31 st ROTH Conference March 17-19, 2019 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY

Transcription

1 31 st ROTH Conference March 17-19, 2019 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY 1

2 Forward Looking Statements 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 and Management s Discussion and Analysis for the year ended December 31, 2018, which are 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. 2

3 Market Facts (As of March 13, 2019) LISTING SYMBOL PRICE MARKET CAPITALIZATION SHARES OUTSTANDING 52-WEEK HIGH/LOW MANAGEMENT & BOARD OWNERSHIP NASDAQ: VFF US$12.75 ~ US$608 M (basic) 47.7 M (basic) US$13.97 ~22% TSX:VFF ~ US$653 M (diluted) 51.2 M (diluted) US$2.93 Publicly traded company since 2006 Very strong alignment of management and shareholders 3

4 Canadian Legal Cannabis: $4B+ in US Legal Cannabis: $25B by Global Hemp CBD: $22B by Global Legal Cannabis: $146B+ by U.S. CBD Market:: $16B by Deloitte 2. New Frontier Data 3. Grand View Research 5. Cowen 4. Brightfield Group 4

5 Unmatched North America Greenhouse Assets Owned Assets Canada: Delta, BC 2 Facilities 3.7 M sq. ft. (85 acres) 9.4 M sq. ft. (215 acres) U.S.: West Texas 4 Facilities - Vegetables 5.7 M sq. ft. (130 acres) Cannabis JV Canada: Delta, BC 50% Ownership of JV 1.1 M sq. ft (25 acres) Growing Partners Mexico: 1.7+ M sq. ft. (40+ acres) Ontario: 3.0 M sq. ft. (70 acres) BC: 3.0 M sq. ft. (70 acres) 5

6 Leaders in High-Tech, Low-Cost Vertically Integrated Greenhouse Growing Experts in agricultural product safety 750 years of combined master grower experience from around the world Leaders in crop management registrations in North America Decades of experience as a vertically integrated grower/distributor 30-year history developing and operating mega-scale greenhouses Proven track record as a low-cost operator Cannabis and hemp are agricultural products like any other 6

7 Fast Mover Advantage: Ability to Rapidly Transition to New Crops with Lower Risk Existing facilities require lower cap ex and allow faster time to market compared to new builds Existing operations with experienced management and skilled labor force enable faster ramp to profitability Proven operating systems and decades of sitespecific experience allow for more effective climate management, providing higher yields Extensive in-house facilities development and conversion expertise 7

8 Canada On Track to be One of the Largest Vertically Integrated Producers Delta, BC 8

9 Canada: On Track to be One of the Largest Vertically Integrated Producers PSF: Village Farms 50%-Owned JV 1.1 M sq. ft. conservative projected yield of 75,000 kg PSF has options on D1 & D2 (Owned by Village Farms) 3.7 M sq. ft. conservative projected yield of 255,000 kg Pure Sunfarms has the potential to address a substantial portion of forecasted Canadian demand 9

10 Creating One of Canada s Largest Vertically Integrated Cannabis Companies Well positioned for the evolution of the Canadian cannabis market Capitalizing on the current wholesale opportunity to other Licensed Producers Building a premier vertically integrated supplier with a leading brand and reputation Wholesale distribution agreement with a Canadian LP for 40% of remainder of 2019 production Supply shortage: Realizing very favorable spot market pricing Strong demand from other Licensed Producers Appointed President and CEO: Mandesh Dosanjh Joined from LCBO: SVP, Supply Chain & Wholesale Developed/managed LCBO s supply chain/wholesale strategy for adult-use cannabis Selected to supply Ontario Cannabis Store in discussions for supply agreements with other gov t distributors/private retailers Strategic supply arrangement with one of Canada s largest online medical cannabis platforms Developing product and brand strategy Extraction capabilities in place by mid-2019 Pure Sunfarms is building a reputation for quality, consistency, safety and reliability 10

11 Capital Efficient, Rapid Conversion of Existing Produce Operation Fully automated, high-capacity nursery and 16 state-of-the-art flower rooms 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 Configured for continuous weekly harvesting year round 11

12 GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada 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 Continuous year-round harvesting and processing allows for a consistent, experienced, skilled agricultural labor force Ability to be sustainably profitable in a commoditized market 12

13 Rapid Transition to Production and Sale Initiate Cultivation License Process June 2017 Commence Conversion of 1.1 M sq. ft. Oct 2017 Complete Conversion of Quadrant 1 (275,000 sq. ft.) April 2018 Obtain Selling License July 2018 Expand Licensed Growing Area to 550,000 sq. ft. Sept 2018 Expand Licensed Area to 825,000 sq. ft. Jan 2019 Obtain Processing License Q Commence Sales to Provincial Boards/Retailers Q Sept 2017 File Cultivation License Application March 2018 Obtain Cultivation License May 2018 Commence Commercial- Scale Production Sept 2018 Commence Sales (Other LPs) Jan 2019 Complete Conversion All Growing Area March 2019 Complete Licensing for ALL GROWING AREAS: >1 M sq. ft. Q Obtain Packaging License Pure Sunfarms has consistently achieved key milestones on or ahead of schedule 13

14 Entire Growing Area Will Be in Production in April 2019 Growing Area Ramp Up August 2018 April ,000 sq. ft. 550,000 sq. ft. January 2019: 825,000 sq. ft. 1 in production 825,000 sq. ft M sq. ft. Targeted Annual Production ,000 52,000 kg ,000 kg Expect to reach run-rate annual production of 75,000 kg Mid

