malcolm jackman elders limiteds3-us-west-2.amazonaws.com/brr-streamguys/files/eld/elders.pdf ·...

Malcolm Jackman

Elders Limited

The New Elders ASX Small to Mid Cap Conference Hong Kong October 29 2009ASX Small to Mid Cap Conference Hong Kong October 29 20092

Malcolm Malcolm JackmanJackmanChief Executive OfficerChief Executive Officer

ASX Small & Mid Cap ConferenceASX Small & Mid Cap Conference29 October 200929 October 2009

RefocusedReorganisedRecapitalised

RefocusedRefocusedReorganisedReorganisedRecapitalisedRecapitalised

The New EldersThe New Elders…

3

EldersElders is a leading Australian agribusiness offering exposure to:

Australian farmers via the premium distribution brand

supply of food and fibre to Asian and global markets

value accretion arising from business renewal and transformation programs.

The New Elders ASX Small to Mid Cap Conference Hong Kong October 29 2009

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TREND OVERVIEW

Population Growth

UN forecasts world population growth of 390 million from 2010 to 2015 with Asia accounting for 58%

Consumption Patterns

Increased wealth in emerging Asian economies driving change in consumption towards safe, high value agricultural products

Renewable Energy

Growing biofuel industry and associated demand for key commodity inputs & outputs impacting overall demand-supply balance

Arable LandDecreasing arable land per capita due to urbanisation and environmental contamination (particularly in emerging economies)

Continued food supply/ demand imbalance

Structural change in demand for farm inputs/outputs and advice

Competitive advantage of Australian producers vis-à-vis Asia & food traceability

Continued demand and growth opportunities for

Elders

IMPLICATIONS

Elders has a leading position at the intersection of Australasian production and global markets

Fundamentals supporting the soft commodity cycle remain

intact

Favourable sectoral outlook…Elders’ growth plans are underpinned by strong sectoral demand fundamentals


Change in financial year end to Sept 30 (FY09 a 5 qtr transitional year)Refinancing completed 30 September with 3 year term on core debtRecapitalisation approved by shareholders:– $400 million institutional issue completed 20 October

– $150 million SPP to settle 30 October

Issued share capital increasing from 819.2 million at 19 October to 4,486 million by 2 November (consolidation likely)Net debt reduced from $1 billion to pro-forma $200 million as at 30 JuneHiFert sales process continuingMarket capitalisation increases from circa $300 million to ~$850 millionElders is now ready to push on with its business turnaround

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Recent events…the foundations of business recovery have been put in place


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Sales *Agribusiness^ 1,983

Forestry 121

Automotive 232

2,336

EBITDA*Agribusiness^ 88Forestry 16Automotive 22Corporate & other (10)

116

EBIT*Agribusiness^ 73Forestry 14Automotive 7Corporate & other (10)

84

* FY2010 Prospectus forecast

Income streams concentrated on agribusiness… from which over 80% of sales and EBIT is generated

^ includes Banking and insurance


Rural Services Operations …unmatched brand, with business model and strategic position that confers competitive advantage

Goodwill from 170 years of serviceNetwork of over 390 points of presence distributing farm inputs, financial services and providing marketing, technical and advisory servicesNetwork related supply chain assets that leverage distribution/accumulation capabilities in:−

Grain−

Livestock−

Wool

Competitive advantage in intelligence through position at farm-gate−

Relationships with 100,000 farmers

Points of presence Australia New Zealand TotalRural branches 267 18 285Real Estate & Insurance 91 4 95Franchise Real Estate (rural and regional) 33 - 33Franchise Real Estate (metropolitan) 132 - 132

The New Elders ASX Small to Mid Cap Conference Hong Kong October 29 2009ASX Small to Mid Cap Conference Hong Kong October 29 2009 8

Rural services financial results & outlook …2009 impacted by year’s events, rebound forecast for 2010

