Our Path To Global Leadership. June 27 th, 2010

Transcription

1 Our Path To Global Leadership June 27 th, 2010

2 Disclaimer This presentation is for marketing and information purposes only. By this presentation, Makhteshim Agan industries Ltd. (the Company") does not intend to give and the presentation does not constitute professional or business advice. The accuracy, completeness and/or adequacy of the content of this presentation, as well as any estimation and/or assessment included in this presentation, if at all, is not warranted or guaranteed and the Company disclaims any intention and/or obligation to comply with such content. The Company may make improvements and/or changes in the features or content presented herein at any time. The Company shall not be liable for any loss, claim, liability or damage of any kind resulting from your reliance on or reference to any detail, fact or opinion presented herein. This presentation contains proprietary information of the Company and may not be reproduced, copied, disclosed or utilized in any way, in whole or in part, without the prior written consent of the Company. 1

3 Albaugh acquisition: achieving clear leadership in the off-patent industry On June27 th, Makhteshim Agan s board approved a letter of intent TO ACQUIRE ALBAUGH The largest off-patent crop protection company in the Americas ( NAFTA and LATAM) Considerations include: cash ($340m), vendor notes for 7 years (totaling to $455m), MAI equity (59m shares, 12% of the combined company) Net financial debt of Albaugh which will be assumed by MAI of up to $280m This represents the first major business combination in the sector since 2002 After transaction, MAI becomes the clear leader in the off-patent industry, positioned to ride the foremost growth trends of the industry 2

4 Achieving clear leadership in the off-patent industry Commercial A sustainable leadership position in the Americas A Global Network That Supports Our Growth Aspirations Operational Low cost manufacturing plus regional supply chain excellence Financial Attractive deal economics for our shareholders Financial Operational 3

5 Transaction rationale Commercial A sustainable leadership position in the Americas Transforming market position in North America Creating a unique value proposition in South America Achieving leading position in GMO driven molecules Establishing no.1 off-patent position in key markets - US, Mexico, Brazil, Argentina Operational A global network that can support our growth aspirations Creating regional operations platforms that can support our growth in North and South America Acquiring high quality, efficient synthesis in low cost countries Leveraging global scale in sourcing, manufacturing, development and registration Financial Attractive deal economics for our shareholders Industry in cyclical trough leading to realistic valuations Top and bottom line synergies of $50-60m Expected to be EPS accretive one year post-acquisition (on non-gaap basis) 4

6 Key transaction highlights Business Combination: Dennis Albaugh to be appointed Chairman of North America Spencer Vance, President of Albaugh, will become CEO of the combined U.S. business operations Miguel Gonzalez will continue to serve as President and CEO of Atanor Key Albaugh managers to hold senior position in the combined entity Due Diligence teams on the ground already Final agreement expected to be signed Q4 Closing anticipated before year end Combined business strategic plan expected to be announced by year end 5

7 The clear leader in the off-patent industry 2009 Agrochemical sales, $ billion % Albaugh New Co 1 Based on financial reports, excluding 80 million of non AgChem sales SOURCE: Philips McDougal; Company public filing; MAI analysis 6

8 Critical mass equals mid-sized research based companies 2009 Agrochemical sales, $ billion 8.3 RBC Off patent Albaugh New Co 1 Based on financial reports, excluding 80 million of non AgChem sales SOURCE: Philips McDougal; Company public filing; MAI analysis 7

9 Crop protection industry is sizable and mature Agrochemical industry revenues $ bn +2% % CAGR Non Crop % % % Crop Protection F Decline Recovery Acceleration Steady Sources: Phillips McDougall 8

10 but the off-patent segment is growing fast Crop Protection Market Share by Product % Off-patent products have gained a total of 9.3% in market share since 2004 Generic Proprietary Proprietary off-patent Source: Phillips McDougall 9

11 $MM Generic crop protection products market value and market share 20,000 Market Value, million $ 50.0% 18,000 16,000 14,000 12, % 41.2% 37.2% 39.6% 45.4% 42.2% 45.0% 40.0% 10,000 8,000 6,000 4,000 10, % 8,405 10,362 11,647 12,048 14,006 18, % ~15, % 25.0% 2, % 2009E Source: Phillips McDougall; MAI analysis Market Value Market Share 10

12 Off Patent Growth Opportunities Value of products that are expected to come off- patent (bn $) Total Source: Phillips McDougal, MAI analysis * based on product prices of

