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8-K - AgFeed Industries, Inc. | v204081_8k.htm |
AgFeed Industries, Inc.
Presentation
to
Hong Kong Stock Exchange
NASDAQ: FEED NYSE Alternext: ALHOG
Hong Kong
29 November 2010
Safe Harbor Statement
This presentation contains forward-looking statements within the meaning of the safe-
harbor provisions of the Securities Litigation Reform Act of 1995. Such statements
involve
known and unknown risks, uncertainties and other factors that could cause the
actual results of the Company to differ materially from the results expressed or implied by
such statements, including changes from anticipated levels of sales, future national
or
regional economic and competitive conditions, changes in relationships with customers,
access to capital, difficulties in developing and marketing new products, marketing
existing products, customer acceptance of existing and new products, and
other factors.
Accordingly, although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. The Company has no
obligation to update the
forward-looking information contained in this presentation.
AgFeed: An Overview
An international agribusiness leading the
modernization and integration of the Chinese
hog & animal nutrition industries
Animal Nutrition
Harvest Initiative
Hog Production
AgFeed Industries, Inc.
An International Agribusiness
AgFeed: Profile
AgFeed Industries, Inc. is a, NASDAQ listed company operating in China; ticker symbol FEED. It is
also listed in Europe, NYSE Alternext: ALHOG
AgFeed is focused on becoming a fully integrated market leader and already has a leadership position
in two of the three core business areas:
Animal Nutrition, including additive premix, concentrates and complete feeds
The Chinese feed industry is a $58.0B of which pig feed is $20.5B
Hog Production 625 million head slaughtered in China (2009) versus ~100 million in US
AgFeed operations are currently comprised of the following:
31 farms in China & 10 sow farms with a 200+ farm finishing system in the United States
2,000 employees
5 feed mills
USD in millions
2005
2006
2007
2008
2009
Animal Nutrition
$7.6
$8.6
$36.2
$51.7
$63.6
Hog Production
0
0
0
$91.9
$109.5
Total Revenue
$7.6
$8.6
$36.2
$143.6
$173.2
M2P2 Acquisition: Transforming AgFeed
Establishes AgFeed as an international hog production company positioned to
respond to global opportunities for growth and development
Growth opportunities exist in; China, the United States and Southeast Asia
This business combination will double our revenues
M2P2 produces 1.3 million market hogs per year
M2P2 brings to AgFeed the hog production industrys leading team with a proven
record of outstanding performance as measured by numerous metrics
M2P2 operates in; Iowa, Colorado, North Carolina and Oklahoma
In partnership with local government we are developing our western production
pods (7 farms) in Dahua and Xinyu under M2P2s leadership
Operating & Organizational Structure
AgFeed Animal Nutrition, Inc.
(AANI)
Chinese Production System
Existing 31 Farms
M2P2 (U.S. Production)
Western-Style Farms
(Dahua and Xinyu
Production Pods)
AgFeed International Protein
Technology (AFIPT)
Harvest Initiative
AgFeed Industries, Inc.
An International Agribusiness
Business Strategy: AgFeed, Government & Farmer
Recognizing the cultural and political significance of the Farmer and the vital role
of Government our core operating philosophy is: AgFeed, Government & Farmer
Government (local & regional) works with us to secure the land necessary for
developing our new western-style farms, to put in the necessary infrastructure of
roads, power and water and
to coordinate our local farmer relationships
Local farmers, in partnership with AgFeed, finish pigs from 40 pounds to market
weight
AgFeed provides; training, feed, nutritional and veterinary support and insulates
the farmer from market risk, providing farmers with employment and income
AgFeed leverages its operational expertise and human capital while establishing
a production base of high quality, verifiably safe pork
AgFeed: Profile
- feed mill
- hog farms
AgFeed: Profile
Animal Nutrition
Founded in 1995 by animal nutrition experts. The animal nutrition business
produces additive premix, concentrates and complete feeds
AgFeed has exclusive distribution arrangements with approximately 1,300
independently owned retail stores and serves over 790 commercial farms.
Hogs
Currently 31 farms with a capacity of 600,000 market hogs per annum.
Construction of two production pods with a total of 35,000 sows and market hog
capacity in excess of 850,000 head.
U.S. production system producing 1.3 million market hogs annually.
Harvest
AgFeed is moving forward in completing the development of a fully integrated
production system controlling all aspects of production and processing in a safe,
verifiable and auditable system
AgFeeds processing business will initially be scaled to harvest 2,000,000 hogs per
year, AgFeeds 2015 targeted controlled production.
