Ricegrowers Ltd. Class B · ASX:SGLLV
Ricegrowers Ltd. Class B — SunRice — Non-Deal Roadshow (November 2015)
63 slides from Ricegrowers Ltd. Class B's roadshow presentation, November 2015
Slide 1: Welcome and introductions
Welcome and thank you for taking time out of your busy schedules to meet with us. As you know, the Board and I are pleased to announce that we will take the Capital Restructure to a vote in March 2016, following your strong support. This next step forward is designed to strengthen SunRice for the fu
Slide 2: Directors and management in attendance
• Glen Andreazza; • John Bradford; • Gillian Kirkup; • Mark Robertson; and • Leigh Vial. I would also like to acknowledge members of our Corporate Management Team in attendance: • Mandy Del Gigante, our Company Secretary; • Mike Hedditch, who many of you will be aware leaves us as General Manager Gr
Slide 3: Collaborative session and Restructure Booklet
I want to say up front that we want today’s session to be a collaborative one. We encourage open and frank debate and want to give everyone an opportunity to ask questions and understand the detail. From a legal stand point, I also need to let you know that shareholders will receive a Restructure Bo
Slide 4: Key questions on why change is needed
been asking for ahead of the formal Restructure Booklet. Answers to questions like: • Why is this change needed? • What do we want capital for in the future? • And why do we need help to fund the business? Over the past few months, I’ve personally talked to hundreds of shareholders about the Capital
Slide 5: Grower control is not at stake
Firstly, I cannot stress this strongly enough – grower control is not at stake. By grower control, I mean the sole right of A Class shareholders to vote at SunRice general meetings, which gives you the right to elect Directors, make changes to the Constitution and – as a result - control the company
Slide 6: SunRice Fund listed on the ASX
---- Further to this, the Capital Restructure does not contain a sunset clause or any of the elements that have seen other agricultural companies lose grower control on the ASX. That’s in part because it is not SunRice the company or your A Class Shares that will be listed on the ASX. A separate ent
Slide 7: Why not fund directly
One of the other questions that’s come up is why we can’t just fund the capital required for SunRice’s future directly. While there is no initial capital raising planned, David’s presentation will outline some of the potential opportunities open to SunRice and why some of these investments will requ
Slide 8: Shareholder history and drought investment
I was head of the RGA and not long after that a SunRice Director when the industry was in the most challenging period of the Millennium drought. All shareholders, large and small, who were able to invest in the company at that time are to be applauded. 4
Slide 9: A Class share register and cycles of adversity
I want to finish by talking about the A Class Share register and cycles of adversity. We are undoubtedly facing a difficult outlook with respect to current low water availability and crop size and I know this is felt very keenly by you all. A Class Shareholders are assessed to be active growers, bas
Slide 10: A Class shareholder base and current water concerns
will consider those applications in time to issue any new A Class Shares prior to the shareholder vote on the Capital Restructure. As I mentioned at the AGM, the Board assesses the A Class shareholder base periodically to ensure it remains representative of our industry. As part of this, we will con
Slide 11: Questions and handover
Before I hand over to David, I’d like to invite any questions on the topics I’ve just covered. There will of course be further opportunities in the meeting, but if anyone wants to raise one now, please feel free to do so. ----- Thank you. I’d now like to invite SunRice General Manager, Consumer Mark
Slide 12: Welcome from David Keldie
Thank you Laurie. Welcome everyone. I’m pleased to be here today, although in difficult circumstances as the Chairman mentioned earlier. 7
Slide 13: Presentation focus: strategy, challenges, why change
Today is an important opportunity to inform you on the context as to why and how SunRice needs to continue to change. Our ability to adapt, to be flexible and to innovate has been a common hallmark of SunRice’s success from the beginning and continues to be today. I will look to focus today on leavi
Slide 14: Existing capital and operating structure
Looking firstly to our existing capital and operating structure, and the context behind the development of our Group Strategy. 9
Slide 15: Existing capital structure and Rice Pool business
While this will be known to many of you, SunRice’s existing capital structure separates and protects the interests of A Class grower Shareholders, who have voting control of the company and B Class investor Shareholders, who have the economic rights to receive Dividends from SunRice. This structure
Slide 16: Profit businesses and dividends
International Rice business and mainly deal with value adding of non-Riverina rice. Profits generated by SunRice’s Profit businesses are available for distribution by the Board to SunRice’s B Class Shareholders in the form of dividends. These profits may also be used to supplement Paddy Prices in ce
Slide 17: Strategic review 2012/13
As a result, a comprehensive strategic review of the Rice Pool and Profit businesses was undertaken in 2012/13. This focused on: • Detailed analysis by geography, market, channel and product; • Identifying opportunities for growth; and • The development of an optimised plan for the Group as a whole,
Slide 18: Role in international rice trade
Firstly, looking to our role in international trade. The figures in this chart are finished product tonnes. As you all know, globally, Indica rice varieties (or long grain) account for 85% of production and Japonica rice varieties (which are largely medium grain rice) account for 15% of production.
