khonburi sugar public company limited opportunity day q2...
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บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Khonburi Sugar Public Company Limited Opportunity Day
Q2 - 2012
August 20, 2012
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บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
I. Company Overview
II. Industry Update
III. Financial Hi-Lights
IV. KBS Outlook
V. Q&A
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Content
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Major Developments
Khonburi Sugar Plc. was established as Nong Yai Industry Company Limited with registered capital of THB 1 mm and production capacity of 1,500 ton canes/day
Relocated the plant to Khonburi District, Nakornratchasima with production capacity of 13,690 ton canes/ day
Expanded the crushing capacity to 21,000 ton canes/ day
Increased its registered capital to THB500 mm by offering newly issued shares 150 million for IPO, and become a listed company in the Stock Exchange of Thailand
Changed the company‘s name to Khonburi Sugar Company Limited
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1965
1996
2006
2007
2010
BOD approved the 35 MW power plant project with investment amount of THB1,638 mm 2012
Expanded the crushing capacity to 23,000 canes/day 2011
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
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KBS’s Business Overview
Farmers
Breeding Project
KBS’s Electricity Production Unit
Sugar
Molasses
Filter Cake
Bagasses
Ethanol Manufacturer
Organic Fertilizer
PEA
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Expansion in Capacity
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(Tons/day) (Tons/day)
21,000
13,690
23,000
1,000
900
1,200
Maximum Crushing Capacity Maximum Refining Capacity
KBS continues to expand capacity to capture growth of the industry
At the start of 2012 crushing season, the Company has completed the capacity expansion. Maximum crushing capacity was raised to 23,000 tons/day, and maximum refining capacity to 1,200 tons/day
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Value Creation through Revenue & Product Mix
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Revenue & Operating Profit Contribution
Sugar Product Mix
Revenue
2010: Total THB4,863 mm 2011: Total THB6,010 mm
Operating Profit
2010: Total THB298.2 mm 2011: Total THB1,091.7 mm
2008 2009 2010 2011
KBS will increase the proportion of electricity business that generates stable income steam to the Company KBS will focus on value-added products such as refined and white sugar
Note: “Service & utility” included performance from Agricultural products and Electricity
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Distribution Channels
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Sugar Sales: Export vs Domestic
2008 2009 2010 2011
Distribution Channels - Domestic
70-80% of total sales are export, which KBS mostly sells through large, credit-worthy international traders For domestic market, KBS sells through multiple channels with the aim to maximize profit margin
2008 2009 2010 2011
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
I. Company Overview
II. Industry Update
III. Financial Hi-Lights
IV. KBS Outlook
V. Q&A
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Content
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Global Sugar Overview (2012/2013 crop)
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Brazil
Cane production in Center-South region of Brazil in year 2011 had decreased first time in the last decade due to higher aged cane profile and unfavorable weather; as a result, the cane production dropped to 494 mm tons (-11.3%) from 557 mm tons last season
The Center-South region of Brazil delayed the start of 2012/13 crushing season due to unseasonal raining. Crushing volumes ended July 12 are 22% lower than last year with sugar yield drop by 4%
Australia
So far, the sugar production in new season is slightly worse than last year. The sugar production number is estimated at 4.00 mm tons (-3.6%), reduced from 4.15 mm tons of last year.
