UNMATCHED GREENHOUSE ASSETS & EXPERIENCE FOR THE GLOBAL CANNABIS INDUSTRY

Transcription

1 UNMATCHED GREENHOUSE ASSETS & EXPERIENCE FOR THE GLOBAL CANNABIS INDUSTRY Investor Presentation October 2018 September 2017

2 Forward Looking Statements 2 This presentation contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form for the year ended December 31, 2017 and the most recent management's discussion and analysis for the quarter ended June 30, 2018, which is available electronically at Actual results may differ materially from any forward looking statement. Although the Company believes that the forward looking statements contained in this presentation are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.

3 Market Facts 3 (As of October 12, 2018) LISTING SYMBOL PRICE MARKET CAPITALIZATION SHARES OUTSTANDING 52-WEEK HIGH/LOW MANAGEMENT & BOARD OWNERSHIP TSX:VFF OTCQX: VFFIF C$7.18 ~ C $342 M (basic) ~ C $368 M (diluted) 47.6 M (basic) 51.2 M (diluted) C $9.80 C $2.80 ~22% Listed on the TSX since 2006

4 Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing 4 OWN 10.5 M sq. ft. (240 ACRES) OF GREENHOUSE CAPACITY TECHNOLOGICALLY ADVANCED GREENHOUSE FACILITIES MASTER GROWER TEAM WITH 750 YEARS OF EXPERIENCE INDUSTRY LEADER IN PRODUCT QUALITY & SAFETY 30 YEARS IN OPERATION 2017 REVENUE 1 C$206 M 2017 EBITDA 1 C$9.6 M 1. Converted to Canadian dollars at $0.77.

5 One of the Largest, Longest-Operating Greenhouse Growers in North America 5 Vertically-integrated provider of premium produce to grocers across North America Greenhouse growing produces a more consistent, higher quality product that customers demand and that commands a premium price Exclusive varieties address consumer demand in the specialty growth segment Strategically located greenhouses and logistics and distribution chain ensure the freshest, highest quality produce Marquee customers across the U.S. and Canada

6 Strategically Located Operations and Distribution Network 6 Village Farms Owned Greenhouses British Columbia: 2 produce facilities 85 acres (3.7 M sq. ft.) 1 cannabis facility 1 25 acres (1.1 M sq. ft.) Texas: 4 produce facilities 130 acres (5.7 M sq. ft.) Ontario Partner Greenhouses Ontario: 70 acres British Columbia: 35 acres 1. Pure Sunfarms joint venture (50% owned). Mexico Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S. Mexico: 70 acres

7 Financial Profile 7 (All figures in Canadian dollars unless otherwise stated) FY 2017 Revenue: C$206 M (US$158 M) EBITDA: C$9.6 M (US$7.4 M) Margin: 5% REVENUE (C$ MILLIONS) At June 30, 2018 Cash: C$17.1 M (US$12.9 M) Long-Term Debt: C$49.7 M (US$37.6 M) EBITDA (C$ MILLIONS) $250 $200 $150 $147.2 $158.9 $196.9 $209.1 $205.7 $15 $10 $13.8 $10.1 $14.1 $12.6 $9.6 $100 $5 $50 $ $ Net Income of C$5.0 M and EPS of C$0.13

8 TRANSFORMING OUR FUTURE: Creating One of Canada s Largest, Vertically Integrated Cannabis Suppliers With Global Opportunity

9 Uniquely Positioned for the Long-Term Global Cannabis and Hemp Opportunity 9 Canada 1.1 M sq. ft. of greenhouse operations currently in cannabis production (conservative projected yield of 75,000 kg) Additional potential of 3.7 M sq. ft. of existing greenhouse operations (conservative projected yield of 300,000 kg) U.S. 5.7 M sq. ft. of existing greenhouse operations Unmatched mega-scale, low-cost greenhouse growing/operating experience & expertise First large-scale facility nearing full production provides ability to supply substantial portion of demand in first 12 months of legal adult-use market Potential to supply a substantial portion of the long-term Canadian market One of the largest greenhouse operations in the U.S. -- can be rapidly converted to hemp or cannabis production when legal

