectives… Go-to-Market strategy – establishing Elders as the productivity partner of choice Supply Chain – buying and moving stock in the most effective and efficient manner Operational Excellence – delivering
Slide 13: Key projects currently in train
Key projects currently in train Go-To-Market Strategy Supply Chain For personal use only Initiated better systems to gather and Centralised procurement to improve analyse client data and target margins and lower our cost to-serve marketing/sales Preferred product access particularly in Develop the r
Slide 14: New Zealand Network
For personal use only Speaker: Mike Guerin – Chief Operating Officer Subject: New Zealand Network 14 Elders Field Days 2009
Slide 15: NZ presents an attractive market place for Rural Services
NZ presents an attractive market place for Rural Services For personal use only Rural Services is a natural player ….. with significant earnings in NZ market ….. potential NZ Farmers have similar needs to NZ has a profit pool potential about Australian farmers and competitive 1/3rd of Australia – pr
Slide 16: New Zealand Network Overview
New Zealand Network Overview For personal use only Statistics 12 mths to 30 Sep 09 Branches 18 Employees 404 Clients 40,000 Cattle sold 142k Sheep sold 457k Merchandise sales A$50m Total NZ sales A$135m 16
Slide 17: New Zealand: improving performance through Elders strategy
New Zealand: improving performance through application of Elders strategy and management framework For personal use only Transition to regional management structure – Change from product structure to customer orientated regional structure – Completed Implementation of Go to Market Model & rationalis
Slide 18: Go-To-Market
For personal use only Speaker: Mark Geraghty – GM Marketing Subject: Go-To-Market 18 Elders Field Days 2009
Slide 19: The need for a new go-to-market strategy
The need for a new go-to-market strategy For personal use only The consolidation of the farm sector has driven the need to change…… Number of Farms CAGR (%) 147,112 146,372 12.4 129,934 Farm Turnover ($’s) 8.7 >1m 500k - 1m 200k - 500k <200k 2.3 -3.5 1995 2000 2005 19 Source: ABS data; team analysis
Slide 20: The need for a new go-to-market strategy: no differentiation
The need for a new go-to-market strategy No perceived differentiation in the market place… For personal use only Average rating of Key buying factors Customers see little across all customers differentiation in the market Very poor Average Very good Price 22 Responsiveness 18 Knowledge 15 Local bran
Slide 21: Elders' go-to-market strategy at a glance
Elders’ go-to-market strategy at a glance For personal use only Aspiration Shift from a ‘current-value’ segmentation to one that incorporates profit potential, industry and needs Serve all parts of the market but gain: – Representative share of horticulture, dairy and major accounts Who Target – Dis
Slide 22: Elders go-to-market strategy at a glance
Elders go-to-market strategy at a glance For personal use only Livestock Progressive 2 Price Service NEEDS Cropping 1 AND SUB – INDUSTRIES Traditional INDUSTRY Horticulture LARGE (PLATINUM) Dairy 3 MEDIUM (DIAMOND, GOLD PROFIT POTENTIAL & SILVER) SMALL (BRONZE) 22
Slide 23: What is the opportunity?