12 months to 30 June 2009:Collapse of demand volumes & prices post GFCCommencement of Elders Transformation ProjectDisruption brought by ReFi/Recap process

$ million^ FY08

12 mths

June 2009 FY10P*

Sales 2,691 2,439 1,983

EBIT 79.8 32.3 73.4

Prospectus forecast:12 months to 30 Sept 2010:

Cost savings from 2009 initiativesStabilisation of prices, recovery of volumesContinuation of Business Transformation gains

^ Includes banking and insurance* Prospectus forecast


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Shifting focus to performance & growth …through a structured program addressing totality of operations


Element Status

Renew market understanding & structure Updated understanding of modern Australasian agriculture market needs

Client needs analysis Restructuring of Elders’ value proposition based on needs of identified customers

Re-organise around the customer Reform of “City-centric’’ sales & operations management to regional structure

Key Account Management Bidding and winning on large and corporatised accounts where Elders previously ineffective

Price book Tighter price discipline, pricing for customer value, margin control & integrity

Re-engineer distribution model & customer interface

More effective, lower cost, performance-driven branch model

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Go to market …more effective sales performance based on reappraisal of client needs and Elders’ sales proposition


Essential ingredient for operation of large distributed network

DMAIC* & Lean 6 Sigma structured program to reduce operating costs & improve efficiency

First 6 months focussed on Branch operations (including Farm supplies, Livestock & Real Estate) and HR

High strategic significance – central to Go to Market, Supply Chain & Cost initiatives

**DMAI C= Define, Measure, Analyse, Improve, Control11

Operational Excellence …establishing cost effective standardised process that focus on the customer

Standardisation of service and process across Elders’ network will bring efficiency gains, reduce risk, rework and non-conformances and increase sales’ staff capacity to sell


Element Previous Benefit Status

Consolidate the spend

~300 individual branch-based deals

↑

Buying power↑

Negotiation power↑

Control of offering

Cost-downs progressively captured. More robust tender processes implemented. Increased control on product direction.

Develop DC infrastructure

Supplier-to-store direct

↓

Inventory↓

Admin costs↓

Transport costs↑

Service levels

Infrastructure implemented. Driving service improvements & freight- rate cost-downs.

Forecasting & functional alignment via Sales & Operations Planning

“loose” alignment ↑

Planning, through single “demand” figure↑

Responsiveness ↑

Service↓

Inventory

Forecasting software implemented. Sales and Operations Planning beginning to deliver better alignment between Supply Chain, Marketing, Sales & Finance.

The New Elders12

Supply chain …cost-downs through better buying, reduced working capital and efficiencies in physical logistics


The New Elders13

HEAD COUNT SUPPORT CENTRE COSTS ($m) - Quarterly

NETWORK COSTS ($m) - Quarterly SG&A ($m)¹ - Quarterly

3,008

1,162

2,9402,666

660

2,593

Permanent Casual FTE

Down 43%

Down 11% Down 12%

1316

2219

1418 1716

September December March June

Down 20%

8275 79 8585

72 77 76


Down 3%Down 4%Down 11%

61 58 59 5963

53 55 54


Down 7%Down 8% Down 8%

Cost improvement….significantly reduced operating and overhead structure leading to improved cost performance


The New Elders14

The margin improvement opportunity …. targeting 2% - 3% improvement in rural services* margin from initiatives in train

Earnings improvement on $2 billion pa sales + additional sales brought by Go to Market gains

* excluding banking and insurance1. FY2010 defined as the 12 month period ending 30 September 2010.

2. FY2008 (margin normalised to remove effect of operations discontinued in FY2009 (12 months ended 30 June 2009)).3. Includes margin changes for cost initiatives from 1 July 2009 to 30 September 2010.

