UKRAINIAN AGRICULTURE OPPORTUNITIES INVESTMENTS AND ACQUISITIONS - PowerPoint PPT Presentation

UKRAINIAN AGRICULTURE OPPORTUNITIES INVESTMENTS AND ACQUISITIONS

Table of contents I. Ukraine’s competitive advantages and potential II. Potential Targets

Ukraine beginning to produce world class agricultural companies Subsector Company Key figures Success factors Outlook Market cap • #1 egg producer in Eurasia/#2 • First mover advantage in eggs, • Uncertain – ~US$0.6 billion • High-tech/high quality approach worldwide heavy debt • Shell egg production: 6.0 billion in 2011 • Timing to financial markets load a major • Growth story vs. 4.4 billion in 2010 risk • US$246m EBITDA on US$553m revenues in 2011 • #1 Poultry producer in Eurasia/#12 • World class technology & marketing • Positive – ~US$2.0 billion • High level of self-sustainability in feed worldwide MHP should be • Poultry sales of 371,000 tons in 2011 production and oil crushing the no. 1 • First mover advantage vs. 331 in 2010 chicken • US$401m EBITDA on US$1,229m • Steady, organic growth producer • Timing to financial markets revenues in 2011 worldwide by 2016 • #1 sunflower oil producer in Eurasia/#1 • First to begin large-scale consolidation of • Positive with ~US$1.5billion worldwide large farms and crushers exports to Asia • 2.6 Mio tons/year sunflower seed • Significant land banks contribute a large and Middle crushing capacity in 7 crushing plants percentage of feedstock to crushing units East increasing • US$310m EBITDA on US$1,899m • Timing to financial markets revenues in 2011 • #1 producer of sugar from beets in • First mover advantage at time of increasing • Uncertain – ~US$0.5 billion Ukraine/#1 in CIS global sugar prices cost structure • Processed 2.6m tons of sugar beet • Timing to financial markets still not • High ratio of own production to procured (+65% y-o-y) and produced over competitive 370,000 tons of sugar from beet. sugar beet feedstock with major • US$154m EBITDA on US$423,572 • Conversion of gas-fired sugar plants to coal Brazilian • Downstream activities such as milk players production via JV with Danone Source: Company reports

Massive scale (100K+ HA) is achievable 4 Average Ukrainian farm size is increasing… …but largest players still hold only a fraction of land… Average size of ten largest agricultural holdings, ha Percent of total arable land held 300 000 Top 10 holdings 250 000 Top 20 holdings 200 000 10 largest 89% 150 000 8% holdings Small players 3% 100 000 Next 10 ready for largest consolidation 50 000 holdings 0 2006 2007 2008 2009 2010 2011  Ukraine is the largest country in Europe (excluding Russia) by land area  The country has 41.6 million ha of agricultural land (71% of total land area) and 32.5 million ha of arable land (53%) Source: Dragon Capital

Climate and Soil Make For Ideal Conditions Agro Climatic Zones Soils Forest Forest Steppe Steppe

WHEAT 2013 - PROFITABLE HARVEST MMT YIELD TONS PER HA ● > 1 mmt ● >4 ● 0.5 – 1 mmt ● 3 - 4 ● < 0.5 mmt BEST LOCATION ● < 3 RETURN PER HA COST PER HA ● > $300 ● > $400 ● $200 - $300 ● $250 - $400 ● <$200 ● <$250

BARLEY 2013 - PROFITABLE HARVEST MMT YIELD TONS PER HA ● > 0.4 mmt ● >3 ● 0.2 – 0.4 mmt ● 2.3 - 3 ● < 0.2 mmt BEST LOCATION ● < 2.3 RETURN PER HA COST PER HA ● > $500 ● > $170 ● $275 - $500 ● $40 - $170 ● <$200 ● <$40

CORN 2013 – MOST PROFITABLE HARVEST MMT YIELD TONS PER HA ● > 2 mmt ● >7 ● 0.5 – 2 mmt ● 5 - 7 ● < 0.5 mmt BEST LOCATION ● < 5 RETURN PER HA COST PER HA ● > $500 ● > $500 ● $250 - $500 ● $300 - $500 ● <$250 ● <$300

RAPESEED 2013 – MOST PROFITABLE HARVEST KMT YIELD TONS PER HA ● > 150 kmt ● >2.5 ● 60- 150 kmt ● 2 – 2.5 ● < 60 kmt BEST LOCATION ● < 2 RETURN PER HA COST PER HA ● > $500 ● > $700 ● $200 - $500 ● $500 - $700 ● <$200 ● <$500

SOY 2013 - PROFITABLE HARVEST KMT YIELD TONS PER HA ● > 200 kmt ● >2 ● 50- 200 kmt ● 1.5 – 2 ● < 50 kmt BEST LOCATION ● < 1.5 RETURN PER HA COST PER HA ● > $550 ● > $500 ● $375 - $550 ● $250 - $500 ● <$375 ● <$250

