BECOME ONE OF THE LARGEST COCOA PRODUCERS IN IVORY COAST & A PREFERRED PARTNER FOR THE CHOCOLATE INDUSTRY

Transcription

1 October 2016

2 2 BECOME ONE OF THE LARGEST COCOA PRODUCERS IN IVORY COAST & A PREFERRED PARTNER FOR THE CHOCOLATE INDUSTRY

3 SOMMAIRE 1. Cocoa, a growing market 2. SOLEA, an innovative cocoa plantation 3. SOLEA, an export model 4. An active first-half

4 COCOA: A GROWING MARKET

5 COCOA INDUSTRY: FROM BEANS THROUGH TO CHOCOLATE COCOA BEANS TRANSFORMATION OF BEANS INTO MASS TRANSFORMATION OF MASS INTO CHOCOLATE Harvesting Splitting Fermentation Drying Conditioning Small-scale individual growers Cracking Roasting Milling PLAYERS Barry Callebaut Cargill Pressing of the mass Conching Molding Barry Callebaut Mars, Kraft, Hershey s, Ferrero PRODUCTION OF 4.1 M TONS 1 - USD 12 BILLION GLOBAL MARKET MILLING OF 4.2 M TONS 1 USD 120 BILLION GLOBAL CONFECTIONERY MARKET 1 Estimates 2015/16 - Sources: The International Cocoa Organization (ICCO) & Hardman&Co 5

6 STEADY GROWTH IN GLOBAL DEMAND FOR COCOA BEANS Annual growth in the market for chocolate-derived products is estimated at 2% to 3% per year 1 Doubling of production in 30 years 1 Consumption driven by growing middle classes in emerging countries, particularly in Asia 2 Emergence of new markets Breakfast cereals, dairy products, chocolate substitutes, ice creams, etc. Sources: (1) The International Cocoa Organization (ICCO) data, (2) Euromonitor 6

7 RESTRICTED AREAS FOR PRODUCTION Tropic of Cancer Tropic of Capricorn Production between sealevel and a maximum altitude of 1,000 meters 15 AFRICA 74 % 3.1 million tons 1 1 Estimates 2015/16 - Sources: The International Cocoa Organization (ICCO) 7

8 BEAN PRODUCTION UNDER PRESSURE Despite global production doubling in 30 years... Global production for 1986/1987: 2.01 million tons 1 Global production estimated for 2015/2016: 4.15 million tons 1...the cocoa bean is an agricultural product, subject to periods of production surpluses and shortfalls......with a risk of a structural shortfall from Increased demand Complex growing of cocoa trees Strong appeal of other crops that are easier to grow (hevea rubber, palm oil) Sources: (1) The International Cocoa Organization (ICCO) (2) Mondelez, Barry Callebaut 8

9 COCOA BEAN BUYERS: A STRUCTURED SECTOR 59 commercial companies and 36 accredited cooperatives for buying cocoa beans in Ivory Coast: A dozen major players, local processors (Cargill, ADM, Barry Callebaut, Cemoi, etc.) or major chocolate groups (Mondelēz International, Nestlé, etc.) Between them, they represent around 50% of a highly competitive market Significant assets locked up for buyers with seasonal production* Buyers looking for cocoa ensuring consistent quality throughout the year * As coca production is by definition seasonal, buyers (millers) must buy in enough supplies at harvest times to be processed by their milling factories throughout the year. This mass purchasing of cocoa involves high levels of stocks and therefore fixed assets on the balance sheet. 9

10 A VOLATILE COCOA TRADE ON A RISING TREND $4 000 $3 500 $3 000 $2 500 $2 000 $1 500 $1 000 $500 $ Source : Bloomberg 11

