Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — Investor Presentation (September 2013)
38 slides from Australian Agricultural's investor presentation, Sep 12, 2013
Slide 1: Strategy update and capital raising
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES For personal use only AUSTRALIAN AGRICULTURAL COMPANY LIMITED Strategy update and capital raising 12 September 2013
Slide 2: Important notice and disclaimer
Important notice and disclaimer For personal use only This presentation (“Presentation”) has been prepared by Australian Agricultural Company Limited (ABN 15 010 892 270) (“AACo”). The Presentation is in relation to an accelerated non-renounceable pro-rata entitlement offer of new fully paid ordinar
Slide 3: Important notice and disclaimer
Important notice and disclaimer For personal use only Future performance This Presentation contains certain “forward‐looking statements” with respect to the financial condition, results of operations and business of AACo and certain plans and objectives of the management of AACo, including AACo's st
Slide 4: Outline
Outline 1 Executive summary 5 For personal use only 2 Overview 6 2.1 AACo's heritage 2.2 AACo's current position 3 AACo's strategy 8 3.1 Value chain positioning 3.2 Acceleration of vertical integration 3.3 Darwin Abattoir 3.4 Market development 3.5 Further potential opportunities 4 Capital raising 1
Slide 5: 1. Executive summary
1. Executive summary AACo to raise capital to strengthen its balance sheet and accelerate the implementation of For personal use only its strategy which is aimed at lifting return on capital and driving shareholder value over time Current position • Highly cyclical domestic cattle markets and a cons
Slide 6: 2.1 Overview–AACo's heritage
2.1 Overview–AACo's heritage Since its establishment in 1824, AACo has succeeded by recognising and responding For personal use only to change and positioning the company for future growth 1824 1824: Crown grant of 1.0m acres of land at Port Stephens, NSW by King William IV. Sheep, Durham and Shorth
Slide 7: 2.2 Overview–AACo's current position
2.2 Overview–AACo's current position Despite its solid fundamentals, AACo is trading at a material discount to the value of its For personal use only net tangible assets AACo fundamentals Current constraints Australia's largest cattle and beef producer – Volatile domestic cattle markets affected by
Slide 8: 3.1 AACo's strategy–Value chain positioning
3.1 AACo's strategy–Value chain positioning AACo's strategic focus is on diversifying away from capital intensive primary production For personal use only and increasing exposure to higher margin, less cyclical opportunities to improve return on capital. The focus will be on vertical integration of
Slide 9: 3.2 AACo's strategy–Acceleration of vertical integration
3.2 AACo's strategy–Acceleration of vertical integration Vertical integration and overseas market development, supported by a strong balance sheet, For personal use only are key to improving return on capital and reducing earnings volatility AACo's vertical integration strategy Global beef price vs.
Slide 10: 3.3 AACo's strategy–Darwin Abattoir
3.3 AACo's strategy–Darwin Abattoir The Darwin Abattoir development is core to AACo's vertical integration strategy, For personal use only providing beef processing capacity in close proximity to Asian export destinations Darwin Abattoir overview2 Darwin Abattoir investment rationale Processing capa
Slide 11: 3.4 AACo's strategy–Market development
3.4 AACo's strategy–Market development Investment in marketing and sales channels will facilitate new and stronger For personal use only relationships with high value food service customers in overseas markets Market development strategy Greater supply chain integration will enable AACo to further O
Slide 12: 3.5 AACo's strategy–Further potential opportunities
3.5 AACo's strategy–Further potential opportunities Future investment will be directed at enhancing AACo's vertical integration strategy and improving return on capital For personal use only Marketing & Breeding / finishing properties Meat processing distribution • No current plans to make large-sca
Slide 13: 4.1 Capital raising–Entitlement Offer overview
4.1 Capital raising–Entitlement Offer overview Size and For personal use only • 7 for 10 accelerated non-renounceable Entitlement Offer to eligible AACo shareholders to raise approximately $219.2 million structure • 219.2 million new AACo ordinary shares (“New Shares”) to be issued Offer price • $1.
Slide 14: 4.2 Capital raising–Convertible Note overview
4.2 Capital raising–Convertible Note overview Size and For personal use only • $80.0m Convertible Note issued by AACo to the AA Trust structure • Unsecured and subordinated to AACo's senior bank debt • Freely transferable to institutional investors Maturity • 30 September, 2023 (10 years) • The Conv
Slide 15: 4.3 Capital raising–Use of proceeds
4.3 Capital raising–Use of proceeds Proceeds used to fund the completion of the Darwin Abattoir, reduce net debt and For personal use only enable AACo to accelerate its vertical integration strategy Sources and uses Sources ($m) $m Uses ($m) $m Entitlement Offer 219 Fund remaining capital expenditur
Slide 16: 4.4 Capital raising–Balance sheet impact
4.4 Capital raising–Balance sheet impact Adjusted gearing reduced from 40.9% to 23.5% post the capital raising and funds For personal use only committed to the Darwin Abattoir Pro-forma adjustments Balance sheet adjustments1 Completed Capital Funding for $m 31-Mar-13 asset sales4 raising5 Darwin Aba
Slide 17: 5.1 AACo update–Operational update
5.1 AACo update–Operational update Ongoing dry conditions and resultant increased supply has continued to depress cattle prices For personal use only Four months to end of July 2013 Rainfall–six months to end of July 2013 Climate • Dry conditions persisted in the four months to end of July 2013 • AA
Slide 18: 5.1 AACo update–Operational update (cont.)