13 6.9% Market Growth 0.9% Market Growth 4.2% Market Growth Better balanced across the 3 main regions: NAFTA, LATAM and Europe Market size billion, 2009 MAI Market Share (%) $ $ NewCo market share (%) NAFTA (North America, Canada, Mexico) #1 Off-patent Player #6 AgChem player Europe #1 Off-patent player #4 AgChem player 14.1 $ LATAM Market Growth: CAGR Source : Phillip McDougal May 2010; Company public filing #1 Off patent Player #5 AgChem player Balanced revenues Agricultural seasons Currency Disease pressure 12

14 Introduction to Albaugh

15 Albaugh profile A leading off-patent crop protection company in the Americas with deep engineering backbone, and backward integrated processes 4 years average revenue of ~$1B billion 40% in N. America to the distribution channel 60% in S. America and Europe, primarily to industry players Sales are generated by major GMO driven herbicides One of the most advanced supply chain capabilities in the Midwest Production site Sales and support A leading producer in the Mercosur of 2,4-D and Glyphosate with a unique cost position Founded in 1979 by Dennis Albaugh ~3,000 employees 14

16 Albaugh attractive product portfolio positioned for further growth Main Albaugh products benefit from current market trends: Glyphosate, 2,4-D, Dicamba and Atrazine Current GMO penetration Significant Glyphosate production capabilities Future GMO introduction Accelerated growth of 2,4-D and Dicamba will be driven by seed resistance Glyphosate resistance 2,4-D, Dicamba an efficient compound in Glyphosate mixtures Bio-Ethanol Ethanol production can help benefit from market trends Backward integrated production processes Leading producer of sugar in Argentina Improves revenue mix Allows for potential product portfolio expansion Foot hold in the green pest control through Copper production capabilities in Mexico (in addition to potential production of Bio-Ethanol) 15

17 Albaugh is the leading off-patent company in the USA Market Share US Ag Chem players sales ($ million, 2009) 21% Syngenta 1,318 15% Monsanto % Bayer % Dow 651 8% BASF 527 6% 5% 5% Albaugh Nufarm DuPont % MAI 160 Albaugh is strongly positioned among the large distributors, which enables it to hold a leading market share SOURCE: Phillip McDougal 16

18 and an advanced supply chain at the heart of the US grain belt State of the art formulation site at an optimal location Located in Missouri, at the heart of the US grain belt Spans 38 areas in 24 buildings Site logistics Diversified formulation capabilities 9 high speed packaging lines 6m gallon storage capacity With a large scale logistics systems Distribution Own tanker fleet Rail head access 5 truck scales 17

19 Large Production Footprint in Argentina Sugar / Ethanol large scale production Concepcion Sugarcane Sugar Ethanol Marapa Sugar Ethanol 2,4-D back integrated through 3 sites Rio Tercero Valuveal Salt lake Baradero Acetic acid Acetic anhedride Acetates Triacetin Sorbitol 2,4-D, Ester and Salt Chlorine Caustic Soda Hydrogen Peroxide1 Hydrochloric acid Sodium hypochlorite Glyphosate high volume direct to formulation Pilar Glyphosate formulation Synthesis Other chemicals Resende Copper fungicides San Nicolas Triazine (Atrazine) Trifluralin Salycilic acid Herbicide/insecticide Munro Formaldehye Phenolic and Ureic resins Seeds small scale Pergamino Biotech seed 18

20 Albaugh has a manufacturing JV in China, as well as significant sourcing capabilities Manufacturing in China In 2006, Albaugh established a Joint Venture with a Chinese player to produce PMIDA (a phosphorus based raw material to produce Glyphosate) The first unit with 20,000 tons/year capacity is planned to ramp up production by end-2010 Sourcing in China Albaugh plant Albaugh sales and support Albaugh has over 10 years of Chinese sourcing experience with full time, Chinese-speaking employees based in Beijing to oversee suppliers 19

21 Albaugh revenues and profitability EBITDA margin 14% 16% 9% -5% Normalized Sales 856 1,065 1, ,

22 Rationale

23 Commercial Rationale

24 NAFTA - #1 Off-patent player #6 Ag Chem player North America Enhanced customer offering broader range of crop protection solutions, flexible, efficient service No. 1 off-patent player, 6 th largest Ag Chem player Business model enhancement direct sales to distributors Combining the experienced and market based mangers of Albaugh with MAI capabilities Leverage existing Albaugh s sales force with MAI s portfolio Mexico No. 1 off-patent, 3 rd largest Ag Chem player Expanded product offering through complimentary portfolios Canada Complimentary business portfolios Stronger operational regional support Environmental solutions Continue to grow current platform 23