11 SOLEA, AN INNOVATIVE COCOA PLANTATION

12 COCOA BEAN: A MAJOR RESOURCE IN IVORY COAST Ivory Coast No. 1global producer of cocoa beans 1 40 % of global production million tons Estimated for the 2015/2016 campaign 1 15 % 25 % of of GDP 2 jobs (68% of agricultural jobs) 3 40 % of export revenues 3 Sources: (1) ICCO (2) Ministry of Agriculture, Republic of Ivory Coast, (3) Central Bank of West African States 12

13 CHALLENGES FACING THE IVORIAN INDUSTRY Small-scale operations, without the financial means to invest (the average age of cocoa trees is 20 years, compared with a lifespan of 35) Low yields: average Ivorian production represents 0.5 tons of beans per hectare Widescale rural exodus combined with strong appeal of other crops that are easier to grow (hevea rubber, palm oil) High average age of growers: 51 Questions about the next generations taking over plantations Research into creating added value in Ivory Coast Building milling plants Building chocolate factories Sources: Hardman&Co data, Agritrade July

14 GUARANTEED MINIMUM PRICE FOR IVORIAN GROWERS Guaranteed minimum price determined at the start of each campaign (twice a year, in April and October) by Conseil Café-Cocoa, based on a reference price determined in view of the auctions held each day This guaranteed minimum price currently represents around 60% of the reference price, determined at the start of each campaign based on auctions organized by Conseil Café-Cocoa Guaranteed minimum price for growers for as from October 1st: FCFA 1,100 per kilo ( 1.68 / kilo) ( campaign: FCFA 850 per kilo) 14

15 REGENERATION OF A REGION PREVIOUSLY KNOWN AS THE COCOA BELT Rich, fertile Ivorian land, left fallow for several decades Qualified workforce Bocanda: region served by a number of rivers, generally with good levels of rainfall Optimized investment costs: The plantation is crossed by the N Zi river, on which SOLEA has pumping rights It is located 100 km from the highway linking Yamoussoukro to Abidjan (25 km of tracks) 15

16 SOLEA PROJECT S STRENGTHS 3 Innovations to optimize sustainability and yields for production Land-based innovation Agronomic innovation Societal and environmental innovation 16

17 INNOVATIVE APPROACH TO LAND LEASING LAND FROM LOCAL COMMUNITIES 98% of agricultural lands don t have title of property in Ivory Coast 1, SOLEA innovates by setting up a clearly defined legal framework Land register Source : (1) Agence Ecofin August 2016 Long-term leases set up between the village communities owning the plots and SOLEA 35 year leases, aligned with the lifespan of cocoa trees Leases with payments 5% shares in the revenues generated for owner communities 17

18 AGRONOMIC INNOVATION (I) MERCEDES: HIGH-YIELDING COCOA TREE VARIETY New variety developed by the Ivorian National Agronomic Research Center Production timeframe reduced to 18 months after planting Average yield, with fertigation, of potentially 5 tons / ha / year at full maturity (5 to 7 years) Strong disease resistance Quality seed already tested for cultivation Monitoring, upkeep and health watch A dozen people work daily on each 20 hectares plot A minimum of 700 people permanently on the plantation The cocoa tree variety is not an exclusive asset for the Company, since it was created by the National Agricultural Research Center (CNRA). 18

19 AGRONOMIC INNOVATION (II) FERTIGATION Dedicated irrigation unit for the plantation Water from the N'Zi river, surface-pumped, filtered then stored Storage capacity of 600 cu.m Micro-irrigation (drip) More efficient than traditional watering More uniform water distribution Less waste of resources Less soil erosion Optimization of humidity for foliage, reducing the risk of disease Fertigation: combining micro-irrigation and fertilization Irrigation system integrating the distribution of soluble fertilizer (1L of water for 1g of fertilizer) Increased efficiency thanks to improved mixing and improved absorption of fertilizer in line with the plant s needs and level of maturity Fertigation is an innovation for the cocoa industry. 20