4. Includes margin changes for trading improvements from 1 July 2009 to 30 September 2010.


Forestry strategically significant assets, offering long term cash flows, positioned to benefit from industry rationalisation

Establishment and management of FSC certified hardwood plantations

– 165,000 ha under management– Ownership of 47,000 ha of

plantation landOwnership and operation of port handling infrastructure13.5% interest in Forest Enterprises Australia49.9% shareholding in Agricultural Land Trust

– Owns 24,320 ha land, 17,000 of which hold ITC forests


Forestry results to improve after tough year …2009 sales impacted by GTP, TIM failures & Elders refinancing

12 months to 30 June 2009:Collapse of MIS demand post GFC, industry failures, & Govt reviewMargins impacted by fertilizer & other costsDisruption brought by ReFi/Recap process

$ million FY08

12 mths

June 2009 FY10P

Sales 191.3 184.9 121.1

EBIT 61.4 10.6 14.1

EBIT margin % 32.1% 5.7% 11.6%

Prospectus forecast:12 months to 30 Sept 2010:

Recovery in MIS sales, investor confidence

0

300

600

900

1,200

2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%

3%

6%

9%

12%

MIS Industry Sales ($m)ITC Market Share (%)

Sales ($m) Market Share (%)

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Source: Company announcements.

Ramp-up in harvest volume forecast to turn cashflow positive 2011F onwardsITC model features greater retained equity in harvested treeDedicated to forestry with no capex intensive horticultural projectsSmall loan book (~$20m) with negligible non-performing loans

Cashflow from pulpwood harvest set to grow …ITC estate is 10 years into 12 year establishment cycle

0

500

1,000

1,500

2,000

2,500

3,000

2006A 2008A 2010F 2012F 2014F 2016F 2018F 2020F

GMT (000s)Projected Annual Harvest Volumes


Automotive …cash flow positive, developing non-core asset held for sale when shareholder value merits

Comprises Futuris Automotive & 35% owned associate Air International thermal systemsFuturis Automotive has profitable China operations supplying Chery, JACImpacted by contraction in global vehicle build in 2009Operating cash flow positive in 2009FY10 to improve as volume, costs stabilisedIdentified for divestment to natural owner when values return to market

$ million2008

12 mthsJune 2009 FY10P

Sales revenue 384 270 232Underlying EBIT

Futuris Automotive 23.8 5.6 6.5Associates 2.3 (21.1) -

Total 26.2 (15.5) 6.5


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$ million12 mths

June 2009 2010P*

Sales revenue 2,628 2,336

EBITDA 54.6 116.6

EBIT 16.8 84.2

Interest (51.7) (26.7)

Underlying NPAT (26.9) 55.7

FY2010 financial outlook…Rural services to drive turnaround as markets stabilise and transformation gains begin to emerge

Underlying EBIT$m

Increased EBIT across operations and reduced interest expense todrive turnaround in profit generationFactors responsible for 2009 decline to stabilise, recover30 June 2009 pro-forma debt reduced to 14%Rural services gains expected to compound from 2010

* Prospectus forecast


Gaining Momentum …recapitalisation sets Elders to address and realise organic value gains projected to accrue from 2010

The ‘Elders Makeover’ is all but complete with strategy, finances, organisation structure, management changes all achievedDivestment program in place for non-core assetsBalance sheet position post-recapitalisation leaves Elders management free to concentrate on the margin and performance improvements that have been identified in the businessEarnings profile and targets provide for:

– Partial recovery in 2010– “Break-out” subsequent as through gains targeted by transformation program

addressing identified value accretion in go to market, costs, system and supply chain

Outlook supported by demand fundamentals for Australian farm produce and capabilities of Australian farm sector


Malcolm JackmanMalcolm JackmanChief Executive OfficerChief Executive Officer

ASX Small & Mid Cap ConferenceASX Small & Mid Cap Conference29 October 200929 October 2009

RefocusedReorganisedRecapitalised

RefocusedRefocusedReorganisedReorganisedRecapitalisedRecapitalised

The New EldersThe New Elders…

malcolm jackman elders limiteds3-us-west-2.amazonaws.com/brr-streamguys/files/eld/elders.pdf ·...

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