Graincorp Limited Class A · ASX:GNC
Graincorp Limited Class A — Investor Day (May 2012)
73 slides from Graincorp Limited Class A's investor day presentation, May 24, 2012
Slide 1: GrainCorp 2012 Investor Day announcement
Company announcement For personal use only GrainCorp Limited ABN 60 057 186 035 Date: 24 May, 2012 To: The Manager Announcements Company announcements office PUBLIC ANNOUNCEMENT GRAINCORP 2012 INVESTOR DAY Investor Presentation Andrew Horne Company Secretary GrainCorp Limited Level 26, 175 Liverpool
Slide 2: 2012 Investor Day
24 May 2012 For personal use only 2012 INVESTOR DAY
Slide 3: Agenda
Agenda For personal use only Presentation Topic Time G i C GrainCorp • There is “Value in Grain” 9.40 (Alison Watkins) GrainCorp • Global food themes and implications for GrainCorp 10.00 (Neil Johns) Break Morning Tea 10.30 S&L(1) • Strengthen our grain handling network 11.00 ((Nigel g Hart)) Market
Slide 4: There is "Value in Grain"
24 May 2012 Alison Watkins For personal use only Managing Director and CEO THERE IS “VALUE VALUE IN GRAIN” GRAIN
Slide 5: Mission and investor questions
Today’s presentation will demonstrate our mission by answering investor questions For personal use only An international agribusiness creating value by connecting Mission consumers to growers along the grain chain Grow as our grain customers’ customers preferred partner – driven by our Vision passio
Slide 6: Our Business Model
Our Business Model For personal use only 9 Three core ggrains Global traded Other Wheat 8% • Wheat, barley, canola → represent 30% grains(1) Corn ~35% of global traded grains 23% • Focus on ‘drier drier climate’ climate grains, grains where Barley 3% we have a comparative advantage Soybean 32% Canol
Slide 7: Grain offers unique value add opportunities
Grain offers unique value add opportunities For personal use only We have a platform to create and Grain is a global soft commodity capture grain value • Variability in grain supply, trade • We create value from grain through: flows, quality, fl lit pricing i i within ithi and d 9 Handling → grain o
Slide 8: Building capabilities in our core grains
Building capabilities in our core grains For personal use only Country Logistics Ports Processing • 280+ sites in • Manage 19+ trains • 7 bulk elevators → Flour eastern Australia → → 5mmt+ capacity 16mmt capacity Australia • National network → (1) 20mmt storage • Manage 1mmt+ • 2 container facilitie
Slide 9: Three integrated grain activities create value
Our three integrated grain activities create value in our core grains For personal use only • Our business is more than a ‘distributor’ and ‘manufacturer ‘of grain products • We also create and capture value by owning grain along our grain chain Marketing Matches supply and demand • Links the consum
Slide 10: Our three operating geographies
Our three operating geographies are linked to our core grains For personal use only Europe Australia North America Marketing Storage & Logistics Marketing Hamburg office Country Operations, Calgary office Saxon Agriculture Logistics and Ports Processing Processing Marketing Canada Malting
Slide 11: Our core geographies give us insight
Our core g geographies g p give g us insight g For personal use only • Australia has a meaningful 10%+ share in the global trade of our core grains and malt • Our geographies give us 50%+ visibility in the global trade of our core grains and malt Export share by commodity and region 100% Other 80% E
Slide 12: Our Strategy builds on our Business Model
Our Strategy builds on our Business Model and 4 Strategic Themes For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value Harness our grain Develop improved Grow relationships to processing footprint and capability f
Slide 13: Strategic Themes and Gamechangers
4 Strategic Themes and 11 Gamechangers For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value 1 5 7 Drive supply chain Enhance customer- Optimise p operational p efficiency focused growth performance 2 6 Integrate
Slide 14: ~$40M additional underlying EBITDA
~$40M additional underlying EBITDA For personal use only • In excess of $40M additional underlying EBITDA from identified Gamechangers • To be delivered over 3 years to end FY14 supported by $80-120M capex • Supports the growth of ROE through the cycle ~$40M EBITDA delivered over 3 years ending FY14
Slide 15: GrainCorp Team to implement the strategy
GrainCorp Team to implement the strategy For personal use only Alison Watkins Storage & Logistics Marketing Malt (Nigel Hart) (Sam Tainsh) (Steve Haydon) Corporate Strategy St t & Finance Corporate Services Development (Alistair Bell) (Heather Miles) (Neil Johns) Also includes 60% share of Allied Mi
