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Agriculture in Brazil Overview | April 2010. Los Grobo Overview Section 1.

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Presentation on theme: "Agriculture in Brazil Overview | April 2010. Los Grobo Overview Section 1."— Presentation transcript:

1 Agriculture in Brazil Overview | April 2010

2 Los Grobo Overview Section 1

3 3 ► Execution capacity –Strong local presence –Quickly identify business opportunities ► Production efficiency –Crop rotation –Risk/reward analysis –High technology ► Infrastructure –Agreements with infrastructure players –Better working capital management –Capacity to manage sales according to price fluctuation –Lower logistic costs Los Grobo & Sollus: Unique Integrated Business Platform ProductionFarmlandServices Agribusiness Value Chain Key Value Drivers ► Scale –Dilution of costs and investments –Stronger bargaining power ► Complementary revenues –Recurring cash flow generation –Reduced cash flow volatility –Risk diversification Complementary businesses with specific focus allows for higher value creation in both vehicles Land Appreciation PlayAgriculture Operation Play Partnership LAND PRODUCTION INFRA & SERVICES FARMLAND SCARCITY - Land appreciation + LAND Ecosystem development ► Opportunity identification ► Execution capacity ► Land conversion ► Divestiture of developed land

4 4 Los Grobo & Sollus: Solid Sponsorship Successful agricultural operator, a top financial player and an expert in commodities ► One of the most successful private equity funds in Brazil ► Highly recognized financial player/business developer ► Investment vehicle of Banco Pactual´s former partners –Pactual was the largest investment bank in Brazil and one of the largest Asset Managers. It was sold to UBS for US$ 3.1Bn in 2006 ► Vinci is the controlling shareholder of PDG Realty, second largest real estate company in Brazil by market cap, and of Equatorial Energia, a leading Brazilian energy company ► Vinci has also investments on the ethanol business in Brazil through CMAA and on the retail /fashion business through InBrands Vinci Partners ► Touradji Capital Management is a New York based commodities hedge fund manager ► The firm currently manages over US$ 3.5 billion in assets ► Through its investment activities, the firm has developed extensive firsthand knowledge of the Brazilian agricultural economy and its producing regions ► Touradji Capital Management funds posted positive returns in 2008 despite the market volatility and abrupt downturn, which indicates its expertise in risk management ► The sponsor Paul Touradji has over 14 years experience investing in commodities and related equities Touradji Capital Management Grobocopatel Family ► More than 90 years of agribusiness market, since the arrival of the family in Argentina, from Ukraine ► In 1984 Adolfo founded Los Grobo Agropecuária composed by 4 employees and 3k ha and became a Professional company at the first half of the 90’s decade ► Gustavo, son of Adolfo, joined Los Grobo in 1984 and was responsible for the development of its actual business model ► Under Gustavo´s management, Los Grobo was the first agro company in the world to obtain the ISO 9001, becoming also a Harvard Case ► Gustavo Grobocopatel has received several awards, including the recent most influent company Leader in Latin America by “América Economía”

5 5 Uruguay Argentina Chile Brazil Venezuela Peru Bolivia Paraguay MA PI TO MT GO MS PR MG Colombia Geographically Diversified Production – 2009/2010 Los Grobo: Sizeable and Diversified LatAm Player Planted Area (k ha)¹ Los Grobo is the 2 nd largest LatAm grain producer, with more than 250k ha of productive land throughout Brazil, Argentina, Uruguay and Paraguay… Brazil: Production Area: 55k ha Input Sales: US$ 50 mm Grain Origination: 800 ton Crushing: 90 ton Argentina: Production Area: 90k ha Input Sales: US$ 25 mm Grain Origination: 1,000k ton Crushing: 266 ton Uruguay: Production Area: 90k ha Input Sales: US$ 15 mm Grain Origination: 440k ton Paraguay: Production Area: 16k ha Grain Origination: 35k ton Total: Production Area: 251k ha Input Sales: US$ 99 mm Grain Origination: 2,255k ton Crushing: 170k ton CAGR 02 / 03 – 09 / 10 E: 21% Grain Origination (k tons)¹ CAGR 02 / 03 – 09 / 10 E: 20% BA … also servicing over 500k Ha of production through its services business ,030 1,389 1,763 1,868 2, / / / / / / / / 10E ClientsOwn SoybeanWheatCornOthers / 03 43% 31% 13% / 04 53% 27% 10% / 05 49% 29% 12% / 06 54% 24% 14% / 07 53% 27% 13% / 08 47% 26% 18% / 09 51% 23% 21% / 10E 62% 24% 9%