What is the opportunity? For personal use only Strengthened & Differentiated Increased Market Share Reduced Cost-to-Serve Value Proposition Cross-sell (capture full Inside sales vs. field sales By segment and product (e.g. opportunity) downstream links for livestock Currently over 85% of clients pro
Slide 24: Progress to date
Progress to date Element Previous Target Benefit Status For personal use only Cross-sell Product based Industry oriented Sales Cross-sell and referral marketing sales people and sales team and programs developed Market share support structure support structure, Target clients identified limited cros
Slide 25: Australian Network
For personal use only Speaker: John Molenaar – Head of Australia Subject: Australian Network 25 Elders Field Days 2009
Slide 26: Australian Network Overview
Australian Network Overview For personal use only Statistic 12 mths to 30 Sep 09 Branches 267 Employees (FTE’s) 1,809 Revenue $1.5b Cattle sold 2.2m Sheep sold 12.7m Wool bales sold 475k Tonnes fertiliser 443k Farm supplies sales $1.2b Properties turnover $1.9b 26
Slide 27: Elders Day-to-Day Interaction
Elders Day-to-Day Interaction For personal use only STRATEGIC INTERFACE RIGHT ACROSS THE LIVESTOCK VALUE CHAIN FEEDLOTS SEASONAL BIOLOGICAL ANIMAL ABATTOIRS FINANCE GENETICS ASSETS HEALTH FEED SALES LIVE EXPORT Elders Participation STRATEGIC INTERFACE RIGHT ACROSS THE CROPPING VALUE CHAIN DOMESTIC F
Slide 28: Managing the Australian Network
Managing the Australian Network Region based management structure… For personal use only John Molenaar Head of Australia Financial Services GM South GM North National Sheep & Cattle 12 RSM’s : Regions1-4, 8 RSM’s : Regions 5-12 National ESM (KAM) 13-20 155 Branch Managers 112 Branch Managers Nationa
Slide 29: Value Proposition - Productivity Partner of Choice
Value Proposition – Productivity Partner of Choice For personal use only Better Advice Better Services Agronomic advice Seasonal and term finance − Production planning (whole of − Complete product range farm) Differentiated marketing options Animal Production − ELMS − Livestock: live export, feedlot
Slide 30: How we are improving
How we are improving For personal use only Element Previous Target Benefit Status Regional State based 20 individual regions Market and customer Completed Management management structure based on agri-orientated feedback / corresponding Structure farmer requirements due to management being closer to
Slide 31: Elders Toepfer Grain
For personal use only Speaker: Mark Thiele – MD Elders Toepfer Grain Subject: Elders Toepfer Grain 31 Elders Field Days 2009
Slide 32: Operating Model
Operating Model For personal use only 50:50 joint venture between Elders and Toepfer International Domestic Domestic Buyers Buyers International International Buyers Buyers Trading Contract & Trading Toepfer Toepfer Supply Accumulation Margin ETG ETG Commission Supply Interface & Elders Elders Netwo
Slide 33: Strategy
Strategy For personal use only Client Interface Supply Chain Market Interface Farmer client relationships Create efficient supply Customer partnerships drive support supply.. chains….. demand…. Elders network position Access not ownership Key accumulation nationally relationships Grain market regula
Slide 34: Overview
Overview For personal use only Measurement* State of Play Statistics Volume 3 million mt (est.) Wheat: 1.7 million mt Barley: 0.5 million mt Sorghum: 0.7 million mt Other: 0.2 million mt Staff Numbers Direct Field: 5 Corporate: 21 Indirect Active grain accumulation: Branches: 139 Toepfer global netw
Slide 35: Sales volumes
Sales volumes For personal use only 4,000,000 2,000,000 3,000,000 Tonnes Tonnes 2,000,000 1,000,000 1,000,000 0 0 07/08 (Actual) 07/08 Actual 08/09Actual 08/09 (Actual) Financial Year 07/08 Actual 08/09 Actual Financial Year WHEAT BARLEY SORGHUM OTHER 35
Slide 36: Initiatives to challenge the status quo
Initiatives to challenge the status quo For personal use only Element Description Target Benefit Status Supply Chain Independent on- Partnership with SGS 1 million mt by On farm storage First growers accredited farm warehouse for accreditation of on 2010 harvest by December 1 Flexibility in supply a
