Presentation on theme: "_______________________________ Yulgilbar Field Day Lending to Australian Agriculture Financing the Farm & The Outlook Geoff Rose Head of Agribusiness."— Presentation transcript:
_______________________________ Yulgilbar Field Day Lending to Australian Agriculture Financing the Farm & The Outlook Geoff Rose Head of Agribusiness NSW/ACT 1 st August 2014
Financing Australian Agriculture Today we will cover three topics: 1. What does a Lender look for? Agribusiness lending 2. Lending to Agriculture: What does the Outlook look like? 3. Current economic trends & the Beef Industry. ____________________________________________________________________________ Note: Each red dot represents a NAB Agribusiness Banking Centre (>600 nab agribusiness bankers and 110 locations !)
Five “C’s” of Financing The Farm ____________________________________________________________________________ The Five Cs Collateral CapabilityCashflow Capital Character
Lending – It’s not just about Ratios ……. ____________________________________________________________________________ Cashflow, Leverage /Equity, Interest Coverage & Balance Sheet Strength Financial Analysis Equity Levels (Surplus Assets level / trends) Interest coverage (>1.5-2.0x) Cost to income (65-70%) Cash position (net cash surplus) Debtors & Creditors Trend and key driver analysis Facility Agreement and Structure Undertakings Negative pledge Material Adverse Change Clause Dividend Restrictions Equity participation - ring fencing of project finance Related party arrangements (e.g. Director’s loans) Concentration Risk & Funding Mix Security ‘Primary’ Security = cash flow to met repay ‘Secondary’ (security 1 st RM deeds / fixed & floating charge) Guarantees (Full Recourse & All Monies) Loan to Valuation Ratio (LVR – key focus here ) Reporting & Governance Financial Reporting Frequency (quarterly) Quality (P&L, BS, CF) Board / Senior Management & Key Person Structures Compliance obligations - statutory payments Risk Management Document
____________________________________________________________________________ Agricultural Lending – Growth Since 94’ Since 94’ 3 distinct periods of growth in lending to agriculture. Sep 94’ to June 02’ Average Annual Growth Rate = 8.8% June 02’ to Dec 08’ Average Annual Growth Rate = 12.4% Dec 08’ & Sep 11’ Average Annual Growth Rate = 3.7%
Agricultural Lending – composition by % ____________________________________________________________________________
US Unemployment 6 Unemployment rate dropped to 6.1% from 6.3% with an unchanged participation rate It also shows that a cumulative 1,385,000 jobs have been created in the first 6 months of this year. Annualising this (by simply doubling it) would give a 2,770k annual pace. If sustained, his would be the highest annual total since 1999, greater than the 2,506k in 2005 or the 2,085k at the height of the boom in 2006.
If the US stops printing money, what happens? The US Fed have been pumping money into the economy since 2008. There have been 3 rounds of QE, with the latest (QE3) commencing in September 2012. The US Fed started tapering QE in late 2013 and therefore a slowdown in Bond purchases. If the US continues to withdraw stimulus, term interest rates will likely rise around the world.
China The economy has clearly slowed – shifting to a new normal? 8
China a longer term positive story and Australia’s links to China increasingly dominant. 9
For Australia, main game Asia: about 75% of Australia’s exports 10
Exposures by Industry NAB Agribusiness Q1 FY 14’
Disclaimer Rates are indicative only & subject to market movements. ANALYST DISCLAIMER: The information contained in this document has been prepared without taking into account your objectives, financial situation or needs. The person or persons named as the author(s) of this report work on sales desk within the Global Markets Division” of National Australia Bank Limited (ABN12 004 044 937, AFSL230686). They are not members of the Research Department. The author(s) will be compensated in part on the profitability of [“the trading desk” or as appropriate]. The author(s) certify the report accurately reflects their personal views about the subject securities and issuers and other subject matters discussed. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The views of the author(s) do not necessarily reflect the views of National Australia Bank Group (nab) and are subject to change without notice. nab may receive fees for banking services provided to an issuer of securities mentioned in this report. This material may include analysis of securities and related derivatives that: nab’s trading desks may make markets in; nab is likely to act as principal (or agent); nab will have a long or short position at any time, including possibly a position that was accumulated on the basis of this report prior to its dissemination. nab, its affiliates and their respective officers and employees, including persons involved in preparing and issuing this report (subject to nab’s policies) may also from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as advisors, brokers or commercial bankers in relation to the securities (or related securities and financial instruments), of companies mentioned in this report. nab or its affiliates may engage in these transactions in a manner that is inconsistent with or contrary to any recommendations made in this report. AUSTRALIAN DISCLAIMER: National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686), its affiliates, related bodies and any officer, employee, agent, adviser or contractor thereof (“NAB”) does not warrant or represent that the information, recommendations, opinions or conclusions contained in this document (“Information”) is accurate, reliable, complete or current. The Information has been prepared for dissemination to professional investors for information purposes only and any statements as to past performance do not represent future performance. The Information does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. In all cases, anyone proposing to rely on or use the Information should independently verify and check the accuracy, completeness, reliability and suitability of the Information and should obtain independent and specific advice from appropriate professionals or experts. The Information is not intended as an offer or solicitation for the purchase or sale of any financial instrument. To the extent permissible by law, NAB shall not be liable for any errors, omissions, defects or misrepresentations in the Information or for any loss or damage suffered by persons who use or rely on such Information (including by reason of negligence, negligent misstatement or otherwise). If any law prohibits the exclusion of such liability, NAB limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. NAB may hold a position or act as a price maker in the financial instruments of any issuer discussed within this document or act as an underwriter, placement agent, adviser or lender to such issuer. The Information is governed by, and is to be construed in accordance with, the laws in force in the State of Victoria, Australia, and any dispute or claim arising from, or in connection with, the Information is subject to the non-exclusive jurisdiction of the courts of that State
____________________________________________________________________________ Looking forward to any Questions you may have Thank you