China Dynamic: Macro
Pork production in China is a key political, social and security issue and
promotes the advancement of science, technology and health standards
The Food Safety Law went into effect June 2009 providing a legal basis for
the government to strengthen food safety
Economic growth in China is driving the consolidation and
commercialization of
pork production using the Western model
Meat demand and production strains continue to increase as Chinas 250
million middle
class grows due to rapid urbanization. 20 new cities
planned with a 100 million people projected to move to urban centers by
2020
China Dynamic: Agricultural
Pork consumption accounts for 63% of the meat consumed in China
and is expected to grow at rate of 22.3% from 2009 through 2013
Projected pork demand by 2015 will approach 68 million metric tons up
45% from 46 million metric tons in 2009
Government intervention through the PRCs Ministry of Commerce in
the hog market through the Hog Reserve operations is standard
China has 22% of the worlds population but only 7% of the worlds
arable land
Animal Nutrition
Retail distribution through approximately 1,300
exclusive, independently-owned retail stores
More than 790 large commercial direct hog
farms
AgFeeds 5 manufacturing facilities which are
strategically located in Nanchang, Nanning,
Hainan, Shandong and Shanghai
AgFeed enjoys a large distribution footprint in
Chinas animal nutrition market
Significant growth opportunities still remain as a
result of consolidation
Strong brand loyalty and recognition
Animal Nutrition
There is a growing demand in China's larger, more sophisticated live animal
production systems to utilize complete feeds. We have demand from over
half of our commercial accounts for delivery
of complete feeds
The Food Safety Laws passed in 2009 are accelerating the consolidation of
the feed industry. In 2007 there were 15,000 feed mills in China with
average production capacity of 10,000
tons p.a. today there are less than
11,000. We expect this trend to continue and accelerate
AgFeeds total feed sales were 117,000 metric tons in 2009 versus 74,500
metric tons in 2008
The Chinese feed market is expected to grow 38% over the next 4 years
Hog Production: China
AgFeed acquired 31 hog farms in 2008 with the capacity for 30,000 sows and
production capacity of 600,000 market hogs
Commenced development of 7 western-style, technological advanced, hog farms
with capacity for 35,000 sows and production capacity 850,000 market hogs
annually
New western farms will enter production in Q4 2011
We are a market leader in China, less than 2% of hog farms nationally produce
over 500,000 market hogs annually
Our production target for 2015 is 2,000,000 market hogs annually making AgFeed
a top 5 producer in all of China
Hog Production: United States
AgFeed acquired M2P2 in September 2010 establishing a significant market
presence in the United States
The M2P2 production system is comprised of 10 sow farms in: Colorado,
Oklahoma and North Carolina and a contract finishing system of over 200 farms in
Iowa
Our U.S. production system is the industry leader in terms of all productivity and
efficiency metrics
Producing 1.3 million market hogs annually ranks our system as #23 in the U.S.
The industry leading team of managers and executives at M2P2 has added
significant depth and breadth to our human capital resources
Significant growth opportunities exist in the U.S. for highly efficient producers
Harvest - Processing
Harvest (slaughter, processing & marketing) initiative was launched in 2010
representing AgFeeds final step in deploying a fully integrated hog production
system
Harvest facilities will be located and scaled to serve the production output of our
western-style farms in Dahua and Xinyu
Harvest business initiative will enable AgFeed to capture additional margin
through value added slaughter and processing
We expect the fully integrated production model assuring verifiably safe pork and
standard processing will be attractive to major international distributors
Our production facilities will be ideally located to serve the growing urban markets
of southeastern China
Business Strategy: Importing Expertise & Technology
Improving efficiencies in our existing farm system is driven by importing and
implementing technologies and procedures to improve yields and feed conversion
Assuring continual access to cutting edge technologies, methods and procedures
AgFeed has entered into joint ventures with market leaders; Hypor Genetics, PIC
& M2P2
Hypor and PIC are the worlds largest suppliers of advanced swine genetics
providing the most technologically advanced breeding stock to both our
established farms and our new western-style
farms
M2P2 is a leading innovator in hog production in the U.S. and is our joint venture
partner in the development, design, construction, start-up management and
training for our western-style farms
Milestones: 2009 & 2010
Record revenue for 2009 & first half of 2010
Implementation of genetics program
Western Farm Progress: Dahua & Xinyu
M2P2 Acquisition
Feed Division - AgFeed Animal Nutrition (AANI) carve out
Harvest Initiative
Expansion of Shareholder Base
Summary: Investment Highlights
Pork will continue to dominate the
protein market in China
Significant and growing demand for
safe meat products
All our operations, technologies and
procedures are focused on assuring
and delivering safe pork to the
Chinese consumer
We are a leader in modernizing and
integrating the Chinese hog industry
We have already achieved scale to be
a top 5 producer in China and will
continue our growth rate
Broad dedicated distribution network
for our nutrition products
Ideally located to serve Chinas
growing southeastern urban markets
Chinas demand for safe meat products
Source: MOA, Rabobank estimates, 2009
100%
40
80
32
11
Conclusion
Revenue
millions
We expect continued growth as we execute our plan for the expansion of our western-
style, technologically advanced farms, the growth of our animal nutrition business and
the development of
our Harvest strategy and operations. Integrating and modernizing
the Chinese hog industry to assure safe pork is available to the Chinese consumer.