Slide 37: Future direction
Future direction For personal use only Farmer clients driven increasingly via cash flow management More transparent marketplace - supply chain cost focus Continued innovation to current product offering Rapid and contestable communication of pricing signals, trends and market drivers New service pro
Slide 38: Livestock Trading
For personal use only Speaker: Hamish Browning – GM Livestock Trading Subject: Livestock Trading 38 Elders Field Days 2009
Slide 39: Livestock Trading
Livestock Trading For personal use only Providing livestock supply solutions to downstream customers leveraging the supply capabilities of the Elders network while providing marketing options to farmers Live export of feeder and breeding cattle Grain fed beef cattle from feedlots in Australia (2) an
Slide 40: Business Units & Management Structure
Business Units & Management Structure Management structure defined by operation type and location… For personal use only Hamish Browning GM Livestock Trading Live Export Live Export Killara Feedlot Charlton Feedlot Feeder Cattle Breeder Cattle PT Indonesia (NACC) (ULE) 53% JV with 100% owned Approx
Slide 41: Feedlots
Feedlots Feedlot profitability is a function of cost to produce and the price realised on For personal use only sale… we must produce a kilogram of beef for less and sell it for more Supply chain operations involving 110,000 head per annum in Australia & Indonesia − Sales $135 million & Gross Margin
Slide 42: Live Export
Live Export 30% market share of live cattle exports For personal use only Supply of feeder and breeder cattle to world markets Sales $294 million & Gross Margin $33 million S.E. Asia Feeder Cattle Trade – Approx 200k head pa – Cattle shipped to be put on feed or direct to slaughter – High volume low
Slide 43: Strategy
Strategy For personal use only Live Export Feedlots PT Indonesia Network supports trend Integrated feedlot Increased feedlot capacity to reliable suppliers – operating model – additional 4,000 head target new markets, new customers, as well as High residency strategies Wet market volumes increase in
Slide 44: People and Performance
For personal use only Speaker: Rob Tanti - GM Human Resources Subject: People and Performance 44 Elders Field Days 2009
Slide 45: Focus of People & Performance initiatives
Focus of People & Performance initiatives For personal use only Operational excellence and efficiency – Remuneration – Recruitment – Fleet Cultural alignment High performance culture – Performance management and development – Performance incentives Sales force effectiveness Management and leadership
Slide 46: Operational Excellence - benchmarking and optimising back office
Operational Excellence – benchmarking and optimising back office activities and policies For personal use only Remuneration – Template employment contracts and terms – Single review cycle – Single benchmarking and reporting platform – Single point of governance Recruitment – Centralised transactiona
Slide 47: Cultural Alignment: Building the Elders Way
Cultural Alignment …Building the Elders Way For personal use only Our Values Rewards Guidance Programs & The Elders What we do Processes Way Awards Myths and Results Legends 47
Slide 48: Embedding a High Performance Culture
Cultural Alignment … Embedding a High Performance Culture focused on results. For personal use only Performance management and development – KPI's and objectives classified into; financial, operational, customer, safety, people and behaviours – Review and budget cycle integration – Development needs
Slide 49: Sales Force Effectiveness
Sales Force Effectiveness … For personal use only Technical capability Executive sales management and strategic account management Support management cadence Building sales management framework “selling the Elders way” – Collaboration between Australia and New Zealand to develop a single management
Slide 50: Management and Leadership