Russia
The beet harvest started in early Aug 12
Root weight and sugar content increased from last year due to the weather conditions
Even the beet farming areas are down by 11% this year, but the higher sugar yield coupled with increased capacity has made up for the loss
Sugar production in 2012/13 is expected to match last year’s level of 5.0 mm tons
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Global Sugar Overview (2012/2013 crop)
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EU
As a consequence of bad weather (colder and wetter than expected), the start of beet plantation has been forced to delay for 3 weeks, and so will the harvesting
The sugar beet production will decrease to 16.7 mm tons (-9.8%) down from 18.50 mm tons
India
For 2012, sugar production in India was 26.5 mm tons while consumption amounted 24.0 mm tons. India sugar producers exported the excess of 2.5 mm tons (out of the export quota of 3.0 mm tons)
For updated situation in India, drought in India would be worse than expected, leading to an increase in domestic sugar price
Current domestic price is significantly higher than world market price
Export ban in India is possible
China
The 2011/12 production had ended at 12.50 mm tons while consumption at 15.50 mm tons and import approximately 3.00 mm tons
20112/13 higher support from domestic price and cane price this year should encourage farmers to grow more cane; it is estimated that the sugar production next year will be 13.50 mm tons (+4%)
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Global Sugar Situation Update
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Global Sugar Production, Consumption, and Stock
(mm tons)
According to the forecast, world sugar production will increase significantly to 177.75 mm tons while the consumption is continue to grow and is expected to reach 164.54 mm tons
The surplus this year will bring world sugar stock up to 42.7% from the tough of 37.6% in 2010; however, it is still lower than the 10-year average level of 43.7%
Source: F.O. Licth International Sugar and Sweetener Report
10yr avg stock level = 43.7%
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
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World Sugar Price Movement ( NY#11 )
• Wet Weather in Brazil, slow loading at port Santos
• Worst drought in 50 years in Midwest, USA
• The market fear of the reporting surplus number for 2 consecutive years
• Brazil reports its production to by quite stable (better than expected)
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Thailand Sugar Situation
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Cane Volume: Thailand and KBS’s
There are favorable factors contributing to good cane situation in Thailand, which are 1) sugar price in world market remains in high region for a relatively prolonged period, leading to continued high cane price, and 2) good weather conditions
Thailand start its crushing season in Dec 11, and most of the sugar mills completed the crushing in Apr 12; the total cane crushed broke the record again with total 97.97 mm ton (+2.7%)
KBS’s cane crushed for 2012 was 2.55 mm tons (-11.4%), decreased from the record high of 2.88 mm tons last season
(mm tons)
Source: Office of Cane and Sugar Board (OSCB), the Company
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
I. Company Overview
II. Industry Update
III. Financial Hi-Lights
IV. KBS Outlook
V. Q&A
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Content
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Understanding of Sugar Business
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Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 20122010
Support farmers on cane plantation (Oct 10 – Oct 11)
Cane Crushing (Dec 11 – Apr 12)
Re-melting season (Dec11 – Aug 12)
Machinery Maintenance (May12 – Dec 12)
Operation
Domestic Sales
Sales & Delivery (Jan12 – Dec 12)
International Sales
Delivery (Jan12 – Oct 12)
Sales (Mar11 – Mar 12)
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Conservative Selling Policy
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• To protect the Company against the damage that may arise from the fluctuation in cane price and exchange rate, KBS has the policy to follow TCSC
Case I: TCSC sells @ 25 cent/lb;
KBS follows and sells @ 25 cent/lb
Case II: TCSC sells @ 25 cent/lb;
KBS NOT follow and sells @ prevailing price
Case III: TCSC locks ex rate @ 31 THB/USD;
KBS follows and locks rate @ 31 THB/USD
Case IV: TCSC locks ex rate @ 31 THB/USD;
KBS NOT follows and gets prevailing rate
Hedging Sugar Price Hedging Exchange Rate
Change from TCSC -10% -5% 0% 5% 10%
Sugar price 22.5 23.8 25.0 26.3 27.5
KBS price 25.0 25.0 25.0 25.0 25.0
Cost (70% of TCSC) (17.5) (17.5) (17.5) (17.5) (17.5)
Gross profit 7.5 7.5 7.5 7.5 7.5
% profit change 0.0% 0.0% 0.0% 0.0% 0.0%
Change from TCSC -10% -5% 0% 5% 10%
Sugar price 22.5 23.8 25.0 26.3 27.5
Revenue 22.5 23.8 25.0 26.3 27.5
Cost (70% of TCSC) (17.5) (17.5) (17.5) (17.5) (17.5)
Gross profit 5.0 6.3 7.5 8.8 10.0
% profit change -33.3% -16.7% 0.0% 16.7% 33.3%
Change from TCSC -10% -5% 0% 5% 10%
Exchange rate 27.9 29.5 31.0 32.6 34.1
Revenue 27.9 29.5 31.0 32.6 34.1
Cost (70% of TCSC) (21.7) (21.7) (21.7) (21.7) (21.7)
Gross profit 6.2 7.8 9.3 10.9 12.4
% profit change -33.3% -16.7% 0.0% 16.7% 33.3%
Change from TCSC -10% -5% 0% 5% 10%
Exchange rate 27.9 29.5 31.0 32.6 34.1
Revenue 31.0 31.0 31.0 31.0 31.0
Cost (70% of TCSC) (21.7) (21.7) (21.7) (21.7) (21.7)
Gross profit 9.3 9.3 9.3 9.3 9.3
% profit change 0.0% 0.0% 0.0% 0.0% 0.0%
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Total Revenue Analysis
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THB2,800 mm
THB2,144 mm
(THB mm)
KBS’s total revenues for Q2-2012 has dropped by
23.4% mainly due to the following factors
Sugar sales decreased by 23.0% as sale
volume has dropped by 27.4% owing to the
delay in international logistics &
transportation process
Molasses sales decreased by 55.6% as
average selling price of molasses this year is
significantly lower than that of last year
Sugar Sale Volume (mt.)