SUNSEED 2013 - PROFITABLE HARVEST MMT YIELD TONS PER HA ● > 0.7 mmt ● >2.4 ● 0.1- 0.7 mmt ● 2 – 2.4 ● < 0.1 mmt BEST LOCATION ● < 2 RETURN PER HA COST PER HA ● > $400 ● > $590 ● $340 - $400 ● $400 - $590 ● <$340 ● <$400

I. Ukraine’s competitive advantages and potential II. Potential Targets

TARGETS – INDEPENDENT BROKERS Number 2 Number 1 Sumy 11,000 Ha Poltava 7,500, 4,300 Chernihiv 14,000 Ha 6,600 Ha Vinnytsia 30,000 Ha Ternopil 6,000 Ha Poltava 11,200 Ha Zhytomir 5,800, 2,700 Kharkiv 3,460, Khmelnytsky 9,000 Ha r 15,000 Ha Mr. Mykola Korol Odesa 12,000, 8,000 Kyiv 4,000 HA Khmelnytsky 12,000 Set your criteria and contact Brokers, investment bankers, or agro consulting companies. Gather the information and then go forward.

26,000 ha farm in Central Ukraine Opportunity description Location and infrastructure • Locally-owned farm with operations in two oblasts in • Operations in Cherkassy and central Ukraine. Zhytomyr Oblasts.  Produces primarily corn.  Good access to rail.  Business consistently delivers high yields and  Storage and drying capacity for margins. 50% of production.  Production grew from 52K tons in 2008 to a forecasted 125K tons in 2011, generating a CAGR of 34%.  Company also has small animal husbandry business with 1,500-2,000 heads of cattle for Crop structure 2011, ha Yields 2010, ton/ha diary and meat.  90% of company’s production is sold through Total = 19,592 tons Glencore.  Company was founded in 2002 and is currently Soy owned 100% by its founders. 8.7 7.8%  Company employs roughly180 people. 68 Corn Other 8.9 7.7% 59 56 57% 56 Land holdings 6.5 Wheat • Company had 26,000 ha of land under lease at the 3.2 4.4 14% 4.8 beginning of 2012. 4.4 20 20 • Company intends to grow its holdings by another Sunflower 2.3 1.9 1.3 5,000 has by 2013. 14% -7 Investment overview Financials, 2009-2011 • Company is prepared to discuss the sale of a majority stake to a strategic USD m 2008 2009 2010 2011E investor. EBITDA 2.6 4.8 8.9 11.1 • Company’s financial statements are audited by an international accounting firm. EBITDA/ha 281 455 539 566 Source : Company info, public information, team analysis

AGRO EVALUATION CHECKLIST The following are initial queries to guide the evaluation and valuation process. The list is not complete and is only a guide to initial questions that potential investors need to ask. The list does not include financial or legal audit questions. • Does the company have a crop plan? If not how does it plan its cropping pattern? If yes how old is the current plan and when was it last updated? • How does the company plan crop rotation? • Does crop rotation depend on field size, soil types in particular parts of the holding, prior years crop, market indicators, or other factors? Please list the factors used in developing the crop plan. • Does the crop plan set out indicative dates for each field operation? • Does the crop plan have indicative targets – inputs, outputs? • Does the crop plan include results from soil tests? If not when was the last soil test? • How does the company monitor performance of crop plan objectives? • What are the internal penalties – bonuses for meeting or failing to meet crop plan objectives? • Can the company show crop plan implementation records for the last year, two years, three years?

AGRO EVALUATION CHECKLIST - CONTINUED • Does the company have a purchasing program? If not how does it plan purchasing? • Does the company use input financing from suppliers? • Does the company conduct tenders? • How does the company decide which input suppliers to use? • Does the company have physical stores for inputs or does it expect on time delivery? Do physical stores meet requirements for seed, fertilizer, fuel and agro chemicals? What form of security system does the company use to safeguard inputs? • How is inventory accepted and monitored? • How far in advance before use does the company acquire inputs? • What is the average holding period of inputs? • Can the company show its inventory records, purchasing records? • Does the company have an equipment maintenance schedule? If not how does it perform routine maintenance? • Who is responsible for the equipment maintenance schedule – developing, monitoring and implementing? • Does the company perform equipment maintenance or does it hire third parties? • Is company staff certified to perform equipment maintenance? What training or certification does company staff have for equipment maintenance or repair? • Can we see the documents proving that staff is certified to maintain equipment?

THE REALLY REALLY BIG QUESTION Does the company fit the investor strategy? If so what is the plan to use the acquisition? If not what changes need to made? What are the priorities?

WHAT IS TO BE DONE 1. To obtain real information from operating entities requires signing an NDA and making a commitment to issue a non binding offer. 2. Light Due Diligence 3. Making a non binding offer 4. Intensive due diligence 5. Negotiation