Management and Leadership … building best in class bench strength For personal use only Elders leadership competency matrix – Talent management – Succession management – Recruitment and selection Performance management Business management 50
Slide 51: Supply Chain
For personal use only Speaker: Jim Lynch – GM Supply Chain Subject: Supply Chain 51 Elders Field Days 2009
Slide 52: The Big Plan
The Big Plan For personal use only “…optimising the balance between service and cost through better buying, reduced working capital and efficiencies in physical logistics” 52
Slide 53: Elders' Supply Chain
Elder’s Supply Chain For personal use only Elders’ Farm Supplies Business is……………… $1B+ p.a. spend − Spread across Ag Chem, Fertiliser, Animal Health & General Merchandise Active stock items reduced by 26% over last 2 years (from approx 40,000) 2,000+ Active suppliers 115,000 end customers serviced
Slide 54: The need for change
The need for change For personal use only The need to change was driven by the need to…. Align with the Go-To-Market strategy Buy better - Drive margin gains through procurement Control of our offering - What we sell, to whom, when, how much Optimise logistics - Lower cost-to-serve Reduce working ca
Slide 55: Better Buying
Better Buying For personal use only Element Previous Target Benefit Status Consolidate the 250+ individual Centrally Buying power Key categories spend branch-based controlled, consolidated Negotiation power deals strategic Controls in place and procurement Control of offering discipline improving Em
Slide 56: Improved Physical Logistics
Improved Physical Logistics For personal use only Element Previous Target Benefit Status Develop Direct to 250+ Deliver & hold Inventory 3 DC’s implemented Distribution individual selected lines in 3 Fast tracking improvement Carrying risk Centre (DC) stores. National DC's initiatives around systems
Slide 57: Better Planning
Better Planning For personal use only Element Previous Target Benefit Status Functional “Loose” Supply chain Planning, through Formal mechanism to align & alignment via alignment deliverables match single “demand” optimise Marketing direction with Sales & sales execution & figure Sales execution, Su
Slide 58: 2006 Elders' Australian Supply Chain - Basic Design
2006 Elders’ Australian Supply Chain – Basic Design 30% of volume flowing through Elders DCs For personal use only 50+ Major suppliers 500kg median branch delivery size Daily deliveries with heavy use of local carriers 200+ Regional supplier DCs Heavy use of urgent orders & deliveries − peak season
Slide 59: 2010 & Beyond Elders Supply Chain
2010 & Beyond Elders Supply Chain – Compared to 2006 Targeting 70+% volume flow via DC's For personal use only 50+ Major Suppliers Median branch shipment weight increased by 150-450% Reduced Supplier Purchase Orders by 70-75% Peak-season, Urgent Branch Orders reduced to <15% Reduction of Elders Redu
Slide 60: Timelines for Implementation & Benefits
Timelines for Implementation & Benefits Basic Nov Mar Jun Sept Dec Implementation 2009 2010 2010 2010 2010 For personal use only Consolidate the spend Better Robust Processes Buying Demand Driven Develop DC Infrastructure Improved Physical DC Rebates Logistics Freight Review Sales & Ops. Planning Be
Slide 61: Operational Excellence
For personal use only Speaker: Miriam Silva – GM Commercial Operations Subject: Operational Excellence 61 Elders Field Days 2009
Slide 62: The Big Plan
The Big Plan For personal use only “……..creating a sustainable base for growth by implementing operational best practice to reduce risk, support sales and free up capacity to focus on customers” 62
Slide 63: The need for change
The need for change For personal use only Non-standard processes across our business. Elders needs… Better process links to customer service standards and customer value propositions (Supply Chain and Go-To-Market ) Improved understanding of customer requirements and cost to serve A better spread of
Slide 64: How are we doing it?