20 SOCIETAL AND ENVIRONMENTAL INNOVATION SHARED VALUE CREATION Local communities benefit from value creation Over 800 jobs at end of September, 2016 Employee pay higher than local average Payments for land based on 5% of the revenues generated by SOLEA Strong commitments Very strict policy against child labor Healthcare center and school already built, teacher paid by SOLEA Electricity supply set up to serve the plantation and some neighboring villages Creation of infrastructures and supplies for drinking water Rainforest Alliance certification underway Globally recognized label, guaranteed by an independent NGO Certifies that the plantation applies sustainable eco-friendly farming practices, respecting the social rights of employees and the environment Strong selling point for buyers 20

21 INNOVATION SUPPORTING OPTIMIZED YIELDS AND SUSTAINABLE PRODUCTION Selection of high-yielding cocoa trees (Mercedes) with productivity expected to be increased by over 65% thanks to fertigation* to produce consistent quality beans throughout the year MAKING IT POSSIBLE TO TARGET HIGH YIELDS WITH 5 TONS OF COCOA BEANS PER HECTARE FOR A MATURE TREE FROM 2024, COMPARED WITH A CURRENT NATIONAL AVERAGE OF 0.5 TONS PER HECTARE * Company estimate 21

22 OBJECTIVES OF SOLEA PROJECT IN IVORY COAST The plantation is divided in plots of 20 hectares each: cocoa trees per ha banana trees per ha GOAL OF PRODUCTION: 15,000 TONS OF COCOA BEANS PER HECTARE FOR A NATURE TREE FROM

23 SOLEA, AN EXPORT MODEL

24 2 NEW INTERNATIONAL PROJETS FOR SOLEA Acquisition in Ecuador Negociation underway to acquire an ecuadorian company specialized in intensive farming of cocoa Strengthen expertise and R&D Development in Madagascar Project to begin operating in Madagascar, an excellent area for growing high-quality cocoa Secure production volumes 24

25 A VALUE-ADDED R&D EXPERTISE FOR A NEW OFFER OF CONSULTING AND TRADING SERVICES R&D expertise reinforced by the acquisition in Ecuador R&D center specialising in the genetic development of cocoa Owner of an hybrid cocoa seeds: «Sacha Gold» Recognised know how in industrialisation of cocoa farming Subsidary project of the R&D activity in order to develop an activity of consulting services Commercial development of Sacha Gold cocoa seeds 25

26 CONTOUR OF THE PROJET OF NEW PLANTING IN AFRICA Planting of 500 ha in Madagascar Negociation underway for 400 to 500 hectares of land Creation of a new intensive farming of cocoa Goal: planting start in

27 AN ACTIVE FIRST HALF 2016

28 OPERATIONAL CHALLENGES SOLVED Phytosanitary monitoring Fire safety plan Constant monitoring of plots Plenty of internal procedures for an early intervention and prevention of the spread of the phenomenon CIPOL certification Creation of a dedicated committee Fire managment training Effectiveness of phytosanitary monitoring to the damage caused by Achaea catocaloides Guenee caterpillar No reported fire in the plantation in the 2016 first half despite of lost of bush fires 28

29 PURSUITE OF INVESTMENTS AND FIRST ACHIEVEMENTS Opening of a soil analysis laboratory Successful certification Rainforest Alliance Set up of a specialist engineers team and advanced equipment for soil analysis Certification for SOLEA plantation Kotokonou in Ivory Coast by the agency AfriCert for a sustainable farming Speed up the pace of studies A sustainable cocoa that meets the new quality and origin expectations of industry and consumers 29

30 FURTHER STRENGTHENING THE TEAMS IN BRUSSELS AND IVORY COAST March 2016 April 2016 June 2016 Appointment of a Chief Administrative and Financial Officer Strengthening R&D teams in Ivory Coast New director appointed Appointment of Marc-Henri Decrop to the post of Chief Administrative and Financial Officer Recruitment of two agronomic engineers: - One soil analysis specialist - One fertigation and drip systems specialist Appointment of Pierre Moncheur as director of KKO International 30