Ricegrowers Ltd. Class B · ASX:SGLLV
Ricegrowers Ltd. Class B — Corporate Update (November 2012)
41 slides from Ricegrowers Ltd. Class B's corporate update, November 2012
Slide 1: Capital Structure Review – SunRice Shareholder Meeting
Capital Structure Review SunRice Shareholder Meeting November 2012
Slide 2: Introduction
Introduction GERRY LAWSON AM CHAIRMAN
Slide 3: Why are we here today?
Why are we here today? • To inform you about the capital review process and the issues we have identified; • To seek your input and feedback; and • To advise you of the next steps. 3
Slide 4: Objectives of the Capital Review
Objectives of the Capital Review • Maintain a secure supply of Australian rice at a competitive price and provide transparency around paddy pricing; • Preserve the voting rights of current shareholders, and address anomalies within the share register and current structure; • Achieve a realistic mark
Slide 5: Challenges of the Review
Challenges of the Review • The aim of the review is to better address the requirements of both classes of shareholders, whilst protecting existing rights and ensuring the company’s long term requirements can be met. • We understand that some new growers are frustrated that they are unable to apply f
Slide 6: What has been done to date
What has been done to date • There has been significant work undertaken over the last five months, including: – Exploring impacts of various options, ranging from the status quo, to control entity structures, to an entity with a single class of shares, to an ASX listed company. – Consulting advisors
Slide 7: Topics for discussion today
Topics for discussion today • Share structure and register; • Paddy charter; • Board structure; and • Funding. 7
Slide 8: Share Structure and Register
Share Structure and Register 8
Slide 9: Share register
Share register • Our shareholder base is changing. There is now a divergence between the needs of the different groups. For example: – Growers accessing facilities with little equity investment; – Equity investors supplying little or no paddy; – Related entities holding multiple A Class Shares; – Co
Slide 10: Share register continued
Share register continued • Since converting to a company, there has been a change in the shareholding within SunRice. • At conversion in 2005: – 99% of B Class Shares were owned by A Class shareholders. • In 2011, after the issue of A Shares following the delivery of the C11 crop: – 69% of B Class S
Slide 11: SunRice's Constitution vs. Corps Act
SunRice’s Constitution vs. Corps Act SunRice Constitution The Corporation Act The company operates a large The Corporation Act sets out laws a business and the constitution sets out company and directors must comply our structure and the rights of with and may override a company’s shareholders. The
Slide 12: A Class Shares
A Class Shares • Issues identified by the Board: – Constructive arrangements are able to be put in place by restructuring farming arrangements to maximise supplier entities. – Potential to build multiple A Class holdings to influence votes. – In 2012, we believe up to 33 new delivery names (4% of th
Slide 13: B Class Shares
B Class Shares • Issues identified by the Board: – Limits on who can own B Class Shares. – Shareholder cap at 5%. – Limits on capital raising and debt reduction. – Limits on transfer of shares, including upon inheritance. – Lack of liquidity – as a result of the restrictions in the constitution and
Slide 14: Share register - A Class shareholder interests
Share register - A Class shareholder interests • Key issues relevant to A Class shareholders may include: – Paddy pricing. – Security of paddy payments and payment options. – Access to the SunRice brand through branded pricing for Australian grown rice. – Access to storage facilities and local milli
Slide 15: Share register - B class shareholder interests
Share register - B class shareholder interests • B Class shareholders have contributed equity to the business. They also bear economic risk. • Key issues relevant to B Class shareholders may include: – Liquidity of shares. – Business performance and governance. – Dividend returns. – Underlying value
Slide 16: Control
Control • What is “grower control” or control of the company? • Control means different things to different people. Is it: – Paddy price and priority for Australian rice to access “premium” markets? – Delivering paddy into SunRice-owned storages? – Voting on any take-over proposal? – Having shares o
Slide 17: Share Structure and Register – Discussion / Questions
Share Structure and Register Discussion / Questions 17
Slide 18: Paddy Charter
Paddy Charter 18
Slide 19: Paddy price and security of supply
Paddy price and security of supply • Ensure grower rights relating to rice supply and production are entrenched and protected under all future circumstances (no matter what structure is proposed). • Increased transparency for growers and shareholders. • Confirm rules for paddy pricing and grower sup
Slide 20: Paddy charter – inclusions/exclusions