Slide 16: Agenda
Agenda For personal use only Presentation Topic Time G i C GrainCorp • There is “Value in Grain” 9.40 (Alison Watkins) GrainCorp • Global food themes and implications for GrainCorp 10.00 (Neil Johns) Break Morning Tea 10.30 S&L • Strengthen our grain handling network 11.00 ((Nigel g Hart)) Marketing
Slide 17: Global food themes and implications for GrainCorp
24 May 2012 Neil Johns For personal use only Chief Development Officer GLOBAL FOOD THEMES AND IMPLICATIONS FOR GRAINCORP
Slide 18: Food Security themes drive the global grain supply chain
‘Food Security’ themes will drive the global grain supply chain For personal use only Growth to 2050 Grain Exported Population 35% Demand 50% Grain 100% - 17 -
Slide 19: Grain industry underpins global food chain
Grain industry y underpins p global g food chain For personal use only • 2.3bmt(1) of grain drives a food supply chain that supplies ~60% global calories • 55% of grain for cereal foods and beverages and 45% for animal protein foods Wheat Barley Canola Sorghum Pulses Corn Soybean Grain processing Mi
Slide 20: Global grain demand to increase by 50%
Global g grain demand to increase by y 50% For personal use only • Global grain demand forecast to grow by 1bmt or 50% by 2050, driven by – 35% rise in population to 9.7 billion – 13% rise in per capita consumption of grain for animal feed (i.e meat and dairy) Grain consumption drivers to 2050 (bmt)
Slide 21: Global grain trade to increase by 100%
Global g grain trade to increase by y 100% For personal use only • Global wheat and malt export trade has doubled in the past 40 years • Global trade of our core grains to increase from ~155mmt to ~300mmt pa by 2050 Past and projected global core grain trade Past global malt trade Trade (mmt) and Po
Slide 22: Uneven spread in global grain trade flows
Uneven spread p in global g g grain trade flows For personal use only • 80% of the increase in the global trade of our core grains will be wheat • 75% of wheat trade growth driven by import dependent regions – Middle East & North Africa (MENA), Sub-Saharan Africa and Asia(1) Forecast growth in wheat
Slide 23: Internationalisation of grain markets
Internationalisation of g grain markets For personal use only • Grain prices could trend higher with greater variability • Grain prices will be increasingly transmitted and linked through global trade Grainin Grain prices Prices past and Volatility 10 years 350 350 2000=100 2000=100 Wheat Corn 250 2
Slide 24: Increasing global grain yields to meet demand
Increasing global grain yields to meet demand For personal use only • Higher grain prices will support increased grain yields – Grain yield has increased by ~1% pa in past 40 years – Continued improvement in farm practices, fertiliser usage and plant technology World and eastern Australian grain yie
Slide 25: GrainCorp opportunity: normalised receivals and exports
GrainCorp opportunity: Normalised grain receivals and exports For personal use only Eastern Australia Grain Yield(1) (mt/Ha) GrainCorp receivals 30 3.0 25 year moving average 1.8mt/Ha Eastern Australia production 2.5 ~18.0mmt 2.0 x 1.5 GrainCorp receival share 55-60% Yield 1.0 ~1.8mt/Ha = 05 0.5 Nor
Slide 26: GrainCorp opportunity: increased yield would support growth
GrainCorp opportunity: Increased yield would support growth For personal use only • If yield growth exceeds domestic demand growth, there will be a greater than proportionate increase in exports – E.g: ~10% grain yield increase to 1.95mt/Ha → grain exports ~20% higher Scenarios for GrainCorp normali
Slide 27: Storage & Logistics
24 May 2012 Nigel Hart For personal use only Group General Manager – Storage & Logistics STORAGE & LOGISTICS
Slide 28: Storage & Logistics Gamechangers
Storage & Logistics Gamechangers For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value 1 5 7 Drive supply chain Enhance customer- Optimise p operational p efficiency focused growth performance 2 6 Integrate custom
Slide 29: Compelling storage and handling package for customers
We have developed a compelling storage and handling package for customers For personal use only Country Logistics Ports • Flexible network of 280+ • 19+ trains managed • 9 export terminals(2) receival sites • 5mmt+ rail capacity • 16mmt capacity • 20mmt storage capacity • 60% market share • 75% expo
Slide 30: Competitive eastern Australian grain market
We operate in a competitive eastern Australian grain market For personal use only • Key drivers of our Storage & Logistics environment are capacity and competition Country Logistics Ports • ~10mmt domestic • ~3mmt pa of rail freight • 4mmt pa export capacity consumption ti with ith fi firstt capacit
