Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — 2012 Annual Stockbrokers Conference
31 slides from Australian Agricultural's conference presentation, Jun 1, 2012
Slide 1: Presentation at the 2012 Annual Stockbrokers Conference
Australian Agricultural Company Limited ABN 15 010 892 270 For personal use only Presentation at the 2012 Annual Stockbrokers Conference ASX Announcement 31/2012 1 June 2012 Attached is a presentation by David Farley AAco Managing Director and CEO to the Stockbrokers Association of Australia at the
Slide 2: Australian Agriculture in the Global Context
For personal use only Australian Agriculture in the Global Context Why the world requires Australia to be responsible and productive with its Agriculture assets Australian Agricultural Company Limited
Slide 3: Who is AAco?
Who is AAco? For personal use only Australia’s largest producer of beef AAco portfolio More than 600,000 head of cattle Darwin 19 cattle stations, two feedlots and three farms Cairns Owns and manages 7.2 million ha Townsville of land across Queensland and the Northern Territory Mackay The world’s la
Slide 4: Australian Agriculture
Australian Agriculture in the global context For personal use only Why the World requires Australia to be Responsible and Productive with its Agricultural Assets Australia’s importance to global trade Global macro drivers for agriculture and implications for Australia Impact of global supply shocks
Slide 5: Australia's importance to global trade
Australia’s importance to global trade For personal use only Australia is one of the major global exporters of agricultural production… Wheat (000’ MT) Sugar (000’ MT) 30,000 #2 20,000 20,000 10,000 #3 10,000 0 0 Guatemala Australia India Thailand Brazil Argentina United Australia Canada Zone Euro S
Slide 6: Australia's importance to global trade
Australia’s importance to global trade For personal use only Australia exports c.60% of its total farm production, the majority of which goes to Asia Major Australian agriculture export markets Major Australian agriculture export products Other China Wheat Asia 17.2% Other 17.7% 20.1% 25.1% Beef NZ
Slide 7: Australian Agriculture
Australian Agriculture in the global context For personal use only Why the World requires Australia to be Responsible and Productive with its Agricultural Assets Australia’s importance to global trade Global macro drivers for agriculture and implications for Australia Impact of global supply shocks
Slide 8: Global macro drivers for agriculture
Global macro drivers for agriculture For personal use only Population and income growth in developing economies to drive food demand… World agrifood demand, population and income (2050) Real growth 211% World income 300 250 200 World agrifood demand 77% 150 40% World population 100 50 2007 2014 2021
Slide 9: Global macro drivers: Asian food demand
Global macro drivers for agriculture For personal use only Demand for food in Asia expected to double by 2050—accounting for 70% of the global increase World agrifood demand by region 3,071 Asia 1,503 1,993 Rest of world 1,350 1,745 China 798 Breakdown of Asia 511 demand India 225 815 Rest of Asia 4
Slide 10: Global macro drivers: Asian import demand
Global macro drivers for agriculture For personal use only Multiplied impact on demand for imports in Asia given widening regional food production deficits World agriculture imports in Asia 591 Asia 123 360 China 39 108 India 5 123 Rest of Asia 79 0 200 400 600 Billion (2007 US$) 2007 2050 Australia
Slide 11: Global macro drivers: protein consumption
Global macro drivers for agriculture For personal use only Substantial increases in protein consumption over past 10 years … 41.4% 47.7% 7.5% 23.7% 29% 70.2% 48.7% 32.2% 23.3% Australian Agricultural Company Limited Source: Food and Agricultural Policy Research Institute
Slide 12: Global trade for meat forecast to grow
Global macro drivers for agriculture For personal use only Global trade for meat (inc. beef) is forecast to grow substantially… World agrifood imports by commodity group Global import demand (beef) Beef import demand expected to be Meat 209 3x higher by 2050 36 Vegetables / fruit 136 39 71 China 1 9
Slide 13: Global cattle herd numbers decreasing
Global macro drivers for agriculture For personal use only Global cattle herd numbers decreasing, exacerbated in the US… US cattle herd (000’ head) Australian cattle herd (000’ head) 34% 120,000 30,000 (22%) 20,000 100,000 10,000 80,000 0 1982 1992 2002 2012 1982 1992 2002 2012 Australian Agricultur
Slide 14: Implications for Australian Agriculture
Implications for Australian Agriculture For personal use only Increased global demand will lead to a dramatic shift in production and exports of key Australian agricultural commodities … Australian production Australian exports 14.3 10.4 Beef Beef 7.8 4.5 7.0 5.8 Wheat Wheat 3.8 2.7 2007 Dairy 6.6 D
Slide 15: Australian Agriculture
Australian Agriculture in the global context For personal use only Why the World requires Australia to be Responsible and Productive with its Agricultural Assets Australia’s importance to global trade Global macro drivers for agriculture and implications for Australia Impact of global supply shocks
Slide 16: Impact of global supply shocks in agriculture
