Graincorp Limited Class A · ASX:GNC
Graincorp Limited Class A — JP Morgan "A Day at the Farm" 2011
25 slides from Graincorp Limited Class A's conference presentation, Jul 13, 2011
Slide 1: JP Morgan – A Day at the Farm: GrainCorp Focus on Grain Marketing
Ms Alison Watkins (Managing Director and Chief Executive Officer) 13 July 2011 JP MORGAN – “A A DAY AT THE FARM” FARM GRAINCORP – FOCUS ON GRAIN MARKETING 1
Slide 2: Today's presentation
Today’ss presentation... Today presentation About GrainCorp 1. GrainCorp is an integrated grain business with strategic assets along the grain chain 2. Strategy to grow by applying our integrated grain business capability 3. A strong grain marketing capability is logical and important for our f t fu
Slide 3: About GrainCorp
GrainCorp ABOUT GRAINCORP
Slide 4: GrainCorp is an integrated grain business
GrainCorp is an integrated grain business Country 1 Operations Grain Storage & Logistics Logistics Ports 3 Grain Canada Malting Co Marketing Great Western Malting 2 Grain Malt Barrett Burston Malting Processing Allied Mills Bairds Malt 4
Slide 5: An established international presence
An established international presence European p Grain Marketing office(1) North America Grain Singapore Australia Canada Malting Co elevators Europe office Grain Grain Processing Storage & Logistics – Canada Malting Co Grain Grain Marketing Country Operations, Great Western Malting Scot
Slide 6: Well placed to deliver on corporate objectives
Well placed to deliver on corporate objectives Corporate objectives: Improve Returns Manage Variability Growth Manage earnings Scale through accretive Increase underlying through the cycle and organic and acquisitive shareholder return consistent dividends growth Supported by positive fundamentals:
Slide 7: Clear mission, vision and strategic themes
Clear mission, mission vision and strategic themes • Mission → An international agribusiness creating value by connecting Mission consumers to growers along the grain chain and Vision • Vision → Grow as our grain customers’ preferred partner, driven by our passionate pass o ate people, peop e, and a
Slide 8: Good traction delivering on strategic themes
Good traction delivering on strategic themes 1 Maintain a New integrated g stock system y (Grain ( Transact)) implemented p strong market New trains and rapid rotation trains → increased rail productivity presence Introduce time slotting for trucks → increased road productivity 2 Operate ACC
Slide 9: Strong FY11 earnings
Strong FY11 earnings NPAT ($M) and ROE (%) • Earnings driven by higher 180 15% receivals storage and export receivals, 145‐165 150 12% volumes, and higher Grain Marketing earnings 120 9% • Volume guidance: 90 6% – Country receivals ~15.0mmt 60 3% 80 – Grain G i exports t 7.0‐8.0mmt 7080 t 30 63 0% –
Slide 10: Grain Marketing – Role and Purpose
GRAIN MARKETING – ROLE AND PURPOSE 10
Slide 11: Grain Marketing generates investor questions
Grain Marketing generates investor questions • What competitive advantage does GrainCorp have? • What risks is GrainCorp taking and how does the company manage those risks? • Why does GrainCorp want to open a European Grain Marketing office given the performance of other Australian agribusinesses en
Slide 12: GrainCorp has a strong proposition for certain end consumers
GrainCorp has a strong proposition for certain end consumers • Australia is a relatively small (~10% of global trade) but important contributor (quality and value) to world wheat markets • Geographic advantage for the growing Asian, Middle Eastern and African markets • Eastern E t Australian A t li
Slide 13: Three separate but integrated businesses
Three separate but integrated businesses 3 Grain Marketing • Creates a market place → links the grower and consumer • Creates and captures value from grain → engages the grain consumer • Participation (grain ownership) di drives grain i through h h the h networkk 1 Grain Storage & Logistics 2 Grain
Slide 14: Focus on connecting growers and end consumers
Focus on connecting growers and end consumers • Grain Marketing is focused on linking our integrated and asset intensive supply chain capability → “marketing” marketing not “trading” trading grain Growers Grain Storage & Logistics End Consumers Country Ops Logistics Ports ~90%(1) of grain Grain Mark
Slide 15: Business model consistent with offshore peers
Business model consistent with offshore peers • GrainCorp’s integrated supply chain network and Grain Marketing solution is consistent with similar business models around the world Our Grain Marketing Business Model • GrainCorp is an asset intensive business operating along the grain chain • Grain M
Slide 16: Grain Marketing does entail risk
Grain Marketing does entail risk... risk Risk GrainCorp Approach Price • Limited “flat” price risk → trading “basis” price • Hedge positions → derivatives or physical Positions • Position limits and established loss limits set for selected commodities within a structured framework and policy Perform
Slide 17: Inherent advantages mitigate risks
Inherent advantages mitigate risks • Grain Marketing risk mitigated through GrainCorp’s supply chain capability, customer relationships (grower and end consumer) and risk framework and policy Infrastructure support Grain ownership Hedge • Use GrainCorp GrainCorp’ss supply • Build deep • Derivatives:
Slide 18: A good track record and measured growth
A good track record and measured growth Grain Marketing Earnings • Business opened in Jan‐96 35 10 30 9 • Successful f l organic growth h→d domestic 8 and international 25 7 20 6 • Marketingg p physical y grain g reduces 5 earnings volatility 15 4 26 26 10 20 3 • Contribution is greater than the 5 1
Slide 19: European office adds to competitive advantage
European office adds to competitive advantage • GrainCorp has opened a Grain Marketing office in Hamburg, strengthening t th i our competitive titi advantage d t in i core focus f areas... Core grains → wheat, barley, canola Core customers → add value via information and selected multi‐ origin s
Slide 20: Impact of open positions on earnings
Impact of open positions on earnings • Accounting standards require Grain Marketing’s open positions be valued as and when “contracted” contracted rather than as “executed” executed • Amount represents fair value less best estimate of costs to fulfil sale Accounting treatment GrainCorp Grain Marketi
Slide 21: Inventory fully funded via short-term finance
Inventory fully funded via short‐term short term finance Debt Profile ‐ $M • Inventory balance fluctuates as 800 (1) (2) Core debt Net debt expectedd andd in i line li with i h crop size, i 700 grain prices, seasonality and 600 customer demand 500 400 756 • Short term debt facilities utilised to 300
Slide 22: International Growth
GrainCorp INTERNATIONAL GROWTH 22
Slide 23: International growth vital for GrainCorp in this new competitive environment
International growth vital for GrainCorp in this new competitive environment Competitors in Australia Conditions for GrainCorp GrainCorp’ss Success Size of Australian Competitors – 2010/2011 • Balanced regulatory environment Reported Net Assets (A$‘billion) 29 • Greater “end to end” business 25 - Le
Slide 24: Thank you
GrainCorp THANK YOU 24
Slide 25: Disclaimer
Disclaimer 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. The forward looking sta