Slide 31: Our unique and competitive offering
Our unique and competitive offering – we’re we re more than just a grain handler For personal use only 9 Network flexibility → grain accumulation and execution capability 9 Quality assurance → grain quality management along the grain chain 9 Insight → ability to match grain profile with customer nee
Slide 32: Strategy to maximise attractiveness of our network
Strategy to maximise the attractiveness of our network For personal use only • Target incremental underlying EBITDA → ~$15M • Focus → improved capability from our network to maintain share and improve margin 1 ork 1 ng netwo Drive supply • Optimise rail performance chain efficiency • Improve plannin
Slide 33: Drive supply chain efficiency
1 Drive supply chain efficiency For personal use only Optimise rail Improve planning efficiency performance and effectiveness • Target → optimise network capability • Target → improve network efficiency and improve p rail p productivity y by y 20% to reduce supply pp y chain costs • Reduce down time
Slide 34: Integrate customer offering
2 Integrate customer offering For personal use only Develop an integrated offering to Grow our domestic buyer our export customers relationships • Target → develop capacity planning • Target → increase grain supply to alternatives for export p customers domestic animal feed market • Match rail capac
Slide 35: Enhance value proposition for growers
3 Enhance value proposition for growers For personal use only Create an “easy to access” Develop grower segmentation marketplace for growers and engagement model • Target → develop tools to improve • Target → develop segment approach growers’ access to market g to meet the different needs of g growe
Slide 36: Enhance value proposition for growers
3 Enhance value proposition for growers For personal use only Strengthen our core Grow our container packing country network capability • Target → invest $20M+ to improve • Target → grow containerised exports grower site service g beyond y 20% market share • Acquire new mobile equipment to • Leverag
Slide 37: Grow complementary non-grain commodities
4 Grow complementary non-grain commodities For personal use only Capture non-grain storage and handling opportunities at our ports • Target → grow non-grain export and import storage and handling activity • Increase non non-grain grain exports to > 2 2.0mmt 0mmt pa and grow non non-grain grain impor
Slide 38: Marketing
24 May 2012 Sam Tainsh For personal use only General Manager – Marketing MARKETING
Slide 39: Marketing Gamechangers
Marketing Gamechangers For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value 1 5 7 Drive supply chain Enhance customer- Optimise p operational p efficiency focused growth performance 2 6 Integrate customer Broaden
Slide 40: Linking our asset intensive supply chain
Linking our asset intensive supply chain For personal use only • Our Marketing Business Model → domestic and international grain marketing Grain supply chain Country Logistics Ports Processing g connects growers Marketing g g and consumers through... Country Storage Transport and Ports Customer Supp
Slide 41: Constant domestic sales and strong export growth
Constant domestic sales and strong export growth For personal use only Domestic Australia International • Higher volumes and improved • Expanding export capabilities → customer service Australia, Europe and Canada • National Marketing capability • Building sustainable customer • Strong eastern Austr
Slide 42: Who are our overseas customers
Who are our overseas customers For personal use only • A broad base of 60+ overseas consumers of our core grains • We have doubled our Marketing export volumes in the past 3 years GrainCorp export volumes by region region, commodity commodity, end use and delivery (3 year average %) 100 Other Contai
Slide 43: Competitive global environment
Competitive global environment For personal use only • Australia is freight advantaged to Middle East, Asia and eastern Africa • International presence complements our Australian freight advantage Global Wheat Exports/Imports – mmt (2011/2012) and Australian Freight Advantages 20 5 20.5 18 0 18.0 17
Slide 44: Our growing international presence
Our growing international presence For personal use only • Market intelligence key → close to supply fundamentals and supports our offering to overseas customers • We have visibility across 50%+ global export trade of each of our core grains GrainCorp Marketing international presence Canada Calgar
Slide 45: Strategy to grow domestic and export Marketing activity