15 Production Ramping Very Well at Scale Facility operating as intended benefitting from 20 years of site-specific experience, existing operational/growing team and existing labor force Quality and consistency firmly in line with expectations Yield consistent with production targets Production to date validating low-cost assumptions Nursery capable of supplying production double the size of the Delta 3 requirement On track to achieve or exceed all production expectations/forecasts 15

16 Positioned to be a Leading Large-Scale Supplier in Canada Currently one of the largest production capacities On track to be a top-ten producer at full production Potential to be a top-three producer Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity 555,000 Existing Capacity (kg) Future Capacity (kg) 330, , , , , ,000 92,950 88,000 87,000 68,000 Pure Sunfarms At March 13, 2019 Pure Sunfarms expects to reach run-rate annual production of 75,000 kg mid

17 Pure Sunfarms Already Contributing to Financial Results Village Farms Including Proportionate Share of Pure Sunfarms $US (000s except per share data) Q4 Full Year Sales 38,787 36, , ,406 Cost of Sales (36,367) (31,908) (140,282) (144,433) SG&A Expenses (3,622) (4,019) (14,108) (13,894) Net Income/Loss 270 (607) (5,145) 3,822 Pure Sunfarms Before VFF s Proportionate Share Q4 Full Year ,606 3,794 (1,058) (1,190) (982) (2,612) 5,500 4,762 Net Income/Loss Per Share 0.01 (0.02) (0.11) 0.10 N/A N/A EBITDA (1) 1,484 2,591 2,878 7,363 1, Brightfield Group. (1) EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Management believes that EBITDA is a useful supplemental measure in evaluating the performance of the Company. Consolidated EBITDA includes the Company s 50% share of its joint venture Pure Sunfarms. Pure Sunfarms generated positive net income for both Q4/18 (first full quarter of sales) and the full year 17

18 U.S. & Beyond Uniquely Positioned for Both Near-Term & Longer-Term Opportunities Fort Davis, Texas 18

19 Formidable Platform to Capitalize on U.S. Opportunities One of the largest existing greenhouse footprints in U.S.: 5.7M sq. ft. of existing, state-of-theart, produce operations in best growing climate in U.S. (5,000 ft. elevation, most sunlight in US) U.S. assets are INDEPENDENT of Canadian cannabis joint venture (100% owned by Village Farms) Extensive experience developing large-scale agricultural projects in U.S. and globally 20+ years of operating history and >600 employees Can be rapidly converted to hemp or cannabis (upon federal and state legalization) Will benefit from cannabis experience in Canada U.S. opportunities are significant 19

20 Significant Near-Term U.S. Hemp Opportunity 2018 Hemp Farming Bill PASSED: Hemp Removed from Federal Controlled Substances Act and Cultivation of Hemp Federally Legalized Industrial Hemp: Cannabis plant with low THC content (<0.3% -- not psychoactive) Hemp-derived CBD increasingly popular to improve general health and wellness Wide variety of potential large-market applications for hemp-derived CBD: pharmaceuticals, nutraceuticals, oils, topicals, beverages, bottled water, energy drinks, beer, beauty, food (confections), vapor U.S. market for CBD is conservatively forecast to generate sales of US$16B by Cowen: Cowen s Collective View of CBD, February 2019 Aggressively pursuing both opportunities to become a vertically integrated leader in hemp-derived CBD with field and greenhouse cultivation on a national scale 20

21 Village Farms Hemp/CBD Advantage Decades of experience as a vertically integrated supplier to North America s top grocery and big box retailers Millions of dollars and countless person hours invested in infrastructure and IT systems to consistently meet customers exacting standards Existing in-house regulatory team with deep expertise and extensive experience with USDA and FDA Village Farms already has established relationships with the leading big box retailers, and a reputation for quality, reliability and safety 21

22 Village Fields Hemp: Anchored in Research-Driven Cultivation Foundation for Vertical Integration: JV for Multi-State Outdoor Hemp Cultivation and CBD Extraction (65%-owned by Village Farms) JV Partner: Jennings Group experienced hemp farm operator 10th generation farmers: Deep knowledge of field agriculture across a vast array of crops Expertise with hemp plant and success applying their cultural and genetic expertise to improve CBD content and yield Field cultivation planned to commence Spring 2019 with 500 to 1,000 acres in production during 2019 Extraction operations expected to in place by end of 2019 to begin to supply CBD oil on wholesale basis 1. Brightfield Group. Target to commence sales of branded CBD products for big box retailers in

23 Investment Summary Uniquely Positioned for Multiple Large-Scale Opportunities Unmatched platform with proven ability to move quickly into new high-value crops Canada: Pure Sunfarms is firmly on track to be one of the largest vertically integrated cannabis producers with the capability to be the low-cost, high-quality producer USA: Aggressively pursuing opportunities in hemp/cbd with field and greenhouse cultivation: JV for field hemp cultivation/extraction and own one of the largest greenhouse footprints (independent of Canadian JV) Mexico: Strong existing partnerships/operations with large-scale growers to pursue cannabis opportunities Well aligned management team 19.9% owned by founder and CEO Compelling valuation on Canadian cannabis business alone PLUS US/international hemp and cannabis opportunities PLUS underlying produce business 23

24 31 st ROTH Conference March 17-19, 2019 AN UNMATCHED PLATFORM FOR THE GLOBAL CANNABIS OPPORTUNITY 24