Management Presentation August 2015
Disclaimer Any estimates, projections, targets or forecasts contained herein have been prepared by the management of Axzon and involve significant elements of subjective judgments and analysis, which may or may not be correct. No representation or warranty, either expressed or implied, is or will be made by Axzon, or its respective directors, officers, partners, employees, agents, representatives or advisers as to the accuracy or completeness of the information contained in this document, or which this document is based on or of any other written or oral communications with the recipient in connection with an evaluation of a specific transaction with or relating to the business of the Group, and all liability therefore (including direct, indirect or consequential loss or damage) is expressly disclaimed. Neither part of this document should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever, and the recipient thereof should conduct its own independent investigation and analysis of the information contained or referred to herein. This document may not be passed on, copied, reproduced, in whole or in part, or otherwise disseminated, directly or indirectly, to any other person. Failure to comply with this restriction may constitute a violation of applicable laws. 2
Baggrunden for for Axzon En idé I hovedet på en dansk landmand Lad os placere landbrugs-og fødevareproduktionen så tæt på markedet og forbrugeren som muligt! Hvorfor flytte korn og råvarer den halve verden rundt? Hvorfor betale overpriser for landbrugsjord for at understøtte en meget høj koncentration af husdyr? Hvorfor flytte arbejdskraft i stedet for produktion? Lad os etablere os med produktion rundt om i verden, og dermed medvirke til integration! Lad os medvirke til en mere bæredygtig landbrugsproduktion, også i Østeuropa! Lad so bidrage til en mere stabil og fredelig verdensorden!
Establishment and early years Tom Axelgaard s first visit to Ukraine Prime Food acquired Danosha started operations 1992 1994 2000 2002 2004 Poldanor started operations Axzon A/S incorporated 4
Sustainable development The first biogas plant launched in Poland Welfare Pigs concept introduced at Poldanor Construction of the 1 st biogas plant in Ukraine started Merger with Dan Invest and Initializing production in Russia 2005 2008 2009 2010 2011 2013 2013 Sevel Slagteri acquired Restructuring of the Group under Axzon A/S Verification of Carbon neutral meat production in Poland 5
Stabil udvikling! Revenue EBITDA 1.085 1.207 1.252 1.416 154 43 375 433 406 97 66 64 730 602 593 623 620 133 88 94 107 62 801 900 144 178 261 354 268 365 Mio. DKK Source: Audited financial reports, the Group 6
Polen Invest A/S 90 Danske investorer 84,67 % IFC Verdensbanken 6,97 % Axelgaard Holding Tom Axelgaard 3,91 % 76 Danske investorer 4,45 % Holding company 40 % #2 I polsk svineproduktion #1 biogas producent på farmbasis Top 10 producent I Polen og kendt for høj kvalitet #2 største svineproducent I Ukraine og nu med biogasanlæg Solid platform for udvidelser i Rusland Med-ejer af mindre Slagteri i Danmark Økonomiske indikatorer 2014 Omsætning 1,5 mia DKK EBITDA 365mio. DKK EBITDA margin 26% Netto resultat 46mio DKK Produktions indikatorer, 2014 Antal solgte slagtesvin 930k stk. Solgt svinekød I ton 87k tons Kødprodukter solgt i ton 49k tons Besætning (total/søer) 470/40.1k stk. * In live-weight ** Excluding slaughtering services of Sevel Slagteri 7
Axzon producerer i dag ca. 10 tons svinekød i timen. Poldanor er 2 største svineproducent I Polen, med 22.300 søer og 620.000 slagtesvin produceret om året Danosha er 2 største svineproducent I Ukraine med 11.600 søer og 330.000 slagtesvin produceret om året Dan Invest har en produktionskapacitet på ca. 8.000 søer og kan producere 240.000 slagtesvin om året Prime Food er mellem de 10 største slagterier i Polen med 2 % og kendt for høj kvalitet og sporbarhed Poldanor er Polens største biogasproducent med en årlig produktion på ca. 60 mio KWH strøm Samlet har Axzon rådighed over 35.000 ha. Landbrugsjord i Polen, Ukraine og Rusland 8