Impact of global supply shocks in agriculture For personal use only World food inventories run down in 2007–08, resulting in price spike 250 200 150 100 50 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Food Price Index Meat Price Index Australian Agricultural Company Limited Source: FAO F
Slide 17: Case study: wheat example
Impact of global supply shocks in agriculture For personal use only Case study: wheat example World wheat inventories vs. wheat prices (US/BH) World stocks/use % Wheat prices (US¢/BSH) 40.00 1,200 2008: Prices peak at 1,100 $10.73 1,000 900 30.00 800 700 600 20.00 500 2007: World 400 Stocks/Use 20%
Slide 18: Potential flow-on effects of a supply shock
Impact of global supply shocks in agriculture For personal use only Potential global flow on effects of a significant supply shock event External shock to Australian exports Inventories run down Global prices increase Wheat importers increase spend as a % of GPD Additional spend impacts on the domes
Slide 19: Critical initiatives to improve Australia's agricultural productivity
Impact of global supply shocks in agriculture For personal use only Critical initiatives required to improve Australia’s productivity in agriculture … Accelerate R&D Australia’s key Implement education Create revolving food productivity programs banking program initiatives Establish effective Create
Slide 20: Foreign investment supporting Australian agriculture
Foreign investment supporting Australian agriculture For personal use only Foreign investment assists Australian agricultural producers access new and higher value markets…. AAco register breakdown by geography Select recent foreign investments in Australian agriculture assets Europe 6% Foreign inve
Slide 21: Australian Agriculture
Australian Agriculture in the global context For personal use only Why the World requires Australia to be Responsible and Productive with its Agricultural Assets Australia’s importance to global trade Global macro drivers for agriculture and implications for Australia Impact of global supply shocks
Slide 22: AAco's role
AAco’s role in the global context For personal use only AAco is a low cost / high quality producer with close proximity to the world’s highest growth markets in Asia Low cost Predominantly grass fed primary production production Significant investment in productivity improvements Superior beef
Slide 23: Transforming into a vertically integrated producer
AAco’s role in the global context For personal use only Transforming itself into a globally focussed, vertically integrated producer … Progress on strategic initiatives over time 2013 2012 • Achieve scale and relevance 2011 • Vertical integration (proposed • Reward shareholders NT abattoir) • Divide
Slide 24: Herd restocked to record levels
AAco’s role in the global context For personal use only Herd restocked to record levels and well positioned to take advantage of global supply constraints AAco herd levels over time Herd composition 13% 6% 666 700 Feedlot 590 588 28% 577 556 600 Trading 524 508 503 Breeders 500 Calf accrual 395 385
Slide 25: Superior financial performance over the last 2 years
AAco’s role in the global context For personal use only Translating to superior financial performance over the last 2 years Cattle sold (000’ head) EBITDA ($m) 240 250 80 58 176 166 200 42 150 40 100 0 2009 2010 2011 (40) Kg’s produced (m) (49) 100 81 (80) 64 51 2009 2010 2011 50 0 2009 2010 2011 Au
Slide 26: Proposed vertical integration via Darwin processing facility
AAco’s role in the global context For personal use only Pursuing vertical integration via proposed processing facility in Darwin…. decision to acquire land for the proposed site announced 30 May Proposed NT abattoir vs. others in region Compelling fundamentals for processing plant in Northern Terr
Slide 27: Individual Animal Recognition
AAco’s role in the global context For personal use only AAco is a recognised industry leader in developing innovative management programs to improve the productivity and security of its asset base Individual Animal Recognition Unprecedented management control and selection over breeding and tradin
Slide 28: Superior genetics and breeding programs
AAco’s role in the global context For personal use only AAco’s is utilising its superior genetics and breeding programs to maximise profitability as well as deliver cattle to suit end markets Barkly composite Gulf composite Wagyu program Australian Agricultural Company Limited
Slide 29: Increasing contributions from cropping
AAco’s role in the global context For personal use only Significant opportunity exists for AAco to increase contributions from cropping to improve returns across its portfolio Cropping at Goonoo Australian Agricultural Company Limited
Slide 30: Other key management initiatives
AAco’s role in the global context For personal use only Other key management initiatives Land use & water management Energy management Technology and innovation Animal welfare Indigenous engagement Youth engagement Australian Agricultural Company Limited
Slide 31: In summary
In summary For personal use only Population and income growth in developing economies is driving food demand Need for more productivity in Australian Agriculture AAco transforming itself into globally focused vertically integrated producer Latest initiative – acquisition of land for Darwin processin
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