Strategy to grow our domestic and export Marketing activity For personal use only • Target incremental underlying PBT → ~$10M • Focus → Grow relationships with domestic and international customers to market an additional 1-2mmt of our core grains 2 keting business 5 Enhance E h • Do more with existi
Slide 46: Enhance customer focused growth
5 Enhance customer focused growth For personal use only Do more with existing Pursue new customers international customers and markets • Target → grow core grain exports to • Target → grow core grain exports to existing g customers new customers and markets • Service through supply chain • Harness g
Slide 47: Broaden origination footprint
6 Broaden origination footprint For personal use only Grow Australian (WA and SA) grain Grow international (Europe and origination Canada) grain origination • Target → grow core grain exports • Target → grow core grain exports from WA and SA from our core g geographies g p • Grow our WA and SA capab
Slide 48: Malt
24 May 2012 Steve Haydon For personal use only CEO – GrainCorp Malt MALT
Slide 49: Malt Gamechangers
Malt Gamechangers For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value 1 5 7 Drive supply chain Enhance customer- Optimise p operational p efficiency focused growth performance 2 6 Integrate customer Broaden orig
Slide 50: Integrated Malt business provides a platform for growth
We have developed an integrated Malt business that provides a platform for growth For personal use only Strong global position Broad customer base • 18 plants with 1.4mmt capacity • Service >800 customers → 4th largest commercial maltster • Diverse range of customer channels • Operations in 5 countr
Slide 51: Margins under short term pressure; demand fundamentals sound
While margins are under short term pressure – medium term demand fundamentals are sound For personal use only Global beer demand Craft beer demand Global whisky demand • Forecast to grow ~2% pa • Change in beer sales mix • Forecast to grow ~4% pa • Led by developing • Craft beer gaining higher • Lea
Slide 52: Value is created at each stage of the malt supply chain
Value is created at each stage of the malt supply chain For personal use only • Malt’s earnings are generated along the malt supply chain • Procurement → access, pricing and position management Barley • Barley quality → varietal management and yield procurement • Barley handling → elevation, elevati
Slide 53: Global malt portfolio provides strong competitive position
Our global malt portfolio provides a strong competitive position For personal use only • Positioned across ~60% of world’s barley production • Located in regions that supply ~80% of global malt exports Our global malt portfolio Europe Bairds (UK) 5 plants (250kmt(1)) North America Sales(2) - dom
Slide 54: Strategy to create and capture additional malt value
Strategy to create and capture additional value from malting activities For personal use only • Target incremental underlying EBITDA → ~$10M • Focus → Leverage our footprint and capabilities to optimise our malting activities and develop a superior malt supply chain offering 3 ue Malt valu 7 Optimis
Slide 55: Optimise operational performance
7 Optimise operational performance For personal use only Global cost benchmarking and Implement cost saving continuous improvement initiatives • Target → leverage our global network • Target → invest to reduce for best p practice and innovation operating p g costs • Harness our deep network of • Inv
Slide 56: Global model and customer management
8 Global model and customer management For personal use only Global margin management (sales Global customer account mix) management • Target → develop an integrated • Target → provide an integrated global barleyy and malt p pricing g strategy gy customer offering g • Develop strategies for margin r
Slide 57: Extend value beyond processing
9 Extend value beyond processing For personal use only Leverage capability in malt barley Grow capability in craft brewing procurement market • Target → leverage regional Marketing • Target → build capability to capture and Malt p procurement capabilities p opportunities pp in craft brew market • Wo
Slide 58: Capital Management
24 May 2012 Alistair Bell For personal use only Chief Financial Officer CAPITAL MANAGEMENT
Slide 59: ~$40M EBITDA growth improves through the cycle ROE
~$40M underlying EBITDA growth improves through the cycle ROE For personal use only Grains Malt Improved ROE • Target $25-30M EBITDA • Target $10-15M EBITDA • Improve through the cycle growth (S&L, Marketing growth (Malt and shareholder return and synergies) synergies) • Value creation from our • Im