How are we doing it? For personal use only DMAIC & Lean 6 Sigma structured program to reduce operating costs & improve efficiency 19 projects to be conducted over 15 months First 6 months focussed on Branch Network (including Farm Supplies, Livestock & Real Estate) and HR. High strategic significanc
Slide 65: Establishing the Standardisation Program
Establishing the Standardisation Program For personal use only Building a platform to support our customer facing operation…. Reviewing existing documentation within the business (10 years old, ambiguous and state oriented) Selecting the ‘best process’ currently existing within the business to stand
Slide 66: Timelines
Timelines 2010 2011 For personal use only 1 Proof of Concept 39 Policies & Procedures delivered across: 1. HR 2. Farm Supplies 3. Livestock 4. Real Estate 2 Full Stream Delivery 1. HR 2. Farm Supplies 3. Livestock 4. Real Estate 5. Livestock Export & Trading 6. New Zealand (Improve) 3 Standardisatio
Slide 67: Outcomes
Outcomes For personal use only To support Elders Transformational Program by providing…. Improved customer experience – Efficient, standardised and common processes measured to customer requirements – Better customer service Consistency – Across all branches and geographies – Increased staff capabil
Slide 68: Elders Insurance
For personal use only Speaker: Tim Plant – CEO Elders Insurance Subject: Elders Insurance Elders Field Days 2009
Slide 69: Elders Insurance - Business snapshot
Elders Insurance – Business snapshot For personal use only Key facts Gross Written Premium (GWP) $500m Customer numbers 250,000 Policies 290,000 Agents & Salespeople 209 Product & Distribution Elders Insurance (Underwriting Agency) Pty Ltd (EIUA) – 75:25 JV between QBE & Elders Underwriter • QBE Ins
Slide 70: GWP Break Down
GWP Break Down For personal use only GWP by Product GWP by State HO NT Tas ACT 1% Commercial 1% 1% 8% SA Farm NSW 14% 27% 31% Business Qld 29% 16% Vic Agency Personal WA 22% 18% 11% 21%
Slide 71: Elders Insurance locations
Elders Insurance locations For personal use only Fit with Elders Number % of Total Stand Alone 59 36% High Street Shared 33 20% High Street Rural Services 71 44% Branches Total 163
Slide 72: Elders Insurance Operating Model
Elders Insurance Operating Model For personal use only Product Claims Underwriting Authority All Claims above $10k Product Development including: − Farm −Liability, − Livestock −Third Party & − Crop −Fraudulent Claims Tied Franchised Agents Policy issuance Local claims settlement - $10k or less Prim
Slide 73: Leveraging the best of Elders and QBE
Leveraging the best of Elders and QBE For personal use only Unique Franchise Agency Agreement Tied Agency Network 20-year tenure protected by the Franchise Code Ability to on-sell servicing rights Exclusive access to Elders Insurance products Exclusive access to Elders Ltd client base Quality of Rel
Slide 74: Competitive positioning
Competitive positioning For personal use only
Slide 75: Key market opportunities from formation of EIUA
Key market opportunities from formation of EIUA For personal use only Transition to QBE systems Implementation of c.ch@nge will improve front-end efficiency Enhancement of Agent model and sales capability Agent segmentation Growth in SME business Increased utilisation of QBE Products EIUA to ‘manufa
Slide 76: "…..one strong future"
For personal use only “…..one strong future”
Slide 77: Rural Bank Limited
For personal use only RURAL BANK LIMITED 2nd December 2009 Adelaide Paul Hutchinson Page 77 Managing Director & CEO
Slide 78: Agenda
Agenda For personal use only Background › Legal / Operating Structure › Current Market Position › Business Dimensions › Structure and Governance - Customer Strategy - Customer Value Proposition - Segmentation - Product and Price Competiveness Page 78
Slide 79: Background - Legal / Operating Structure
Background - Legal / Operating Structure For personal use only Legal / operating structure RBL is a 60:40 joint venture between Bendigo and Adelaide Bank Limited (BEN), and Elders Limited (ELD) established in 2000 RBL today leverages capabilities in the Elders and BEN including adjacent product line
Slide 80: Background - Current Market Position