Slide 19: Australian scale and yields
From a global perspective, we’re very good at what we do in terms of yields per hectare. However Australia’s smaller scale of production in relative terms to other rice growing nations means there is limited opportunity for us to become a major exporter that supplies rice to feed the masses. That’s
Slide 20: Returns by market and paddy price
Informing the strategic review, was a detailed piece of analysis that looked at revenue drivers across all markets, from lower value commodity markets to premium consumer markets. This chart, which was originally shown at an RGA Conference, demonstrates this very clearly by plotting the returns we c
Slide 21: Gross profit by varietal mix
We also completed the same analysis by varietal mix. The chart on screen shows the relative gross profit per tonne for some of our key products. Core rice – which falls under the Rice Pool business - is depicted in dark grey and as you can see the highest GP sits with specialty grains, versus medium
Slide 22: Strategic goals and value drivers
The completion of our strategic review led to the development of a meticulous and ambitious strategy for the Group, designed to secure our future profitability and resilience. It refocused us on positioning SunRice as an international branded, value add company, differentiated against commodity play
Slide 23: Six strategic priorities
You’ll also note at the bottom of the screen, six Strategic Priorities, which are designed to drive the achievement of our goals. These priorities are tailored to each business in the Group and are united by our company mission to transform nature’s goodness into healthy, enjoyable and nutritious fo
Slide 24: Implementation and results to date
I’d like to now look back briefly on the implementation of the Group Strategy and results to date, before we look forward to the opportunities and challenges ahead of us. 17
Slide 25: Results since Group Strategy introduced
In the three year period since introducing the Group Strategy we have delivered strong results across all key financial performance indicators, including growth in revenue and establishing a new level of profitability. Our Return on Capital Employed has increased substantially, reflecting more than
Slide 26: Strategic priority results and innovation
There’s a whole section in Rob’s AGM presentation that covers the results in each of the six strategic priorities under the Group Strategy. Everything from: The 41% year-on-year increase in revenue in the Middle East and 40% increase in the Pacific achieved in FY15 alone… To the way we’ve levera
Slide 27: Innovation in core rice
Our ability to continue innovating has always been fundamental to SunRice’s success. In recent years we have conducted detailed consumer insights research, which has informed a comprehensive program of product revitalisation. We have also strengthened retailer partnerships and doubled investment in
Slide 28: Microwave Rice innovation
In the Microwave Rice category we have also continued to improve our range and develop innovation based on consumer trends and our insights research. These innovations include: • New pack designs and improved formulation on the base ‘steamed rice’ pouch range; Development of twin and single serve cu
Slide 29: Rice Snacks innovation
In the same way, Rice Snacks benefits both A and B Class Shareholders, with innovation in this category seeing the introduction of premium product ranges based on the latest consumer trends. Rice Snack innovation has included: • Rice and grain cake combinations such as Rice & Quinoa; • Kids Mini Bit
Slide 30: Branded sales growth
As a result of these and other initiatives, we have strengthened SunRice’s position as an international branded, value add company. And we’ve seen a fundamental shift in revenue drivers, with branded sales up by 42% between financial years 2012 and 2015. This growth, however, is constrained by suppl
Slide 31: Opportunities
Firstly, to opportunities. 24
Slide 32: Forecast growth in branded rice sales
On screen is the forecast growth for branded rice sales for the five year period between 2012 to 2017 in various regions. In that time, packaged rice sales are forecast to grow by more than 100% from $US8 billion to $US17.5 billion across mainland China alone. High growth is also forecast for South
Slide 33: Asia Pacific opportunities
