Future of Mackay Sugar Mac Mackay ay Sugar ar L Ltd Nordzucker - PowerPoint PPT Presentation

Future of Mackay Sugar

Mac Mackay ay Sugar ar L Ltd Nordzucker Proposal Shareh eholder er Briefing ng 19 9 February 201 2019 Strictly Private and Confidential

Nordzucker - Mackay Sugar Comparison Mackay Sugar Unlisted Public Company Unlisted Public Company Amalgamation of Grower Amalgamation of Grower Companies Cooperatives Mostly grower shareholders, Mostly grower shareholders, some non-grower shareholders some non-grower shareholders Refined sugar products, ethanol, Raw sugar, molasses, electricity, animal feed refinery investment 17Mt beet, 2.7Mt sugar, 130ML 5Mt cane, 0.7Mt sugar, 190kt ethanol molasses, electricity 150GWh First season 1838 First season 1867 Strictly Private and Confidential | Slide 4 of 42

Sug ugar prod oduc uction and nd reve evenue Mackay Sugar Sugar Production Consolidated Revenues In millions of tonnes In AUD m 4 4,000 3,648 2.9 3 3,000 2.7 2,679 2,584 2.5 2.5 2,441 2,359 2.0 2 2,000 0.9 0.9 0.9 1 1,000 0.8 0.8 499 475 430 433 407 0 - 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 Nordzucker MSL Nordzucker MSL Note: 2013/14 2014/15 2015/16 2016/17 2017/18 Strictly Private and Confidential | Slide 5 of 42 Conversion AUD/EURO 1.55 1.44 1.52 1.38 1.57

The Nordzucker Supervisory Board Mackay Sugar Supervisory Board Chairman of the Board Members 15 Jochen Johannes Juister • • Member since 2007 Shareholder representatives 10 – Chairman since August 2018 Employee representatives 5 – Strictly Private and Confidential | Slide 6 of 42

Nordzucker Executive Board Mackay Sugar Alexander Bott Dr. Lars Gorissen Erik Bertelsen Chief Financial Chief Executive Officer Officer Chief Marketing Axel Aumüller Officer Chief Operating Strictly Private and Confidential | Slide 7 of 42 Officer

Nordzucker locations in Europe Mackay Sugar  Active throughout Europe in 7 countries Finland  18 locations, 13 sugar factories Sweden Denmark Lithuania Poland Headquarter in Braunschweig Germany Sugar factories Slovakia and refineries Strictly Private and Confidential | Slide 8 of 42

Beet vs cane yields Mackay Sugar Average Sugar Yield Tonnes per hectare 16 13 13 12 12 12 12 12 11 12 11 11 8 4 0 2013/14 2014/15 2015/16 2016/17 2017/18 Nordzucker MSL Strictly Private and Confidential | Slide 9 of 42

Key statistics Mackay Sugar 2.7MT Sugar 3,200 17MT Employees beets EUR88.9m 130,000 m 3 Investments Bioethanol Strictly Private and Confidential | Slide 10 of 37

Automated harvesters Mackay Sugar Sugar factory Clauen Strictly Private and Confidential | Slide 11 of 42

Beet loader Mackay Sugar Strictly Private and Confidential | Slide 12 of 42

Sugar Beets Mackay Sugar Sugar Beets Sliced Sugar Beets Strictly Private and Confidential | Slide 13 of 42

White sugar storage Mackay Sugar Sugar factory Klein Wanzleben Strictly Private and Confidential | Slide 14 of 42

Clean and well maintained old factories Mackay Sugar Sugar factory Uelzen Strictly Private and Confidential | Slide 15 of 42

Mac Mackay ay Sugar ar’s C Current S Situat ation

Need recapitalisation Mackay Sugar  Net Debt $179m end May 2018 including STL  Mill condition is poor and will deteriorate further  Mackay Sugar future is uncertain without a significant injection of funds  Need cash injection from new shareholder or growers Restructure + Invest in Mills debt Need funds for both Strictly Private and Confidential | Slide 17 of 42

Why can’t we trade out of this situation? Mackay Sugar Net Debt vs “Normalised” Profit A$M 213 179 173 Net debt Mossman 160 Cogen A$’m 64 60 44 22 Normalised Profit 16 6 5 1 -1 -11 -11 -13 -40 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Normalised profit excludes revaluations and impairments Strictly Private and Confidential | Slide 18 of 42