Background – Current Market Position For personal use only Current market position VIC/TAS Operates in a market that is dominated by NSW 14% the Big 5 banks (NAB, CBA, ANZ, Westpac 21% and Rabobank), as well as a number of smaller regional players (St George, Bank QLD 24% West, Suncorp Metway, Landm
Slide 81: Background - Key Business Dimensions
Background - Key Business Dimensions Retail Funding Composition For personal use only 2-3 mths $4,000 Millions 31% 0-1mth $3,500 78 21% 203 $3,000 255 $2,500 205 $2,000 60 3,526 3,675 $1,500 0 2,976 2,687 At Call 2,262 4-6 mths $1,000 1,846 15% 18% $500 Over 12 7-12 mths mths $0 11% 4% Jun 04 Jun 05
Slide 82: Background - Structure & Governance
Background – Structure & Governance Operating Model & Executive Management Structure For personal use only Page 82
Slide 83: Agenda
Agenda For personal use only 〉 Background › Legal / Operating Structure › Current Market Position › Business Dimensions › Structure and Governance 〉 Customer Strategy › Customer Value Proposition › Segmentation › Product and Price Competiveness Page 83
Slide 84: Strategic Direction - Brand and Marketing
Strategic Direction – Brand and Marketing For personal use only Customer Value Proposition Proof Points 〉 Rural Bank has unparalleled industry Rural Bank is the Country’s Bank. specific knowledge underpinned by a team of industry experts. For Agribusiness 〉 Rural Bank is committed to helping We are
Slide 85: Strategic Direction - Sales Capability Effectiveness
Strategic Direction - Sales Capability Effectiveness Market Segmentation Driving Sales Planning Process For personal use only i. By LSR district estimate total indebtedness and total deposits Step 1: Determine VALUE of LSR Districts ii. By LSR district estimate total value of production (i.e. turnov
Slide 86: Client Groups - Targeted Penetration
Strategic Direction - Sales Capability Effectiveness Client Groups – Targeted Penetration For personal use only Customer Groups Tier One Tier Two Tier Three Tier Four Tier Five Estimated turnover $10m $2m $0.7m $0.3m $0.1m per farm1 Turnover range1 >$5m $5-1m $1-0.5m $0.5-0.2m $0.2-0m Indebtedness >
Slide 87: Strategic Direction - Product & Price Competiveness
Strategic Direction - Product & Price Competiveness Loan Product Levers For personal use only Product Development Simplicity Target Market Value < $200k Stockbuilder Leasing Harvest > $200k Marketing New customer acquisition Improved product penetration Sales support Page 87
Slide 88: ITC Limited
For personal use only Speaker: Vince Erasmus - Chief Executive ITC Limited Subject: ITC Limited 88 Elders Field Days 2009
Slide 89: Overview of ITC
Overview of ITC For personal use only Now focused on forestry – Manager of Forestry estate of 170,000 ha – ITC manages trees owned by MIS growers and participates in harvest proceeds – ITC owns a small minority of trees in its own right – Port infrastructure at Albany (50% share) and Bell Bay (throu
Slide 90: Plantation & port footprint
Plantation & port footprint For personal use only Area (ha) Owned Leased Total Kununurra 1,640 ha Indian sandalwood Western Australia 22,353 82,297 104,650 Green Triangle 1,407 31,693 33,100 Mourilyan 2,010 ha Teak Queensland 27,686 4,464 32,150 4,270 ha Red Mahogany Tasmania 0 800 800 80 ha Indian
Slide 91: Forestry to end markets
Forestry to end markets For personal use only Eucalypts (93%) Red Mahogany (2.5%) Teak (1.2%) Sandalwood (1.1%) 91
Slide 92: Transition from ITC to Elders Forestry
Transition from ITC to Elders Forestry For personal use only ITC is to be renamed Elders Forestry… Recognition of Elders’ involvement “One Company under the Elders’ brand” philosophy Rebranding to support marketing of future MIS (and institutional) sales Forestry business to be an asset light operat
Slide 93: Differentiating features of ITC MIS business model
Differentiating features of ITC MIS business model Differentiating Factor Elders Forestry For personal use only Focus Dedicated forestry business Revenue Diversification Diversified revenue from MIS - 3rd party timber and port infrastructure Co-investors ITC retains significant equity over life of t
