M S. McGill St Laurent. Philippe Boisclair Chris Labbe January 2018 Montreal, Quebec. Haskayne Consulting

Transcription

1 M S McGill St Laurent Philippe Boisclair Chris Labbe January 2018 Montreal, Quebec Derek Brandschwei, Eva Peng, Bharath Nuthanakaluva, Nicole Drozdiak

2 2 Why are we here? How can McGill St Laurent grow sustainably by innovating in their lines of business? Disrupting the industry while managing risk

3 3 Executive Summary Focus Area Strategy Details Canadian Wood Products Grain St Laurent Buy sawdust and sell bio-electricity producers Utilize Artificial Intelligence (AI) to optimize grain trading -Buy sawdust from existing Saw Mills -Market sawdust to bioelectricity producers in Canada and the US -AI to study weather patterns to predict future grain yields -Help traders make informed decisions on future grain prices CWP Energy Maintain growth strategy -Continue with current investments in AI

4 4 #perpetualmotion Recommendation Seek win-win situations by Buying waste saw dust from your saw mill customers to power bioelectricity plants Utilizing your weather and climate tracking AI for predicting future grain yields and grain prices

5 5 You asked we answered (1/2) How can McGill St Laurent benefit from industry changes to create disruption and become industry leaders? By evaluating how technology and evolving trends can create new possibilities, such as: using waste saw dust to generate electricity Is grain trading an irrelevant business line or an opportunity? An opportunity! Grain is a massive industry where new technology can (AI) can predict grain yields and prices for trading

6 6 You asked we answered (2/2) Is McGill St Laurent efficiently deploying resources to achieve their vision? Absolutely! By actively seeking change and finding new opportunities in traditional commodities How does McGill St Laurent pay for this? Using cash flow generated by operations Using Letters of Intent and mezzanine funds (bridge loans)

7 7 Building the infrastructure Eva to discuss the details

8 8 What business you are in? Trading Commodity supplier Purchase McGill St. Laurent Price and transparency Relationship is key Service help you to differentiate Customers or business Sell Disrupting the industry while managing risk

9 9 Sectors you are operating in McGil StLaurent Energy adds volatile and risk CWP Energy Canadian wood products Grain StLaurent Wood commodity is your expertise The architecture Export/north American commodities manufacture

10 10 How you do business? Balance market supply and demand by placing the most smart trade orders The matrix: Cash cycle + Inventory turn over Manufacture - forward integrate : to increase margin and reduce risk Risk management in trading: best use your technology for the financial exposure Differentiation: delivery on time to customers and relationship is key Corporate culture: young, energetic and willing to try new things

11 11 Options ahead of you immediately 1 Adding additional related commodity to our trading portfolio 2 Expand into new global markets 3 Fully diversity into a band new commodity

12 Criteria to use for your young business with limited resource Expertise Financial Risk Growth strength feasibility exposure potential

13 13 Option analysis Options and criteria Adding additional related commodity to our trading portfolio Expertise Financial feasibility Risk Growth potential Expand into new global markets Fully diversity into a band new commodity

14 14 Option analysis result Options and criteria Adding additional related commodity to our trading portfolio Expertise Financial feasibility Risk Growth potential Expand into new global markets Fully diversity into a band new commodity

15 15 Leverage the strength you already have Technology in AI team and investment Relationship from existing customers and suppliers International is risky to enter for the business environment and relationship takes long time to build Learn from your failure and strenghth

16 Expand to related commodity saw dust 16 Trade new commodity: saw dust from saw mills to bioelectric plants Use your expertise and relationship in wood industry Waste product: making industry more efficient, this is the sustainable project Time to explore relationship to sell Sawdust is sustainable, diversity will help you to be more agile

17 17 Considering technology for disruption Using AI not only for virtue trading, but for predicting weather: learn the weather pattern To forecast market demand in grain trading: weather determines the price of the commodity Help traders make informed decisions on future grain prices Help you to reduce risk and increase profit Overall goal: Cash cycle to increase Technology is transferable in different commodity trading

18 18 Feeding you the numbers Invite Bharath to walk you through the financial data

19 19 Assumptions Currency in CAD Debt interest rate 5% Current gross margin for wood 6% Wood revenue split Industrial 75% Architectural 25%

20 20 Currently in a risky situation Financials (2017) in $MM Equity Cashflow 3.7 Revenue $ Gross Profit $ 9.3 EBITDA $ Interest $ 1.1 EBTDA (Equity cashflow $ 3.7 Costs EBTDA Need to get into a more stable cash flow business

21 21 Saw dust opportunity in Canada Saw dust produce methane; 5 X more Green house gas effect than CO2 Alberta - $20/ton Carbon tax Canada federal carbon tax mandate - $50/ton by 2020 High growth towards Bio-electricity generation plants Need for constant supply for saw-dust for these plants Government is issuing year power purchase agreements Provides steady cashflows with higher margins

22 22 Revenues looking forward Current Revenue Split Revenue split by % 19% 16% 60% 12% 51% 18% Wood Grain Energy Wood Saw Dust Grain Energy Saw dust revenues will put your company in #perpetualmotion

23 23 Projections for 2020 in $MM Gross Margins EBITDA Wood $ 15 $ 5 Saw Dust $ 25 $ 9 Grain $ 3 $ 1 Energy $ 6 $ 2 Total $ 49 $ 17 Achieve target by 2020 Gross margins - $49MM; EBITDA - $17MM

24 24 Funding growth in saw-dust Use operational cash flows first Use credit provided by the saw mills Use LCs and bridge loan funds available No requirement for going public or having to take additional debt from the banks