Paddy charter – inclusions/exclusions Examples of what would be included in the charter: • Defined pool revenue streams. • Defined pool costs, expenses and overheads. • Term of charter. • Transfer price rules. • Crop carryover policies. • Foreign exchange / foreign exchange hedging. • Paddy handling
Slide 21: Paddy charter – inclusions/exclusions continued
Paddy charter – inclusions/exclusions continued Examples of what would be included in the charter: • Varietal premiums. • Industry support / research and development commitment. • Brand value. • Mechanism / timing for crop payments. • Timing and frequency of communicating estimated crop returns. • A
Slide 22: Paddy Charter – Discussion / Questions
Paddy Charter Discussion / Questions 22
Slide 23: Board Structure
Board Structure 23
Slide 24: Board structure
Board structure • SunRice is an international business with $1b in turnover. • We need a performance-based Board with diversified skills. • The size of our Board is large: – 10 members with a concentration of grower skills. – Heavy reliance on two external Directors for other skills such as finance,
Slide 25: Board structure continued
Board structure continued • We need the appropriate skills of Directors on committees: – For example, Finance, Audit and Risk Committee; and Remuneration Committee. • Grower representation remains fundamental with majority representation. • We have engaged a third party to conduct a comprehensive re
Slide 26: Board Structure – Discussion / Questions
Board Structure Discussion / Questions 26
Slide 27: Funding
Funding 27
Slide 28: Funding the business
Funding the business • In the last six years, total shareholder funds has increased by $196m. – This includes $114m from retained profits and $77m from increased equity/capital raising. • Capital issue started with the requirement to repay rice bonds and RMB Equity (from the acquisition of the stora
Slide 29: Funding the business continued
Funding the business continued 29
Slide 30: Funding - gearing
Funding - gearing • Since the high of 2007, SunRice has made significant inroads in reducing its gearing. This has mainly been achieved through reductions in working capital, retained profits, capital raising and lower capital expenditure vs. depreciation. • We are improving our gearing, but it is h
Slide 31: Funding – gearing continued
Funding – gearing continued • Our peers have also continued to de-leverage and have a median gearing of 30%. • RL needs to continue to de-leverage to strengthen its balance sheet and provide the capacity to fund growth opportunities in our core businesses. 120% 100% 80% 60% 2008 Median (57%) 66% 40%
Slide 32: Funding the business continued
Funding the business continued • A reduction in capital investment during the drought has assisted with our debt reduction, but future capital expenditure and investment to renew assets will be required in the next few years. 35,000 1,800 Ricegrowers Limited 1,600 30,000 1,400 25,000 1,200 20,000 1,
Slide 33: Funding / profit source – non Australian rice businesses
Funding / profit source – non Australian rice businesses • Diversified earnings have been key to our strength. • Non Australian rice businesses deliver profit and returns for equity investors and support the rice business in times of drought through paddy price supplements. • C2008 provided a large
Slide 34: Paddy price supplements
Paddy price supplements • Strong profits in non Australian Rice Milling and Marketing businesses ensured the business was able to supplement grower payments. • Over the seven drought-affected years, approximately $140 million was paid in paddy price supplements (an average of $83 per paddy tonne). •
Slide 35: Funding the business
Funding the business • We are in the process of developing our strategic plan to innovate, invest and grow the total business (including returns on the rice business). • This will require significant capital expenditure, for example: – Fumigation storage; – Distribution and supply chain improvements
Slide 36: Funding – Discussion / Questions
Funding Discussion / Questions 36
Slide 37: Conclusion
Conclusion GERRY LAWSON AM CHAIRMAN
Slide 38: Summary
Summary • The review’s objectives are to: – Maintain a secure supply of Australian rice at a competitive price and provide transparency around paddy pricing. – Preserve the voting rights of current shareholders, and address anomalies within the share register and current structure. – Achieve a reali
Slide 39: Summary continued
Summary continued • We will consider all reasonable structures and alternative options that have the potential to deliver a range of outcomes, including; – Higher value for shares; – Improved ability to access capital; and – Preserving voting rights on any change of control event. • We will only put
Slide 40: Next steps
Next steps • Take on board your feedback from today. • Further consideration of ideas and your feedback through other communication, including the website and hotline below. • Further rounds of shareholder meetings to be held in early 2013. • Website http://capitalstructurereview.sunrice.com.au incl
Slide 41: Thank you
Thank you
Ricegrowers Limited (SunRice) — Corporate Update (November 2012) on 6ix