Slide 94: Diversification of revenue streams
Diversification of revenue streams For personal use only MIS forestry projects (both existing and future sales) will be an ongoing MIS source of revenue Timberland Alternative forestry investment structures and investors being investigated funds (e.g. institutional, wholesale, sovereign wealth funds
Slide 95: Features of Australian forestry
Features of Australian forestry For personal use only Premium Product – Eucalyptus Globulus Proximity to Key Customers Faster growing relative to other species leading Australia is well positioned to supply China and to increased forest returns other growing Asian countries Higher pulp yield leading
Slide 96: Positive long-term outlook for pulpwood
Positive long-term outlook for pulpwood Plantation is replacing native timber supply For personal use only Global growth will focus in Asia 20 Native 18 Sawmill Residue 16 Plantation 14 12 Mm3 10 8 6 4 2 0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016f 2018f 2020f Source: Poyry Dec 2007 Source:
Slide 97: Woodchip supply contracts
Woodchip supply contracts For personal use only ITC is lead Australian negotiator for plantation woodchip exports with Japan Typically annual negotiations Priced in A$, current price $207.40 per bone dry metric tonne Long term agreements with Oji, Nippon Paper, and other leading Japanese paper house
Slide 98: Certification
Certification For personal use only Forest Stewardship Council is the highest The first Australian retail forestry company level of environmental certification to achieve Forest Stewardship Council available in the world. Demanded by certification Japanese paper companies, entrenched in Europe and U
Slide 99: How forestry generates returns
How forestry generates returns For personal use only Not suitable for lumber Biomass & Pulpwood Knotty Industrial grade Low knot incidence Structural Minimum defect Defect free joinery Defect free Veneer or peeler log 99
Slide 100: Harvesting operations have only commenced in recent years
Harvesting operations have only commenced in recent years For personal use only ITC ITC harvested harvested volumes volumes 2.5 2 1.5 GMT (million) 1 0.5 2000s 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 1991-97 1998 2001 2005 2006 2008 – Planted –
Slide 101: Forestry
For personal use only Speaker: Ockert La Roux – GM Forestry Subject: Forestry 101 Elders Field Days 2009
Slide 102: Key Facts ITC Forestry
Key Facts ITC Forestry For personal use only Land Staff numbers – Owned 52k ha $291m – ITC 68 – Contractors 400 – Leased 119k ha Trees Annual Costs (12 mths to Jun 09) – Growers & direct clients 158k ha – Silviculture $39m – ITC Owned 8k ha – Harvesting, Chipping, Haulage $14m – Woodchip handling $4
Slide 103: Business Structure
Business Structure For personal use only Finance Human Resources Forestry Planning Funds Management Safety, Health, Environment, Quality management systems Forestry Value Chain Markets Research & Tree Plantations Stump to hull Propagation logistics Procured Timber 103
Slide 104: Geographic and Species Diversity
Geographic and Species Diversity Mourilyan 2,010 ha Teak For personal use only Kununurra Tropical 1,640 ha Indian sandalwood 4,270 ha Red Mahogany High value timbers 80 ha Indian Sandalwood Tropical pulp species Mackay 11,280 ha pulp Gladstone 13,130 ha pulp Bunbury 1,380 ha sawlog 16,070 ha pulp 44
Slide 105: Pulpwood - Seedling to Stump
Pulpwood - Seedling to Stump For personal use only Ongoing Week: -4 Week: 5-6 Year: 2 Year: 9 Research & Land Mid rotation Pre harvest inventory Monitoring development preparation fertiliser assessment Tree breeding Ripping Infilling Fire control Mounding Pest & insect Best practice Weed control con
Slide 106: Pulpwood - Stump to Market
Pulpwood - Stump to Market For personal use only Year: 10 Year: 10 Year: 10 Year: 10 Year: 10 Year: 10 Whole tree Whole trees Weighing, Woodchips Vessel sails Woodchips harvesting with debarked & screening & reclaimed & for Japan converted into mechanised chipped at re-sizing of conveyed to market p