Eastern Europe in focus We target markets where pork prices are high and recourses are relatively cheap EUR 000 per ha 40 30 20 10 0 heads per ha 7 6 5 4 3 2 1 0 40,2 EU-27 average Land price (LhS) Pig density (LhS) Pig carcase price (RhS) Netherlands Denmark Germany Spain Poland Hungary Romania Ukraine* Russia Pork per capita consumtion (RhS) Netherlands Denmark Germany Spain Poland Hungary Romania Ukraine Russia 17,3 21,2 EUR per 1 kg 3,0 where growth opportunities are significant and constrains are limited kg p.a. 50 40 30 20 10 0 2,5 2,0 1,5 1,0 0,5 0,0 *Value of 10 year lease rights Note: Value of farmland - latest available (2008-09); pork price - average for 2011 in live weight, density - pigs herd (Dec 11) per agricultural land area Source: Eurostat, FAS USDA, Savills (International Farmland Market Bulletin, 2011) 9
Potential for further growth in grain production UA 40 mio ha. *5 t = 200 mio t. RU 222 mio ha. * 3 t.= 666 mio t. (RU an UA could double the worlds wheat production.) 10
Extreemely low profitability in Danish pigproduction In spite of the fact that Danish production efficiency is the highest in the world 100 Avg net result pr. pig... - 52 DKK 50 42 0-50 -28-11 -20-12 -35-13 -100-64 -79-150 -108-127 -200-168 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Avg net result pr. pig Source: Foedevarewatch Denmark Note. Net result after depreciation, financial and all other costs. 11
Geography of operations Each of the markets where Axzon is present or plans to be contains substantial growth potential Poland Price is expected to surge upward Axzon s geography of operations Less efficient pig producers quit the business The change in EU regulation will have price upside effect in 2014-2016 Ukraine Favorable price environment Growth potential implied by low internal supply, and a low level of current per capita consumption Pig price growth trend Russia Demand an internal production gap of 475k tons Outstanding margins implied by high pork prices Huge population and vast land resources Growing disposable income and pork consumption Substantial internal economical and political support for investments in pork production Denmark 6 m 81 kg 1,589 k t Regions of operations Markets of presence Poland Population Pork per capita annual consumption (2014) 38 m 38 kg 1,625k t Ukraine 46 m 17 kg 820k t Russia 143 m 22 kg 2,935k t Source: FAS USDA, Statistics Denmark, FAPRI, World Bank Total pork production (2014, carcass weight) 12
Russia: Still a major global importer of pigmeat but Major global pork importer with annual shortage exceeding 450kt (2014) 143m population with growing disposable income and pork consumption Significant pig price premium and abundant grains 1 production (average output during the last 5 years 83mt) Outstanding margins in pork production (EBITDA margin > 40%) despite poor operating efficiency Substantial government support M tons (cw) 5,0 3,0 1,0-1,0 39% 32% 32% 33% 32% 24% 17% 8% 2,84 2,72 2,84 2,97 3,02 3,15 3,20 3,10 1,74 1,84 1,92 2,00 2,08 2,40 2,60 2,90 2008 2009 2010 2011 2012 2013 2014 2015F 1 incl. wheat, corn, barley, oats, rye, millet 2 Correlation coefficient Pork consumption balance in Russia Production (LhS) Consumption (LhS) Share of net import in consumption, % (RhS) Source: FAPRI, Euromonitor, ZSRIR, Rosstat, Ukrstat, the Group data 60% 40% 20% 0% $ bn 2,2 2,0 1,8 1,6 1,4 1,2 1,0 0,8 2.000 1.500 1.000 500-1,67 1,57 1,81 1,82 1,17 19,2 1,06 20,1 1,73 1,53 0,99 20,9 1,87 1,61 1,13 2,08 1,95 1,90 1,33 1,32 1,80 1,83 1,48 1,19 1,32 1,06 1,04 2008 2009 2010 2011 2012 2013 2014 2015f EUR/kg (lw) Poland Ukraine Russia corr 2 = 0.99 Pig average price dynamics Personal disposable income and pork per capita consumption 21,5 21,7 22,0 22,0 768 923 1.076 1.151 1.247 1.123 1.048 2009 2010 2011 2012 2013 2014 2015E Personal disposable income, US$ bn (LhS) 25,0 20,0 15,0 10,0 kg 13
3.5 Sustainable intensification of agriculture