Slide 60: Capital investment for ~$40M EBITDA growth
Capital investment for ~$40M EBITDA growth For personal use only • $80-120M capex to capture earnings growth → 3 years ending FY14 • Average ROCE of ~20% for investments → 2-3 years cash payback Example capex projects to achieve ~$40M $40M EBITDA 1 Strengthen our • Online support → smartphone app an
Slide 61: Low gearing, strong cash and sound dividends
Low gearing, strong cash and sound dividends For personal use only Strong balance sheet and cash flow Sound dividends • Core Gearing(1) 13% at HY12 → • Policy to pay 40-60% of NPAT through strategy to maintain <25% the business cycle • Capacity and flexibility to fund growth • Targeting to pay a div
Slide 62: Good access to debt and cash for strategic growth
Good access to debt and cash for strategic growth For personal use only Use and Position Strategy Implications Short terrm debt • Use → Marketing’s grain trading • Storage & Logistics → facilitate activities, working capital new service offerings requirements and Malt activities • Marketing → flexib
Slide 63: Marketing's activities funded with flexible short term finance
Marketing’s activities funded with flexible short term finance For personal use only Strategy Marketing Inventory and Short-Term Debt - $M • Marketing’s grain trading activities 675 are funded with short term debt Grain Marketing inventory Short term debt 600 - Match debt with asset life - Fluctuate
Slide 64: Stringent approach to managing Marketing and Malt risk
A stringent approach to managing Marketing and Malt risk For personal use only Risk GrainCorp Approach • Limited “flat” price risk → trading “basis” price Price • Hedge positions → derivatives or physical • Position limits and established loss limits within a structured Positions framework and polic
Slide 65: Business Synergies and Wrap-up
24 May 2012 Alison Watkins For personal use only Managing Director and CEO BUSINESS SYNERGIES AND WRAP-UP
Slide 66: Synergy Gamechangers and Allied Mills
Synergy Gamechangers and Allied Mills For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value 1 5 7 Drive supply chain Enhance customer- Optimise p operational p efficiency focused growth performance 2 6 Integrate c
Slide 67: Leverage capability to improve integrated customer offering
Strategy to leverage our capability to improve our integrated customer offering For personal use only • Target incremental underlying EBITDA → ~$5M • Focus → Better capture synergies from our network and integrated grain businesses 4 ynergies s 10 Integrate customer siness sy account and supply • ‘E
Slide 68: Better capture business synergies
10 11 Better capture business synergies For personal use only Integrate customer account and Leverage our global grain and supply chain planning malt market insights • Target → optimise our supply chain • Target → create and capture value planning p g for the customer from our market insights g • De
Slide 69: Allied Mills – strong market position
Allied Mills – strong market position For personal use only Australian network Strong position Core to GrainCorp • Largest flour mill network • Low cost network • Grain processing value • 7 flour mill sites supported • More than a flour miller • Other value by manufacturing, manufacturing – Frozen d
Slide 70: Allied Mills – strategy to build on leading flour position
Allied Mills – strategy to build on our leading flour position For personal use only g → grow • Target g shareholder return and maximise synergy y gy opportunities pp • Focus → leverage national network and pursue downstream growth our leadiing flourr position n • Expand Tennyson mill and lower netw
Slide 71: Brisbane showcases our Business Model
Brisbane showcases our Business Model For personal use only Fisherman Islands Pinkenba Country Logistics Ports Processing • Grain • 4 contracted trains • Bulk → 2.1mmt capacity • Malt plant → 86kmt origination g • Rail inload → • Containers → ~200kmt capacity p y → from balloon loops • Non-grain → w
Slide 72: Our Strategy builds on our Business Model
Our Strategy builds on our Business Model For personal use only 1 Strengthen our grain 2 Grow our grain 3 Create and capture handling network Marketing business additional Malt value Harness our grain Develop improved Grow relationships to processing footprint and capability from our drive grain vol
Slide 73: Disclaimer
Disclaimer For personal use only This presentation includes both information that is historical in character and information that consists of forward looking statements. Forward looking statements are not based on historical facts, but are based on current expectations of future results or events. T