Investor Presentation September September 2017

Transcription

1 Investor Presentation September 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 September 21, 2018) LISTING SYMBOL PRICE MARKET CAPITALIZATION SHARES OUTSTANDING 52-WEEK HIGH/LOW MANAGEMENT & BOARD OWNERSHIP TSX:VFF OTCQX: VFFIF C$7.79 ~ C $347 M (basic) ~ C $374 M (diluted) 44.5 M (basic) 48.0 M (diluted) C $9.80 C $1.87 ~25% 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 Premium Produce Grown In the Most Sustainable, Resource-Efficient Manner 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 British Columbia VF Owned 3 facilities / 110 acres (4.8 M sq. ft.) Texas VF Owned Ontario Partner Greenhouses Ontario: 70 acres British Columbia: 35 acres 4 facilities / 130 acres (5.7 M sq. ft.) Mexico Mexico: 70 acres Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S.

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 A TRANSFORMATIONAL OPPORTUNITY: Creating One of Canada s Largest Vertically Integrated Cannabis Suppliers

9 Ability to Capitalize on Market Opportunity 9 Market Need Canadian Cannabis demand estimated to grow to ~734,000 kg by Projected shortfall of supply based on current capacity and market demand Transformational Opportunity Apply low-cost, high tech greenhouse growing expertise 4.8 M sq. ft. of existing greenhouse capacity (potential yield of 300,000 kg) Potential to address substantial portion of the market 1. Legalized Cannabis: Fiscal Considerations Office of the Parliamentary Budget Officer, Government of Canada (2016)

10 Complementary Partners 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 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

12 The Pure Sunfarms Advantage 12 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

13 GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada 13 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.

14 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

15 Commercial Production and Sales Underway 15 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 Summer 2018 Have consistently achieved key milestones on or ahead of schedule

16 Delta 3 Greenhouse: 17 Individual Flower Rooms 16 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 and producers

17 Nearing Full Commercial Production at Delta 3 17 Targeted Production Area Ramp Up August 2018 December M sq. ft. 1 Targeted Annual Production ,000 8,000 kg 1.1 M ft 2 775,000 sq. ft ,000 52,000 kg 225,000 sq. ft. 550,000 sq. ft ,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.

18 Significant Expansion Opportunity 18 D3: 1.1 M ft 2 (24 MW secured) D2: 1.1 M ft 2 (24 MW secured) D1: 2.4 M ft 2 Estimated Demand by 2021: ~734,000 kg 1 Estimated Existing Industry Capacity: ~395,000 kg Pure Sunfarms has options for Delta 1 and Delta 2 to potentially address ~1/2 of overall market Pure Sunfarms has options for Delta 1 and Delta 2 1. Legalized Cannabis: Fiscal Considerations Office of the Parliamentary Budget Officer, Government of Canada (2016)

19 Positioned to be a Leading Producer in Canada 19 Pure Sunfarms can quickly become one of the largest producers of cannabis in Canada 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 300, , , , ,000 Existing Capacity (kg) Future Capacity (kg) 113, ,000 99,000 70,100 57,000 45,000 Pure Sunfarms (VFF JV) Market Cap (C$M) n/a $33,970 $12,041 $5,102 $2,838 $994 $1,933 $1,449 $871 $11,070 $3,440 Capacity Growth 3x 7x 8x 157x 3x 4x 4x 117x 7x 7x At Sept. 21/18. 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

20 Compelling Value Proposition 20 Comparative Value: 2020 Planned Production Capacity Top 10 LPs (planned 2020 produciton 2) ~153,000 kg average Planned Production 37,500 kg 50% of Delta 3 production 150,000 kg 50% of production at all three facilities ~$7,370 M Market Cap 1 ~$374 M ~$374 M average ~$48.20 average Market Cap/Gram of Planned Production ~$10.00 ~$ Fully diluted. At Sept. 21, WEED, ACB, APH, HEXO, TRST, OGI, TLRY, CRON, TGOD, XLY. PLUS produce business

21 Creating One of Canada s Largest Vertically Integrated Products Companies 21 Appointed Mandesh Dosanjh as Pure Sunfarms President and CEO - LCBO: SVP, Supply Chain and Wholesale - Developed and managed LCBO s supply chain and wholesale strategy as it prepared for legalization of adult-use cannabis Will aggressively pursue product development, branding and marketing strategies

22 Positioned to Lead a Federally Legalized US Cannabis Industry 22 4 facilities - 5.5M sq. ft. Existing, state-of-the-art, mega-scale produce operations in best growing climate in US (5,000 ft. elev., most sunlight in US) Potential US Cannabis Opportunity is a Free Option Will only pursue if and when cannabis is federally legalized in US NOT PART of Canadian JV 20+ years of operating history (600 employees) Can be rapidly converted to be largest US cannabis producer Will benefit from cannabis experience in Canada

23 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 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

24 Investor Presentation September 2018 September 2017