Factory reliability has fallen from 91% to 83% Mackay Sugar Factory Reliability 95.0 % 91% 213 179 88% 90.0 % Net debt Mossman 160 Cogen 85.0 % Reliability 83% A$’m 83% Reliability 64 80.0 % 79% 60 44 75.0 % 22 74% Normalised Profit 16 6 5 1 -1 -11 -11 -13 -40 70.0 % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Normalised profit excludes revaluations Strictly Private and Confidential | Slide 19 of 42

Crushing rate has fallen from 1700t/hr to 1500t/hr Mackay Sugar Crush Rate and Reliability, loss of 800,000 tonnes capacity! 1800 95.0 % 1,730 91% 1,695 90.0 % 1700 1,654 1,651 88% 85.0 % A$’m Reliability 83% 1600 83% 83% 80.0 % 1500 1,492 Rate t/hr 75.0 % 74% 1400 70.0 % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Strictly Private and Confidential | Slide 20 of 42

The prize is having investment to restore the mills Mackay Sugar Net Crushing Rate (rate x reliability) t/hr 1,573 1600 1500 1,488 1,386 1400 1,388 With Investment A$’m 1300 +800kt 1,233 1200 Net Crush Rate 1100 1000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Strictly Private and Confidential | Slide 21 of 42

Why can’t we trade out of this situation? Mackay Sugar  Cogen and Mossman increased debt significantly  We have not met expected returns  Both growers and MSL have had mixed years of crop and price, low part of the cycle  Factories need a lot of investment  Insufficient cashflow to reduce debt and invest in the mills  The path forward is to invest in the mills to capture 800kt of capacity and restructure the debt  Restore grower confidence Strictly Private and Confidential | Slide 22 of 42

Our ur O Options ons

Current options going forward Mackay Sugar Plan A Plan B Nordzucker Another bidder? Bank Review significant investment Unlikely Restructure debt Possible Plan X Pay back $2/t Administration Mill investment Business in limbo Downward pressure MSL recapitalised on cane volume and mill performance New direction Strictly Private and Confidential | Slide 24 of 42

A A Bank nker er’s View | | Geo Geoff Gr Gree een

Banker’s view of the current position Mackay Sugar  MSL appears to be high risk:  Losses in each of the last four years, totalling $93 million including impairments.  Auditor highlights $157m deficiency in net current assets.  Directors’ determination that identifies “uncertainty” about whether MSL can continue as a going concern, auditor confirms.  Need for significant investment in plant:  Farleigh availability “well below the desired performance”  Marian availability “better but still not satisfactory”  Racecourse availability “disappointing”  Mossman availability also down  Is this business in a downwards spiral? Strictly Private and Confidential | Slide 26 of 42

Banker’s view of funding for investment Mackay Sugar Options are: 1. Additional debt  Who would provide it? – Not the current lenders!  On what terms and security and interest rate? 2. Extend or increase the current grower levy to cover all losses 3. Equity investment from an external party Becomes even harder to support additional or extended funding if an equity investor solution was available but “rejected.” Strictly Private and Confidential | Slide 27 of 42

Longer term options available to lenders Mackay Sugar  Worst case: appoint receivers  Give MSL 12 months notice to refinance or set up permanent grower levies to offset losses  Selling the debt is possible if there is a default. The “new lender” may not be concerned by the current political environment  Extend facilities but decline to provide any additional finance to fix the mills. How will the vital investment be funded then? Strictly Private and Confidential | Slide 28 of 42

Nordzuc ucker P Proposal

Nordzucker Proposal Mackay Sugar  The Nordzucker Supervisory Board and Nordzucker Executive Board unanimously support the transaction  Agreement between MSL and NZ is binding but conditional on MSL shareholder approval and other conditions  The MSL Board unanimously support the proposal subject to Independent Experts Report  2 documents govern the proposal  Share Subscription Agreement (SSA)  New Constitution Strictly Private and Confidential | Slide 30 of 42

Share Subscription Agreement (SSA) (1/2) Mackay Sugar  SSA sets out the elements of the deal  NZ are issued new converting preference shares to take them to 70% shareholding in MSL. Existing shareholders retain 30%. NZ will have control of the company.  NZ contribute  $60m for equity  Up to $60m as a NZ shareholder loan ( growers do not contribute )  The financiers continue with term loans, seasonal loan facilities and may contribute to a new Capital Works Loan  Restructure debt and invest in improving the mills  The $2/t levy will be repaid over 2 years, first payment 50% up to $10m 1 month after finalisation; second payment (remainder) 12 months later Strictly Private and Confidential | Slide 31 of 42