25 LATAM - #1 Off Patent Player #5 Ag Chem Player Brazil Brazil is the biggest Ag Chem market after US Strong combination between Albaugh back-integrated manufacturing, and Millenia's sale and customer service abilities Create a strong position in the Glyphosate market Enhance customer service though flexible supply chain Argentina Utilize strong local chemical engineering capabilities globally Compliment Albaugh home base advantage with broader portfolio Mercusor Other MAI markets Other Albaugh markets Rest of Latin America Broaden product portfolio with key growth driven products Improve operational flexibility throughout the region Leverage MAI s position in Columbia and Ecuador 24

26 Brazil - Albaugh and MAI capabilities highly complimentary Albaugh: Operational footprint Strong business with leading industrial players could be leveraged through cross selling Top producer with unique cost position for Glyphosate and 2,4-D, two of the largest and fastest growing herbicides in the country MAI: Established commercial capabilities Well penetrated with ~200 large co-operatives + distributors Deep understanding of customer needs, credit risk history and collections capabilities Significant barter business (~20% of sales) Advanced formulation site close to market New business model for Brazil Lower cost position in key molecules Differentiation in the market Flexibility in local production Local production to meet local demand 25

27 The combined company will benefit from greater balance MAI Sales % of revenue, 2009 pro forma 100% = ~$2.2b NewCo Sales % of revenue, 2009 pro forma 100% = ~$3.1bm Currency USD Other USD Other Hemisphere South North South North 26

28 Segments The combined portfolio will complete our portfolio in growing segments MAI + Albaugh Selective Herbicides Fungicides Big Row Small Row Fruit & Vegetables Presence Limited Presence Insecticides Non selective Herbicides Albaugh integration will create global position in leading products: 2,4-D and Phenoxies Glyphosate 27

29 SOURCE: Merrill Lynch June 2006 The introduction of GMO broadened Glyphosate consumption at the expense of other leading molecules US soybean herbicide sales since GM introduction % of total Glyphosate Imazethapyr Pendimethalin Trifluralin

30 Deep dive on Glyphosate Glyphosate volume (Global market, 1000 metric tons) +11% p.a ~ E Significant part of the growth was driven by corn and soy GMOs, primarily in NAFTA and LATAM Looking forward, growth is expected to be generated by corn, cotton and soy in LATAM and Asia SOURCE: Phillips McDougal; AMIS Global 29

31 After hype, Chinese FOB prices are back to ~$3/kg Glyphosate China FOB price 1 ($/kg) Peak in prices (up to $15) driven by Soft commodity price peak Chinese supply shortage Price dropped to $2.7 in prices were nominated in Yuan and exchanged to USD using yearly average rates SOURCE: Phillips McDougal; AMIS Global; MAI China sourcing center; CCPIA; Everbright securities China 30

32 Operational Rationale

33 Operational rationale Improve global production network Increase production capabilities in low cost locations Balance between costs in China/India and IP risk Shorter supply chain Flexibility close to the end costumer Production capabilities in major and growing molecules Albaugh plant Albaugh sales and support HQ Production Facility Subsidiary Strong engineering backbone in Argentina advantage for IP and quality Leveraging global scale in sourcing High quality, efficient synthesis in low cost countries 32

34 The business combinations creates a strong platform addressing most of our key challenges Cost structure of AI s and products Global supply chain U.S. Ag Chem penetration Brazilian operation Business model New vision, purpose and clear direction 33

35 Building the winning business model Choosing Where to Compete Growth Organizational Model MAI Way Transforming Key Operational Functions Changing How We Compete 34

36 Market Access Broad product portfolio coupled with strong market access High High Low Low Number of AI s High 35

37 The combination Albaugh is a step toward the ultimate goal to be industry s most competitive supply chain NAFTA Ops based on Albaugh platform Europe/Israel Regional Operations MAI platform Share of projected sales 2015 In house production with Cost position - partly in Albaugh Outsourced AIs at best price & quality LATAM Ops based on Albaugh + Millenia platform Competitive cost with flexible service by optimizing regional formulation, inventories and logistics AP/Africa Regional Operations MAI plant MAI Subsidiary Albaugh plant Albaugh sales and support l 36

38 Financial rationale

39 Financials Synergies Forecasted at $50m-$60m Cross-sell MAI products to Albaugh s customers and vice versa Reduce synthesis cost by leveraging Albaugh low cost country assets (Argentina, China) Reduce sourcing cost through scale and leveraging best practices Reduce formulation and logistics costs, and improve service level by rationalizing the regional footprint Reduce back office costs in North and South America 38

40 Financials Deal Structure Combination of cash, vendor note and MAI equity $455m vendor note financing for 7 years Key Terms Key employee retention Coordinated efforts to build a sustainable business 39

41 Fully Aligned with Our Business Initiatives in

42 Thank you