An opportunity exists across the Asia Pacific region for SunRice to capitalise on Australia’s food supply chain reputation. Rice is a fundamental part of Asia-Pacific consumer diets as opposed to a meal accompaniment. As part of the SunRice Group Strategy, the team has identified several opportuniti
Slide 34: Growth opportunities across the Group
Multiple opportunities also exist for SunRice to utilise its global supply chain, new product development and marketing expertise and subsidiary portfolio to seek to deliver growth for both the Pool and Profit businesses. Again, as part of the Group Strategy, we’ve identified opportunities that incl
Slide 35: Joint ventures, acquisitions and dairy feed
Finally, a number of potential growth strategies have been identified across the SunRice Group. These include: • Establishing joint ventures and strategic alliances to launch rice businesses in other global locations to underpin participation in new international markets. • Potential acquisitions of
Slide 36: Maintaining global presence
Firstly, let me acknowledge that SunRice is now in a position of strength. We are experiencing absolute growth across our domestic and international markets. But critical to our ongoing success is maintaining the global presence we have worked hard to re-establish post the Millennium drought. The wo
Slide 37: Market demand and Riverina rice
The chart on the right of the screen shows that we have grown market demand to around 1.1 million tonnes of paddy equivalent rice. While demand continues to grow, if we also look to the future and the potential opportunities that exist across the Group to diversify earnings and achieve stable growth
Slide 38: Placing crops of varying size
• Place a larger Riverina crop in the best returning markets, in years of good water availability; and • Accommodate a smaller crop through trading, in more challenging circumstances. 30
Slide 39: Choices given smaller crop outlook
So how do we do that given the variability of Australian production and the impacts of water availability and pricing? This is the very challenge we are faced with this year and next, given the smaller crop outlook for C16. Broadly speaking, there are two choices: • We get smaller, we lose market sh
Slide 40: Global sourcing strategy
Given the need for more rice, our global sourcing strategy is playing an increasingly important role in enabling SunRice to fulfil any gap between Australian supply and overall market demand. If you look at the thermometer graph on screen, overall the 1.2 million paddy equivalent tonnes equates to j
Slide 41: Global sourcing approach and quality assurance
And Group C is our lowest returning markets. Provenance is not a factor, although like all our markets taste profile and quality remains important. As you can see, by growing total market demand, we have created the flexibility to place a larger crop and accommodate a smaller one, which works to you
Slide 42: Doubling supply by 2025
We have the opportunity now to build other origins leveraging our agronomic capability. As I mentioned earlier, SunRice now has premium markets for more than 1.1 million tonnes of rice. This is up on our previous 800,000 tonnes planning base. Based on current growth trends, we will need to DOUBLE cu
Slide 43: Global sourcing principles
To ensure the success of our global sourcing strategy in delivering positive outcomes for SunRice and our A and B Class Shareholders, we have established a set of principles. These are: • Australian rice volume is prioritised in fulfilling demand in the best returning markets; • Traceability is para
Slide 44: Evaluating new sourcing countries
There is a tremendous amount of work that’s going on in this area. As you can on screen, our analysis spans everything from the political environment and agronomics that exist in a new market to the business environment, access to materials and labour and ownership options. 35
Slide 45: Summary of business environment
In summary, SunRice is operating in a dynamic global business environment. We face challenges with respect to crop availability and competition from large multinationals in many markets. However, as I hope I’ve shared with you in my presentation, we also have before us a significant opportunity to s
Slide 46: Capital Restructure to fund opportunities