10 Canada: Pure Sunfarms (Joint Venture) 10 50% Ownership 50% Ownership High-tech, low-cost greenhouse growing & agricultural product safety expertise Initial Contribution: 1.1 M sq. ft. (25 acre) greenhouse (leased to Pure Sunfarms) A vertically integrated largescale, low-cost supplier of highquality cannabis Cannabis industry compliance and licensing expertise Cannabis IP, including portfolio of high-quality genetics Initial Contribution: C$20 M cash Options for an additional 3.7 M sq. ft. (85 acres) of growing capacity

11 Creating One of Canada s Largest Vertically Integrated Cannabis Companies 11 President &CEO: Mandesh Dosanjh - Joined from LCBO: SVP, Supply Chain & Wholesale - Developed and managed LCBO s supply chain/ wholesale strategy as it prepared for legalization of adult-use cannabis Will aggressively pursue product development, branding and marketing strategies

12 Leaders in High-Tech, Low-Cost Greenhouse Growing years of combined master grower experience from around the world 30-year proven track record of operating mega-scale greenhouses Decades as an industry leading, fully integrated produce distributor Cannabis is an agricultural product like any other

13 The Pure Sunfarms Advantage 13 Pure Sunfarms greenhouses will be operated by veteran Village Farms personnel Use of existing, state-of-the-art greenhouses lowers costs and provides speed to market Extensive experience developing, launching and ramping up new crop operations (with record yields) Long-established, experienced workforce of ~600 at BC facilities Proven operating systems and decades of experience managing the local climate Access to low-cost electricity and no requirement to build co-generation Agricultural product safety expertise/north America leader in pesticide registrations Significantly de-risked production ramp up and ongoing operations

14 GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada 14 Ingrained culture of high-quality, low-cost production built over decades Greenhouse growing provides significant capital and operating cost efficiencies Lower energy needs Greater economies of scale Allows for greater scale conservative target of <$1.00/gram Conversion of existing state-of-the-art greenhouses with significant scale minimize capital costs Village Farms is one of the lowest-cost greenhouse growers of tomatoes & cucumbers in Canada/U.S.

15 Phase 1: Delta 3 Greenhouse M sq. ft. of greenhouse capacity (25 acres) conservative projected yield of 75,000 kg annually potential to generate revenue of 10-15x that of produce projected EBITDA margins of >50% vs. mid-single digits for produce in Canada Significantly more profitable use of existing greenhouse assets

16 Commercial Production and Sales Underway 16 Initiate Cultivation License Process File Cultivation License Application Commence Conversion of Delta 3 to Cannabis Licensing Standards Obtain Cultivation License Complete Conversion of Full 250,000 ft 2 (Quadrant 1) of Delta 3 Commence Commercial- Scale Production Obtain Selling License June 2017 September 2017 October 2017 March 2018 April 2018 May 2018 July 2018 Have consistently achieved key milestones on or ahead of schedule

17 Delta 3 Greenhouse: 17 Individual Flower Rooms 17 Configured for continuous weekly harvesting year round Meticulous attention to the growing environment and systems, processing areas and production ramp up Growing system with automation proven in different crops to provide optimal efficiencies Industry-leading HVAC systems based on extensive climate management experience, with technically advanced data systems High-tech light deprivation/supplementation systems Nursery capable of supplying Delta 3 facility plus other facilities

18 Nearing Full Commercial Production at Delta 3 18 Targeted Production Area Ramp Up August 2018 December ,000 sq. ft. October 1: 550,000 sq. ft. in production 550,000 sq. ft. 775,000 sq. ft. 1.1 M sq. ft. 1 Targeted Annual Production ,000 8,000 kg M ft 2 46,000 52,000 kg ,000 kg 1. Conversion of 1.1 M sq. ft. completed. Production in Quadrant 1 temporarily suspended from October to March for installation of supplemental lighting.