Formål/grundlag: Er det tomme ord?????? Bæredygtig intensivering af landbrugs og fødevareproduktion. Vision At blive verdensførende i landbrugs- og fødevareproduktion, baseret på intensive, bæredygtige produktionsmetoder og standarder og høj kvalitet i både produkter og organisation Key Value Drivers Landbrug Mission: At producere sunde høj-kvalitets fødevarer Ved brug af mindst mulige ressourcer Og have mindst mulig indvirkning på det naturlige miljø Kontrol over hele værdikæden Føde varer Svine produktion Energi Fra jord til bord 15
Danish know-how and sustainable agriculture Danish pig producers are leading the way and develop production based on the most advanced know-how in the world and sustainable farming principles For more than 100 years, production of pigs and pig meat has been a major source of income for Denmark The milestones of sustainable agriculture Nowadays the country is among the world s leaders in breeding, animal welfare standards, food traceability, safety and quality Danish farmers undertook a long and hard way learning how to make intensive agriculture sustainable Led by Danish management, Axzon adheres to the strictest environmental and social standards and brings the principals of sustainable agriculture to the countries where it operates Society Food safety Rural development Environment Waste utilization Animals welfare Bioenergy Economy Food supply Farm profitability Source: the Group 16
Sporbarhed fra bord til jord Fuld control over hele produktionsprocessen til sikring af den optimale kvalitet for forbrugeren. Fra jord til bord strategien Produktion af foderagrøder Produktion af foder Svineavl og produktion Slagtning og udbening Kødforarbejdning og salg Majs ensilage Organisk gødning Elektricitet og varme Husdyr gødning Elektricitet og varme Slaughter waste Elektricitet og varme Elektricitet og varme Produktion af biogas Interne aktiviteter og kontrol til sikring af effektivitet og optimal miljøpåvirkning Intern opformering Af produktionsdyr Optimal udnyttelse af husdyrgødning Egen transportafdeling Egen byggeafdeling Uddannelses Center 17
From Field to Table Top focus: animal welfare Group housing of sows Castration with anaesthetic (all male piglets) Transport by own transport trucks Slaughterhouse animal welfare managment 18
Dyrevelfærd er et relativt begreb 19
Koncentration af produktionssøer og vildsvin i Europa. 20
Udbrud 2014-15 i EU 21
Hvis dyrene har det godt, producerer de godt. 22
Constant focus and development. 23
Operating excellence in pig production Axzon is ahead of its Russian peers by operating efficiency Pigs sold per sow Meat yield per sow, kg Feed conversion ratio, kg 22 25 30,3 21 22,2 2.717 2.520 3.439 2.129 2.308 2,76 2,94 2,68 [VÆRDI] * [VÆRDI] Smithfield USA avg Miratorg Axzon Chercizovo Rus Agro Smithfield USA avg Miratorg Axzon Chercizovo Rus Agro USA Smithfield avg Miratorg Axzon Chercizovo Rus Agro average for benchmarked companies Additional information USA avg EBITDA margin of Russian peers in pig segment, 2014 Sow herd 15 mio. 135.0K 41,6K 80K 81K Average marketable pig weight, kg 120 110 109 117 109 Daily gain on finishers n/a 800 935 n/a n/a Weaned pigs/sow/year 24,8 26 31,4 21,7 24** Born alive pr. sow/year 27,2 ** n/a 35,3 24.4 26,4** 60% 50% 40% 30% 20% 49% 57% *** 50% Note: (*) figures for 2010, other figures for Russian peers are for 2014.(**) Calculated 2014 figures. Figures for Axzon is for 2 quarter 2015 *** 1H 2015 incl. Dankub costs with no production..source: the Group, companies data from public sources
From Field to Table ENVIRONMENT Today: 8 biogas plants 58 000 MWh yearly 200 000 tons yearly reduction of CO2 emission Plan by 2015: 13 biogas plants 120 000 MWh/year (30 000 households) Biogas Modern and environment friendly technologies use least possible resources IPPC permits valid until 30.06.2016 Wastes and waste water management 25
Efficient crop production Reduced farming solutions save the environment (no ploughing => reduction of fuel consumption)
GPS makes growing more efficient, saves resources and saves the environment for unnescessary pollution
Reduceret jordbehandling og minimering af kemi! 28
Rettidig omhu!!
