agroton presentation

8/9/2019 Agroton Presentation

1/7


2/7

9

2018F

Global wheat consumption vs. population growth

Europe

174

182

2009Europe2018

+5%

Percapitawhea

tconsumption,

kg

Wheat prices, $/t

Agricul tural output has to increase 3% p.a. to meet the increasing demand (vs. 1% over the last 20 years) due to the following t rends:

soaring world population (from 6 bln people in 2000 to 9 bln in 2050)

limited arable land per capita (0.5 hectares of arable land per person in 1950 to 0.2 in 2020)

growing consumption in emerging markets (real GDP of China to grow at 10.4% CAGR over 2010-14)

increasing life expectancy (China: 70 years in 2000 to 77 years in 2050, India: 62 years in 2000 to 75 years in 2050)

rising demand for grain to feed livestock growth (7 kg of grain = 1 kg of beef)

Source: FAPRI 2009

Sunflower prices, $/t

Increase in global demand for agricultural produce

6.8

6.9

6.9

7.07.1

7.2

7.3

7.3

7.47.5

2009 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F

662

669

675

681

687

692

698703

709

714

Source: FAPRI 2009, United States Census BureauSource: FAPRI 2009

502496

492490491

469

2009E 2011F 2013F 2014F2012F2010F

225 224

231

235

2009E 2011F 2013F 2014F2012F2010F

241247

population, bln

wheat consumption, mln t


3/7

10

Ferti le black soils

Superior chernozems

Higher than average chernozemsAverage chernozems

Lower than average chernozems

Derno-podzolic sandy soils

Soddy soils

Forest and mountain soils

Chestnut soils

Regradated chernozems

Meadow soilsPeat-boggy soils and turf peats

Source: Cartography USSR

Chernozems

UkraineEU

30

60

Averagede

pthofhumuslayer,

cm

Source: Eurostat, Ukrstat

With one-third of the worlds richest black soils, Ukraine occupies a leading place in the worldin terms of its proportion of high-quality fertile soils

Black soils in eastern Ukraine contain valuable humus layer of approximately 60 cm which aidsin the retention of soil nutrients and moisture and results in the highest productivity of anyknown soils worldwide

Source: USDA


4/7 11

Superior soil characteristics result in a low cost base forUkraine relative to other countries

Proper fertilization and adequate provision with machineryenable Ukrainian agricultural producers to enjoy significantupsides for crop yield improvements

Significant potential for productivity improvements

France

2.6

Source: FAPRI, Eurostat

UkraineArgentina Russia Brazil India Canada USA Poland China EU av France Germany UK

2.3 2.3 2.42.8 2.9 3.0

3.64.1

4.7

5.6

7.1

8.1 8.3

+131%

ArgentinaIndia Russia Brazil Ukraine Canada USA Poland China EU av Germany Italy

0.8

1.1

1.41.5

1.6 1.6 1.71.8

1.8

1.92.0

2.2

Sunflower seed yield

Source: FAPRI, FAO, Eurostat

+73%

t/ha, 2008

Russia

Ukraine

Argentina

Canada

India

USA

Poland

World av

France

Germany

UK

220

215

139

116

110

101

57

27

18

12

Ferti lizer use, kg per ha

Source: NationMaster, World Development Indicators

311

Tractors use, units per 100 ha

Russia

Argentina

Ukraine

India

Canada

USA

World av

France

Germany

UK

Poland

48

107

120

159

160

269

390

685

798

884

1,08

Wheat yieldt/ha, 2008


5/7 12

Storage capacity key profitability driver of Ukrainian agriculture

MykolaivOdesa

Crimea

Zaporizhzhia

Dnipropetrovsk

Luhansk

Kyiv

Vinnitsa

Kherson

Khmelnitsk

Rivno

Lviv

Ivano-Frankivsk Donetsk

Chernivtsi

Uzhgorod

Lutsk

Ternopil

ZhytomyrSumy

Cherkasy

Kyrovohrad

Kharkiv

Chernigiv

Poltava

Ukraine

Source: Apk-Inform, 2009

2009

Grainstoragecoverage

Grain storage allows agribusinesses to significantly increase grain tradingand profitability:

The current capacity deficit exceeds 20 million tonnes, or 46% in 2009

Own storage facilities allow sales at prices with an up to 50% premium atpeak season prices

54%

under 1.0 mln t storage capacity

1.0 - 2.0 mln t storage capacity

over 2.0 mln t storage capacity

Ukraine wheat prices scale

Source: Bloomberg

Ukraine sunflower prices scale

60%

80%

100%

120%

140%

160%

2008

2007

2008

2007

Sep Nov Feb May July

Source: Bloomberg

harvesting

harvesting

Jul Oct Jan Mar May80%

100%

120%

140%

160%

180%


6/7 13

Hidden land appreciation potential

Similar assets should sell at similar prices:

The appreciation potential of Ukrainian land is a hiddenvalue that domestic companies are likely to realise afterestablishment of a land market

There is no legal framework in Ukraine for the private

ownership of land for legal entities they can only leaseit

Why will domestic companies enjoy low level landprices of approximately $200-300 per hectare?

Currently Ukrainian legislation gives the pre-emptive rightto the lessee to purchase the land if the owner decides tosell it (after the ban on sale is lifted)

Low bargaining power of the lessor (on average theindividual lessor owns 3-7 hectares, while large

agribusiness controls over 50,000 hectares) The majority of landowners are pensioners (with average

monthly pension of $108) who reside in villages. They donot have ready access to reliable information on landvalues and other topics related to use and benefits of

land ownership

Farmland prices in 2009, $ / ha

Russia Bulgaria Australia Romania Poland New Zealand US France England Ireland

800

3,120 3,4504,855

6,600

9,643

11,000

12,500

17,100

58,500

median: $8,151

Source: FAPRI, FAO, Eurostat


7/7 14

Strong government support of agriculture in Ukraine

Producers are entitled to retain thedifference between Value Added Tax (VAT)paid on inputs purchased and VATreceived from the sale of crops

Farmers are paid a subsidy per hectaresown that ranges from USD10-45 perhectare depending on the crop

The Ukrainian government continues to support agriculture following WTO accession

Ukrainian agricultural producers areexempt from the 25% income tax, andpay only the Fixed Agricultural Tax (FAT)

FAT is calculated as a percentage of the

deemed value of all land plots leased andequals approximately to USD 60 ths peryear per 100,000 hectares held by acompany

The government refunds 30% of thecost of locally-manufactured farmequipment purchased

Interest rate rebate

Insurance rebate

Equipment rebate

Agricultural companies receive arebate of interest paid on loans up toa maximum rate of 10% for loansdenominated in UAH and 6% forloans in USD

The government refunds 50% ofpremiums paid for insuring againstcrops failure

Income tax

Value added tax

Crop subsidies

I

II

III

IV

V

VI

Source: Company data

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