6 Global Agribusiness Outlook Section 2

7 7 Per Capita Meat Consumption (2009=100) 2 Population Growth ► Global population will rise by 1.5 billion people over the next 20 years ► Migration to urban areas, specially in the developing countries Global Agribusiness Outlook: Increasing and Sustainable Demand Economic and Income Growth ► Consistent personal income growth in developing countries ► Income growth increases meat consumption and food demand Development of Global Biofuels ► Development of viable and environmental friendly fuels globally ► Increase in blending of biofuels with gasoline ► Fuel crops are crowding out food crops, constraining food supply Increasing demand for food and biofuels are the main pillars for bullish commodities outlook… World Biofuels Production (Liters – billions) 3 Urbanization (Million of people) 1 Source: 1.OECD 2.FAPRI 3.MB Agro

8 8 ► All-year-round crops Long Term Competitive Advantages Land Availability (k ha) 2 Leading Producer of Major Products (% of Global Production) 1 South America: The Natural Supplier … and South America is likely to consolidate its position as the global preeminent farming region… Coffee Soybean Sugar Poultry Beef Corn Orange Juice Source: 1.USDA 2008/2009 Estimates 2.FAO 1 st 2 nd 1 st 3 rd ► Highly favorable geographic and climate conditions ► Competitive production costs ► Favorable regulatory environment 3 rd 2 nd 5 th 3 rd 6 th... due to its competitive advantages and abundant resources 20%

9 9 South America: Upside Potential Despite the bullish scenario for agribusiness, land prices are still lower when compared to other main productive areas… … and are likely to appreciate as farmland becomes more scarce Farmland Price Dynamics and Appreciation Estimates ( - ) Development Stages (+) Raw Land Production Infra & Services Scarce Land ► Agriculture potential ► No agricultural utilization ► Lack of services / infrastructure ► Crop is implemented ► Lack of services / infrastructure ► Developed crops ► Availability of services / infrastructure ► Successful prior crops ► Well developed region ► Lack of available properties nearby STAGECONDITIONS APPRECIATION ESTIMATES¹ ► Balsas – MA ► US$ 1.1k / ha ► Luis Eduardo – BA ► US$ 3.0k / ha ► Rio Verde – GO ► US$ 4.0k / ha ► Ribeirão Preto – SP ► US$ 7.5k / ha ► Traditional producing area ► Arbitrage opportunities rising ► Highly developed infrastructure for exports and logistics ► Concentration of high yield products ► Significant soybeans and sugarcane crops expansion ► Limited infrastructural integration ► Several infrastructure developments expected ► Further development of exports and logistics facilities Average Agricultural Farmland Price (US$ / ha) USA 11,000 6,000 4,000 3,000 5,900 5,300 3,500 2,300 1,400 3,500 ► Long cattle tradition ► Northern provinces: best promises in acreage increase ► Paraguay is growing its agricultural acreage steadily Source: FNP, Iowa State University and Sollus

10 The Soybean in the World SoybeansSoymeal Soybeans Soybean Production Soybeans Crushing Exports Imports SoyOil

11 11 Historical Soybeans Yield Historical Soybeans Yield (tons/ha) vs. Modeled (LS) Linear trend grow in Soybeans Yield ArgentinaUruguay ParaguayBrazil

12 Production Cost Breakdown SOYBEANSBRAZILARGENTINAURUGUAYPARAGUAY Cost per Ha Seeds7%10%11%9% Chemicals15%9%10%12% Fertilizer22%5%17%16% Land Lease19%45%32%28% G&A6%11%5%9% Labor/Machinery22%10%14%15% Harvest9%10%11% Production Costs - SOYBEAN

13 Grain Production in Brazil Section 3

14 G RAIN P RODUCTION V ALUE C HAIN 80% Own 20% Leased Largest Owner below 1Mn Ha Farmland Chemicals ($6,5Bn) 25% Direct Sales 25% cooperatives 50% Retailers Fertilizers ($8Bn) Consolidating Mkt Inputs ($14,5Bn) 40Mn Há Farmed Largest Bz Producer – 350,000 Há Production ABCD Mid-Large Traders Local Traders Grain Handling/Export

15 G RAIN P RODUCTION A REA IN B RAZIL

16 Soybeans in Brazil Brazilian Market OverviewBrazil – Consuming Market x 2007 Producing RegionsBrazil – Export Markets – 1990 x 2007 Exports Soybean Crushing SoyMeal SoyOil Seeds and Losses Exports Internal Mkt Exports Internal Mkt

17 17 Brazilian States Risk Reward Analisys Historical Data Different Risk and Risk x Reward relationships 10Y Worst Gross Margin 10Y Yield Volatility Gross Margin Too Risky Best Risk x Reward Good Risk x Reward Hard to Scale Up Good Risk x Reward Lowest Risk and Margin

18 18 Los Grobo: LatAm Agribusiness Preeminent Agriculture Company Sizeable and Diversified LatAm Player One-Stop-Shop Network Model Superior Productivity and Efficiency Proven Track Record with Strength Financials Sponsors & Fully Aligned Management Team With Strong Execution Capacity Structured and scalable growth platform with secured access to relevant grain production/origination … leading to a highly synergistic business to maximize value creation throughout the Agribusiness Value Chain Antonio Oliva Neto CFO Gustavo Barbeito CIO Contacts


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