5.1 AACo update–Operational update (cont.) Four months to end of July 2013 For personal use only Cattle Sales • A robust sales program in the four months Grass Shortfed Grain Breeder and Live Wagyu Total Sales Average to end of July 2013 has seen the sale of Finished Finished Feeder Export 135,022 h
Slide 19: 5.2 AACo update–Darwin Abattoir update
5.2 AACo update–Darwin Abattoir update Construction expected to be completed in 1HFY15 and operations expected to commence by 2HFY15 For personal use only Approximate timing Expected timetable to completion Present 31-March year-end 2HFY12 1HFY13 2HFY13 1HFY14 2HFY14 1HFY15 2HFY15 Land purchased Sta
Slide 20: 6. Capital Raising timetable
6. Capital Raising timetable For personal use only Key event Date/Time Announcement of the Offer (“Announcement Date”) Thursday, 12 September 2013 Result of the Institutional Offer announced to the market, trading halt lifted Monday, 16 September 2013 Record date (7pm, AEST) Tuesday, 17 September 20
Slide 21: Appendices
For personal use only APPENDICES Australian Agricultural Company Limited NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 22: A. AACo's global demand and supply trends
A. AACo's global demand and supply trends The macro thematic continues to underpin AACo’s strategy only Global cattle herd remains stagnant US Cow Herd continues to decrease 1,200,000 United States 1,000,000 Others Canada personal use 800,000 Mexico ‘000 Head Supply Russia 600,000 Australia Colombia
Slide 23: B. Risk factors
B. Risk factors Risks related to an investment in AACo For personal use only This section summarises some of the key risks that may affect the future performance of an investment in AACo. The risks set out below are not listed in order of importance and do not constitute an exhaustive list of the ri
Slide 24: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 1.4 Threats to the health and safety of livestock and unforeseen environmental issues AACo's business is vulnerable to factors which may adversely affect rural production including threats to the health and safety o
Slide 25: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 1.8 Loss of key personnel AACo’s growth and profitability may be limited by the loss of key management personnel who have particular expertise in the agricultural sector, the inability to attract new suitably qualif
Slide 26: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 1.13 New business activities and associated transactional risk AACo’s future growth may be a function, in part, of entering new or different businesses. In particular, AACo is seeking to undertake vertical integrati
Slide 27: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 1.17 Dividends Any future dividend levels will be determined by the AACo Board having regard to its operating results and financial position at the relevant time. There is no guarantee that any dividend will be paid
Slide 28: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 2. Macroeconomic Risks 2.1 AACo is vulnerable to industry cyclicality and movements in commodity prices and other factors of production AACo may be adversely affected by changes in the local and international price
Slide 29: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 2.3 AACo is subject to global and regional economic downturns AACo's business is sensitive to global and regional economic conditions. The level of economic activities may be affected by a number of factors, such as
Slide 30: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to an investment in AACo For personal use only 3. Regulatory Risks 3.1 Environmental regulations National and local environmental laws and regulations affect nearly all of AACo’s operations. These laws and regulations set various standards governing certain aspe
Slide 31: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to the capital raising For personal use only 3.4 Public administrative policy and legislation Any government, government authority or other enforcement agency may repeal, amend, enact or promulgate laws or regulations, or issue a revised or new interpretation of
Slide 32: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to the capital raising For personal use only 4. Financial Market Risks 4.1 ASX market volatility The market price of AACo’s shares may fluctuate due to various factors including general movements in commodity prices, the Australian and international investment m
Slide 33: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to the capital raising 5.Transactional Risk For personal use only 5.1 Underwriting risk The Underwriting Agreement sets out various events, the occurrence of which will entitle the Underwriter to terminate the Underwriting Agreement. Accordingly, there is a risk
Slide 34: B. Risk factors (cont.)
B. Risk factors (cont.) Risks related to the capital raising For personal use only 6. Other Risks and disclosures 6.1 Other external factors Other external factors may impact AACo‘s performance, including changes or disruptions to political, regulatory, legal or economic conditions or to national an
Slide 35: C. International offer restrictions
C. International offer restrictions This document does not constitute an offer of New Shares in any jurisdiction in which it would be unlawful. New Shares may not be offered or sold For personal use only in any country outside Australia except to the extent permitted below. United States This Presen
Slide 36: C. International offer restrictions (cont.)
C. International offer restrictions (cont.) Hong Kong For personal use only WARNING: This document has not been, and will not be, registered as a prospectus under the Companies Ordinance (Cap. 32) of Hong Kong (the "Companies Ordinance"), nor has it been authorised by the Securities and Futures Comm
Slide 37: C. International offer restrictions (cont.)
C. International offer restrictions (cont.) New Zealand For personal use only This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Securities Act 1978 (New Zealand). The New Shares in the entitlement offer are not being offered or sold to th
Slide 38: C. International offer restrictions (cont.)
C. International offer restrictions (cont.) United Kingdom For personal use only Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of se
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