Slide 107: Propagation and Tree Breeding
Propagation and Tree Breeding For personal use only Clonal Forestry OGY TECHNOL eucalypt hybrid cuttings Seed from genetically superior parents Seedling TIME Forestry pure species seedlings In house R&D team and facility Focus on selection and breeding: “elite trees from superior parents” Genetic ga
Slide 108: Measuring Tree Productivity
Measuring Tree Productivity Stand development over time Mean Annual Increment For personal use only Mature phase 24 22 MEAN ANNUAL INCREMENT (t/ha/yr) 20 Stem wood per hectare 18 Rapid growth phase 16 14 12 Establishment phase 10 8 6 8 10 12 14 16 18 20 22 24 3 years 2 years 1 year Stand age FELLING
Slide 109: Future Harvest Estimates
Future Harvest Estimates Pulpwood (‘000 green metric tonnes) For personal use only 2,640 2,513 2,889 2,361 2,085 1,989 1,608 1,549 1,540 429 990 1,035 1,045 618 123 178 9 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 9,83
Slide 110: Long term agreements with leading Japanese paper and pulp companies
Long term agreements with leading Japanese paper and pulp companies For personal use only Supply an average 1.6m tonnes of FSC certified woodchip for the next five years… Supply Volume End User Region (GMT ‘000) Oji Paper Albany 440 Green Triangle 400 Nippon Paper Group Green Triangle 600 Hokuetsu P
Slide 111: Future Forestry Focus
Future Forestry Focus For personal use only Pulpwood Consolidation Consolidationcurrent currenttemperate temperateestate estateto to125k 125kha ha Red Mahogany Grow Growcurrent currentestate estateform formthe thecurrent current4,3k 4,3kha hato to10k 10kha ha Teak Grow Growcurrent currentestate esta
Slide 112: MIS
For personal use only Speaker: Linda Pickering – GM Funds Management Andrew Bendall – CFO ITC Limited Subject: MIS 112 Elders Field Days 2009
Slide 113: MIS Market Size
MIS Market Size For personal use only Forestry $1139 Non-forestry $1140 1200 (F: $698m) (F: $667m) $1090 $1024 (F: $710m) (F: $768m) 2003/04 - 93% growth 1000 2004/05 - 54% growth Capital raised ($m) $800 20% - 18% growth 800 $665 (F: $505m) 15% - 60% growth 600 $500 $400 $345 (F: $360m) $300 $294 4
Slide 114: Market Share
Market Share For personal use only 2009 Market Share 2008 Market Shares 2009 Market Shares TFS Willmott TFS Willmott ITC Gunns ITC Gunns Forest Enterprises Aust Great Southern Forest Enterprises Aust Great Southern Timbercorp Other Timbercorp Other Source: AAG End of Year report 114
Slide 115: Strategy
Strategy Decision Factors For personal use only • Product ratings • Finance • Ease of doing business • Relationship • Education ITC MIS AFSL’s Advisers Investors Decision Factors Financial Planning Strategies • Product ratings • Wealth accumulation • Listed v unlisted • Tax planning • Adviser educat
Slide 116: Product Development
Product Development For personal use only Design Finance ATO ruling Research 1 July 31 Jan Diversified Forestry Project Multiple species Multiple locations Multiple cash flows Choice of fee options Investor protection 116
Slide 117: 2010 Diversified Forestry Product - Cash Flows to ITC
2010 Diversified Forestry Product – Cash Flows to ITC For personal use only 50/50 Single Upfront and Annual Payment – NPV $2,732 Diversified Project - Cash Flow to ITC - 1 Unit Annual Cash Flow Post-Tax $8,000 Cumulative Cash Flow Post-Tax $6,000 $4,000 $2,000 $- 2010 2011 2012 2013 2014 2015 2016 2
Slide 118: 2010 Diversified Forestry Product - P&L to ITC
2010 Diversified Forestry Product – P&L to ITC For personal use only Annual after tax profit margin recorded to ITC Diversified Project - Annual Margin to ITC - 1 Unit $2,000 $1,800 Deferred Management margin $1,600 Establishment - Secondary $1,400 Establishment - Upfront $1,200 $1,000 $800 $600 $40
Slide 119: Historical Forestry Revenue - Breakdown
Historical Forestry Revenue - Breakdown For personal use only 2009 ($m) 2008 ($m) MIS 2009 Sales Establishment Income 13.0 - MIS 2008 Sales Establishment Income 17.8 13.4 MIS 2007 Sales Establishment Income 7.2 26.2 MIS 2006 Sales Establishment Income - 5.7 Establishment Income Total 38.0 45.3 Manag