Corn for cows, pig feed and biogas 30
3.5 Biogas operations and environment protection
Value of covering lagoons for storing animal manure Economics Price of Nitrogen is today 3 PLN/kg N in agricultural fertilizer in Poland Loss by open lagoon pr year = 10.000 t * 1kg loss/ton = 30.000 PLN = pay back 1,5 years Side effects No evaporation of Ammonium and Methane to the atmosphere (pollution) No odor from the lagoons Secondary utilization of both 32
Det kommer jo næsten af sig selv! 33
Biogas operations and environment protection (1/3) With sustainability as underling principle, Axzon strives to utilize the best available technologies to protect environment and boast efficiency China Axzon approach 1 Slurry accumulated in sealed lagoons 6-floor farm for 18,000 sows 2 Biogas plants produce electric and heat energy 3 Degased biomass used as organic fertilizer Slurry goes directly into the river! 4 Ecologic situation meticulously monitored 34
Koczała biogas plant (2009) 2 x 1063 kw
36 Christmas meeting presentation 9/21/2015 Відкриття біогазового заводу Biogas plant opening Ukraine
Essential functions of biogas plants: Electricity and heat cogeneration (app. 52,000 MWh in 2012) Utilization of plant and animal waste (1000 t/year) Better natural fertilizer (fermented pig manure) Reduction of GHG (greenhouse gas) emission (app. 200,000 tons of CO2 eq/year) Reduction of manure odour app. 80% Reduced spreading of pathogens and weed seeds. Development of local infrastructure and new jobs 37
Utilization of the fermented biomass as natural fertilizer, using the soil injection method Capacity: 150 t/h 38
Ammongas and steam Explosion 39
Hvad er det????? Steam explosion
The uniqe production cycle CORN PRODUCTION The biomass is distributed in the spring, when the corn can utilize it optimally. SINGLE-PASS CORN HARVEST BIOMASS DISTRIBUTION SINGLE-PASS CORN HARVEST Wet corn cernels CORN SILAGE Electricity and heat The digested slurry is homogeneous, smells less, and the nutrients accessibility is optimal for the new generation of corn.. BIOGAS PRODUCTION Minimal transport No drying needed no energy used for that, as well as no loss of nutrients Electricity and heat SEALED WET CORN STORAGE NEAR BY FARM. WET MILLING SYSTEM AT THE FARM LIQUID FEEDING STEAM EXPLOSION PIG PRODUCTION The lignin in the corn stover is destroyed, so the dry matter is more accessible for the methane bacteria in the biogas plants (optimum utilization) The steam exploded mass is mixed with the pig manure in exact and stable doses, to keep a constant digestion and methane production. El. SLURRY STORAGE The biomass from the pigs (slurry) is contained in sealed systems No loss of nutrients and gasses Pigs eating and growing from the good food composition.
Minimering af resurseforbrug pr. produceret enhed. Foderforbrug pr. kg. tilvækst Medicinforbrug pr. kg. kød Energiforbrug( el, brændstof etc.) pr. kg. kød. Vandforbrug pr. kg. kød. Arbejdskraftsforbrug pr. kg kød. Pesticidforbrug pr. kg. kød. Udledning af metan, c02, NH3 etc. pr kg. kød. Nedsivning, udvaskning, spor i miljøet pr. kg. kød. Affaldshåndtering, udnyttelse, helhedsindvirkning pr. kg. kød. 42
+ Carbon neutral meat Carbon neutral companies (average benchmark: 5,35 kg CO2) (from 2,5 to 8,2 ) 43
Recognized and awarded by Financial Times and IFC At the Transformational Business Conference & Awards, arranged by Financial Times (FT) and the International Finance Corporation (IFC) in London, Axzon won the 1. prize in the category : "Achievement in project finance Food and Water.
Traceability High Quality Healthy pigs Low CO2 outlet Good retail net Z nami wiesz co jesz