25 25 #perpetualmotion Recommendation Seek win-win situations by Buying waste saw dust from your saw mill customers to power bioelectricity plants Utilizing your weather and climate tracking AI for predicting future grain yields and grain prices

26 26 Alternatives Fully diversify into brand new commodities Expand into new global markets

27 Fully diversify into brand new commodities 27 Expertise in wood and grain More volatility in minerals and metals Does not necessarily leverage existing systems and expertise in place STOP Do Not Do This

28 28 Expand into new global markets Takes longer to build international relationships in new countries Very high uncertainty, given very low margins Over-sea weather disruptions cause heavy delays, which is against your way of on time business STOP Do Not Do This

29 29 Powering the implementation Nicole will discuss the details of the implementation

30 30 For future consideration Out of the box thinking Look at the market for fresh water trading Large anticipated demand for fresh water in the United States in the next ten years Don t do this for future consideration

31 31 #perpetualmotion Recommendation Seek win-win situations by Buying waste saw dust from your saw mill customers to power bioelectricity plants Utilizing your weather and climate tracking AI for predicting future grain yields and grain prices

32 32 Implementation Timeline Short term (1 year) Create contracts with saw mills to supply saw dust Build relationships with bio-electricity producers Implement AI software changes for weatherprediction in grain business Middle term (2 years) Evaluate expertise of using the weather patterns software for grain trading Explore using additional AI capabilities in Energy trading with virtual traders Long term (3 years) Explore future opportunities within Wood, Grain and Energy for related commodity trading Look at expanding into new global markets Re-evaluate performance and long-term strategic goals Don t do this for future consideration

33 33 Risks and Mitigation Strategies Risks Mitigation Likelihood (H/M/L) Impact (H/M/L) Not enough demand for saw dust as a commodity NAFTA and soft-wood lumber tariffs with the US could impact trading across borders High competition and easy barriers to enter sawdust commodity trading Cybersecurity Foreign exchange Explore other buyers globally (UK, Europe, China) Look to new trade deals like Trans-Pacific partnership for other opportunities Establish long term contracts with saw-dust suppliers Use internal data analytics team to evaluate vulnerability Use financial instruments (ie. Hedging) L M L M M M M M M L Feels counter-culture but prepares you for success when the unexpected happens

34 34 Planning for the future Tasks Outcome Responsible Timeline Discuss and make sure you re aligned on future plan Explore buy-sell insurance for McGill St Laurent Explore key-person insurance on Chris and Alain Continue to reward and promote internal talent Be transparent with each other Preventative measures for unexpected events Preventative measure for future protection Keep the culture of taking care of your people Chris / Alain Chris / Alain Chris / Alain Chris / Alain 1 month Chris / Alain 6 months 6 months Feels counter-culture but prepares you for success when the unexpected happens

35 35 How do you continue to manage risk? Ensure agreements with logistics company can be met for customers in lumber transportation Weather disruption can be used on Use clearly outlined and established risk policies and procedures for trading operations Eliminate surprises by leveraging IT systems and AI capabilities Stay aware of government and international trading regulations by using your Risk Committee Risk management is critical to the success of McGill St Laurent

36 36 Key success factors Canadian Wood Products Quality relationships with suppliers and customers Highly reliable logistics providers to offer on-time delivery Grain St Laurent Portfolio diversification Risk management Adapt to a changing market CWP Energy Maintaining quality relationships Risk management Embracing disruption You are on the right track to reach your goals

37 37 Risks and Mitigation Strategies Risks Mitigation Likelihood (H/M/L) Impact (H/M/L) Not enough demand for saw dust as a commodity NAFTA and soft-wood lumber tariffs with the US could impact trading across borders High competition and easy barriers to enter sawdust commodity trading Cybersecurity Foreign exchange Explore other buyers globally (UK, Europe, China) Look to new trade deals like Trans-Pacific partnership for other opportunities Establish long term contracts with saw-dust suppliers Use internal data analytics team to evaluate vulnerability Use financial instruments (ie. Hedging) L M L M M M M M M L Managing risk now will lead to future success

38 How does this align with your mission and vision? 38 Mission: Build, Feed and Power the Planet Build a sustainable planet by re-using waste Feed the planet by using technology to your advantage Power the planet by maintaining your success Vision: Develop a world-class trading company, fuelled by the best entrepreneurs and creative minds This is a feasible, realistic and implementable solution!

39 39 You asked we answered (1/2) How can McGill St Laurent benefit from industry changes to create disruption and become industry leaders? By evaluating how technology and evolving trends can create new possibilities, such as: using waste saw dust to generate electricity Is grain trading an irrelevant business line or an opportunity? An opportunity! Grain is a massive industry where new technology can (AI) can predict grain yields and prices for trading

40 40 You asked we answered (2/2) Is McGill St Laurent efficiently deploying resources to achieve their vision? Absolutely! By actively seeking change and finding new opportunities in traditional commodities How does McGill St Laurent pay for this? Using cash flow generated by operations Using Letters of Intent and mezzanine funds (bridge loans)

41 41 To Build, Feed and Power the Planet Derek to bring everything together

42 42 #perpetualmotion Recommendation Seek win-win situations by Buying waste saw dust from your saw mill customers to power bioelectricity plants Utilizing your weather and climate tracking AI for predicting future grain yields and grain prices

43 43 Executive Summary Focus Area Strategy Details Canadian Wood Products Grain St Laurent Buy sawdust and sell bio-electricity producers Utilize Artificial Intelligence (AI) to optimize grain trading -Buy sawdust from existing Saw Mills -Market sawdust to bioelectricity producers in Canada and the US -AI to study weather patterns to predict future grain yields -Help traders make informed decisions on future grain prices CWP Energy Maintain growth strategy -Continue with current investments in AI