Changing the way we fund SunRice to overcome these challenges and pursue the opportunities I’ve outlined is at the heart of the Capital Restructure process that the Board has undertaken. We now have an opportunity to reshape our structure: • To create a strong, independent, Australian-controlled foo
Slide 47: 38
38
Slide 48: Capital Restructure key points
I’d now like to discuss a number of key points regarding the Capital Restructure. 39
Slide 49: Important Notices
Before we go any further I need to acknowledge the Important Notices on screen. I encourage you to read this statement in full at your leisure. You’ll find this material in the online version of this presentation, which can be found on the NSX and the SunRice website. 40
Slide 50: Shareholder vote and summary video
As I said in my opening address, we have received strong shareholder support for the proposed model the Board has put forward. Given this support, the Board has announced it is moving to a shareholder vote, scheduled for 16 March 2016. The Capital Structure Review process has been comprehensive, wit
Slide 51: Video link
Video can be accessed on the SunRice website: https://www.sunrice.com.au/corporate/investors/capital-structure- review/proposed-new-capital-restructure/ 42
Slide 52: Summary of the Capital Restructure
In summarising the Capital Restructure, I’d like to make the following key points: • SunRice and your A Class Shares will not be NOT be listed on the ASX. • A separate entity called the SunRice Fund will be listed on the ASX and interests in that Fund – called SunRice B Securities – will be traded o
Slide 53: No change to A Class control
today. • There will be NO fundamental change to A Class Shares or A Class Shareholder control and the SunRice business will remain as it is today, with the same Board, management and operating structure. • The only way control rights over SunRice can change is in exactly the same way as it would tod
Slide 54: Future capital and Grower Security Purchase Plan
As we’ve said previously, capital is not required immediately. The Restructure is designed to ensure we can access additional capital in a timely manner and on more beneficial terms, when we do need it in the future. Importantly, existing shareholders will be given every opportunity where possible t
Slide 55: Indicative timeline and key dates
On screen is the indicative timeline and key dates for the Capital Restructure process moving forward. These details may change, in accordance with the input of regulators or the court. You will of course be updated of any change by way of direct communication from SunRice and via the National Stock
Slide 56: Restructure Booklet and approval requirements
Finally, a Restructure Booklet will be sent to all shareholders in early 2016, including an Independent Expert’s Report, detailed information on the Capital Restructure and the advantages and disadvantages of the model. There will also be a series of roadshows covering this detail in February and Ma
Slide 57: Voting majorities and questions
To be clear, those majorities relate to actual votes cast, either in person or by proxy. The Capital Restructure is a significant step in strengthening SunRice’s future, and with it, your future as a shareholder and/or grower. With this in mind, the participation and vote of shareholders is critical
Slide 58: 47
47
Slide 59: 48
48
Slide 60: Closing: benefits for shareholders
The Board and I firmly believe the Capital Restructure is an opportunity to retain grower control into the future while enhancing our future capacity to raise equity capital and build a business that can carry us forward for generations to come. For A Class grower Shareholders, the Restructure repre
Slide 61: Benefits for SunRice and next steps
And for SunRice, the Restructure provides the opportunity to equip the company for the future, enabling us to: • Invest for growth; • Better manage business risk; and • Have greater resilience and balance-sheet strength to withstand future downturns in crop or economic conditions. As I said earlier,
Slide 62: Further discussion and questions
Your vote is incredibly important and we ask that you consider not only what the Capital Restructure would mean for you, but what it would mean for your fellow shareholders and our business too. We encourage you to stay on today and discuss the Capital Restructure in more detail with your Directors.
Slide 63: Thank you
Thank you again for your time. 51