Grower briefing A new marketing partnership between growers and Wilmar April / May 2014 1
Welcome and session overview 2
Session objectives 1. Provide an overview of the proposed marketing partnership to Growers to ensure you have a thorough understanding of the detail 2. Provide Growers with the opportunity to ask questions and gather further information to assist you in considering this proposal 3. Discuss the process for consulting with growers 3
Background and context 4
What growers want from the marketing system • A genuine commercial partnership with Wilmar – Formal contractual recognition in marketing arrangements – Security over cane payments – Greater involvement in RSSA – Removal of annual uncertainty surrounding RSSA termination • Grower representation in marketing strategy and governance – ‘Having a seat at the table’ – Flexible pricing and pooling options • Transparency – Growers receive fair share of sugar revenues – Growers are confident that they are getting the best possible physical premiums 5
What Wilmar wants from the marketing system • Leverage our capabilities to achieve best possible returns for Wilmar and growers – Joint marketing structure is better suited to changing global sugar market – A direct contractual relationship with customers • More direct control over marketing and price risk management • Constructive partnership between growers and Wilmar – The right environment to encourage innovative commercial arrangements 6
Overview of new marketing partnership 7
Overview of the proposed marketing partnership 8
Net Premium / (Cost) is very small element of net sugar price received by producers Build up of Net Premium / (Cost), A$/t ICE #11 price is 600 hedged by growers (forward price) or by QSL in QSL managed 500 pools selected by growers 400 Customer Price (CIF) is based on ICE #11 plus premiums and 300 freight costs under management of the 200 marketer Net price to growers 100 and millers is CIF price less costs 450 15.9 30.0 495.9 17.2 513.2 28.5 21.6 10.4 452.7 2.7 450 including actual 0 freight, storage and handling and marketing and finance expenses The ICE#11 price is ~95% to 99% of the Based on QSL 6 year average (2008 to 2013F) net price! 9
QSL Net Premiums and Cost History Build up of Net Premium / (Cost), A$/t QSL Net Premiums and Costs have averaged $2.50/t QSL Net Premiums and Costs 2008-2013 Seasons sugar $45 $10 $40 $9 $35 $8 QSL net Premiums $30 Net Premium (Cost) - A$/tonne $7 and Costs have $25 $6 $20 ranged from -$1.00 to $15 $5 $6.5/t sugar A$/tonne IPS $10 $4 $5 $3 $- $2 $(5) $1 $(10) $(15) $- $(20) $(1) $(25) $(2) $(30) $(3) $(35) $(4) $(40) $(45) $(5) 2008 2009 2010 2011 2012 2013 (Forecast) Season Net Far East Premium (FEP) Polarisation Premium Storage & Handling QSL Marketing Services Costs Finance Costs Indirect Marketing Costs 10
Benefits of new marketing partnership 1. Genuine commercial partnership 2. Better returns for growers and Wilmar 3. Greater involvement in sugar marketing and pricing decisions 4. Better pricing options, including access to Wilmar Sugar Trading managed pool 5. More flexibility on grower advances and greater security of cane payments 6. Greater transparency of marketing premiums and costs 11
Benefit 1. Genuine commercial partnership 12
Benefit 1. Genuine commercial partnership Appointment of JMC directors • Grower directors elected by JMC members – Candidates nominated by Grower Collectives and individual (non- collective) growers • Grower directors elected on regional basis – BKN 2 – HBT 1 – PRO/PCK (central) 1 • Independent directors appointed by grower and Wilmar directors (one each) 13
Benefit 2. Better returns for growers and Wilmar • WST is one of the world’s largest sugar traders, trading over 5 million metric tonnes of sugar in 2013 – Sugar from Australia, Brazil, South and Central America and Thailand – 15.5% raw sugar world market share – Twice the volume traded by QSL • Greater value can be shared with growers, including: – higher net premiums – better pricing management – trading opportunities. • WST’s specialist trading capabilities: – global presence and reach – large trading volumes – ocean freight chartering experience – market intelligence – price risk management expertise. 14
Wilmar Sugar’s global footprint 15
Wilmar Sugar Trading’s global scale REDPATH NOBLE NOLIS WILMAR 2.0% VITOL 3.0% 3.7% 2.7% NOLIS 2.6% 3.9% WILMAR BUNGE 12.3% 9.0% BUNGE 6.6% CARGILL CARGILL COPER- 13.3% 19.2% COPER- SUCAR SUCAR 12.5% 8.9% SUCDEN LOUIS LOUIS 12.5% DREYFUS DREYFUS 9.4% 12.3% SUCDEN EDFMAN 13.7% 12.3% EDFMAN 9.6% AGROCORP 1.9% Brazil Market Shares - 2011 Brazil Market Share - 2013 (~23Mt total exports) 16
Benefit 3. Greater involvement in sugar marketing and pricing decisions 17
Benefit 3. Greater involvement in sugar marketing and pricing decisions 18
Benefit 3. Greater involvement in sugar marketing and pricing decisions 19
Benefit 3. Greater involvement in sugar marketing and pricing decisions 20
Benefit 3. Greater involvement in sugar marketing and pricing decisions 21
Benefit 3. Greater involvement in sugar marketing and pricing decisions 22
Benefit 4. Better pricing options, including access to WST-managed pool Potential JMC pricing options: • Grower forward pricing • Grower-nominated collective pools run by third party pool managers • JMC-managed committed tonnage pools that growers may nominate tonnage into: – Generic risk pools – WST-managed pricing pool – Daily cash price for current season in AUD/tonne cane • Production risk pool 23
Benefit 5. More flexibility on grower advances and greater security of cane payments Potential payment options for growers: • Pre-harvest payment with balance paid progressively during July to June of the relevant season • Daily cash price for current season in AUD/tonne cane • Deferred advance payment option • Existing advance payment options Cane payments • JMC receives payment for sugar sales from WST • JMC makes cane payments directly to growers, on behalf of WSA 24
Benefit 6. Greater transparency of marketing premiums and costs Monthly reports Audit and inspection JMC costs JMC JMC board and JMC JMC Auditor members • Average net premium on JMC will have the right to JMC will directly manage and JMC sugar, including sale appoint an auditor to review report to board and members prices, CIF costs on a cargo, WST records related to in respect of: customer and destination • calculation of net premiums and terminal storage and basis ‘net trading value’ from handling charges • Average net premiums • arbitrage activities sugar sampling and achieved by WST on all non- analysis costs JMC sugar sold to the same • finance costs for hedging destinations as JMC sugar margins and advances including sale prices, CIF • pricing and pooling costs on a cargo and destination basis (not management and customer) administration • JMC operating costs (e.g. • ‘Net trading value’ gained as board and staff costs) a result of WST arbitrage activities using JMC supplied sugar, e.g. physical or futures position substitution on a cargo-by- cargo basis 25
Consulting with growers 26
Grower consultation timeline 27
Further information Email: sugarmarketing@wilmar.com.au Web: www.wilmarsugarmills.com 28
Summary and review 29
Benefits of new marketing partnership 1. Genuine commercial partnership 2. Better returns for growers and Wilmar 3. Greater involvement in sugar marketing and pricing decisions 4. Better pricing options, including access to Wilmar Sugar Trading managed pool 5. More flexibility on grower advances and greater security of cane payments 6. Greater transparency of marketing premiums and costs 30
Grower briefing A new marketing partnership between growers and Wilmar April / May 2014 31
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