19 Production Ramp Up To Date Exceeding Expectations 19 Selling to other LPs and in discussions with provincial buyers Propagation exceeding expectations nursery has capability to supply Delta 3 facility plus other facilities Multiple strains in production Firmly on track to achieve cost of production target of <$1.00 per gram Shipping product for the adult-use market to other LPs

20 Significant Expansion Opportunity 20 D3: 1.1 M ft 2 (24 MW secured) D2: 1.1 M ft 2 (24 MW secured) D1: 2.6 M ft 2 Estimated Demand by 2021: ~734,000 kg 1 Estimated Existing Industry Capacity: ~437,400 kg Pure Sunfarms has options for Delta 1 and Delta 2 to potentially Pure Sunfarms address has nearly options half of for estimated Delta 1 and Canadian Delta market 2 1. Legalized Cannabis: Fiscal Considerations Office of the Parliamentary Budget Officer, Government of Canada (2016)

21 Positioned to be a Leading Producer in Canada 21 Pure Sunfarms can quickly become one of the largest producers of cannabis in Canada 300, , , ,500 Existing LPs will attempt to meet demand through greenfield development requiring hundreds of millions of dollars Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity 184, ,000 Existing Capacity (kg) Future Capacity (kg) 113, , ,000 84,200 65,000 Pure Sunfarms (VFF JV) Market Cap (C$M) n/a $14,752 $34,786 $4,949 $2,165 $876 $1,215 $1,640 $1,944 $14,830 $2,761 Capacity Growth 12x 12x 2x 8x 113x 233x 3x 4x 4x 4x 10x At Oct. 12/18. Market cap fully diluted. Source: Research analyst estimates/company filings based on last reported capacity and disclosed growth strategy. Pure Sunfarms will be a large-scale producer of cannabis

22 Compelling Value Proposition 22 Comparative Value: 2020 Planned Production Capacity Top 10 LPs (planned 2020 produciton 2) ~194,435 kg average Planned Production 37,500 kg 50% of Delta 3 production 150,000 kg 50% of production at all three facilities ~$7,990 M Market Cap 1 ~$368 M ~$368 M average ~$41.10 average Market Cap/Gram of Planned Production ~$9.80 ~$ Fully diluted. At Oct. 12, WEED, ACB, APH, HEXO, TRST, OGI, TLRY, CRON, TGOD, XLY. PLUS produce business

23 Massive U.S. Opportunity: Unmatched Assets and Experience M sq. ft. Existing, state-of-the-art, mega-scale produce operations in best growing climate in U.S. (5,000 ft. elevation, most sunlight in US) Significant U.S. opportunities are a free option U.S. assets are NOT PART of Canadian cannabis joint venture 20+ year operating history and >600 employees Can be rapidly converted to hemp or cannabis Will benefit from cannabis experience in Canada

24 Significant Near-Term U.S. Hemp Opportunity 24 Hemp Farming Bill 2018: Will See Hemp Removed from Federal Controlled Substances Act and Cultivation of Hemp Federally Legalized Industrial Hemp: Cannabis plant with <0.3% THC (non-psychoactive) Key input in vast array of consumer products (e.g. food & beverage, materials) Hemp-derived CBD increasingly popular to improve general health and wellness U.S. market for hemp-derived CBD is forecast to grow >500% to ~ US$1.7 B in Brightfield Group. Could convert existing Texas assets or pursue opportunities in other states

25 Investment Proposition: A Significantly De-Risked Cannabis Opportunity year track record of success as a large-scale, lowcost grower of high-value agricultural products Positioned to be one of the largest producers in Canada with the goal and capability to be the low-cost producer Use of existing greenhouse facilities for cannabis production provides advantage of speed to market to address near-term supply shortfall Potential US hemp/cannabis opportunity is a free option Key JV Metrics 50% Ownership of Pure Sunfarms Annual Output: Delta 3 Facility: 75,000 kg All Facilities: 300,000 kg Production Cost: <$1.00/gram EBITDA Margin: >50% Positioned to be a Leading Vertically Integrated Supplier

26 Investor Presentation October 2018 September 2017