Total Revenues
Molasses Sales and Pricing
(THB mm) (THB/ ton)
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
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Low season of sugar business is Q4 of calendar year, which is the export season for Brazil’s sugar, putting pressure on world sugar price overall
Thai sugar companies hardly export their sugar during this period
Normally, we export sugar during Q1 – Q3 of calendar year; the concentration of export volume among these three quarters varies from year to year, subject to logistics and requirements of customers
Quarterly Sale Volume
(Tons)
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
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Gross margin Q2-12 dropped by 6.4% mainly due to a dip in selling price of molasses this year
EBIT margin Q2-12 decreased by 7.1% mainly due to the reduction in gross margin coupled with an increase in SG&A to sale ratio
Net margin Q2-12 had less effect and decreased by only 3.9%, thanks to the reduction in corporate income tax rate from 30% to 23%
Margin Analysis
6.3%
7.1%
Margin Analysis Q2-12 vs Q2-11 Selling & Administrative Expenses to Sales
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Balance Sheet Hi-Lights
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(THB mm)
KBS still has a strong balance sheet with D/E of 0.93x, and the Company is in a comfortable position to support expansion projects that will lead to sustainable growth prospect
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Summary of Financial Hi-Lights
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Q2 - 12 Q2 - 11 % change 1H - 12 1H - 11 % change
Total revenues (THB mm) 2,144 2,800 -23.4% 3,765 4,504 -16.4%
Gross margin 22.8% 29.3% -6.4% 23.3% 27.9% -4.6%
EBITDA margin 17.1% 23.6% -6.4% 20.8% 22.2% -1.5%
EBIT margin 15.4% 22.5% -7.1% 19.0% 20.9% -1.9%
Net margin 11.3% 15.1% -3.9% 14.6% 14.6% 0.0%
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
I. Company Overview
II. Industry Update
III. Financial Hi-Lights
IV. KBS Outlook
V. Q&A
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Content
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
2010 2011 2012 2013 2014 Investment Cost
(THB mm)
Improve the crushing capacity to 23,000 tons/day
260
Improve sugar purification process capacity to 1,200 tons/day
140
Biomass Power Plant 35 MW.
1,638
Cane machinery development project 150
Breeding project 50 On going
On going
Investment Plans
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บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Cane machinery development project
Breeding Project
• KBS developed prototypes of cane chopper and planter which are cheaper and more appropriate for small land plot in Thailand
• The Company is looking for the right strategic partner to develop the project commercially
• More than 7,000 cane breeds developed under KBS’s breeding projects
• KBS’s breeding program is aim to develop cane that give higher sugar yield
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บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
35 MW Power Plant Project
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Electricity Production Unit
Bagasses
EGAT
KBS’s Board of Director has approved the 35 MW biomass power plant project in June 2012 with following details
Khorburi Power Plant (KPP), KBS’s 99.9% subsidiary, will be the owner of the Project
Estimated investment amount is THB1,638 mm
Feedstock will be bagasses, the by-product of sugar crushing from KBS’s mill
The electricity will be sold to the Electricity Generating Authority of Thailand (EGAT)
The project construction period will be approx. 18 months; electricity sale to EGAT is expected to be early 2014
KPP already secured bank loan for the project with D/E around 2.3x
Benefit of the Project to KBS
Increase portion of electricity revenue which is less volatile compared to income/profit from sugar business
With new technology employed by the new electricity generating unit, KBS’s group can increase its efficiency in energy utilization within the sugar production
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
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Preparation for AEC Sugar Production/ Consumption in ASEAN Countries
Tax Rate for Sugar under AEC
_
Impact of AEC (ASEAN Economic Community) in General
Allow for the free movement of goods, services, investment, capital, and skilled labor
Tariffs will be eliminated and non-tariff barriers will be gradually phased out
Impact of AEC to Thai Sugar Business
Thai sugar business will be beneficiary under AEC
ASEAN countries –excluded Thailand – consume sugar of 11.1 mm tons/year and produce 6.5 mm tons/year; most of the imports to satisfy local consumption are from Thailand
The local sugar production in other ASEAN countries is far less cost-efficient compared to Thailand
If all quota, tariff, and other measures are completely removed, Thailand can export more sugar to ASEAN region rather than ship outside
Net deficit 4.6 mm tons/year
Total Production 6.5 mm tons/year
Total Consumption 11.1 mm tons/year
=
Country Tax rate
Original members Brunei 0%
Singpore 0%
Thai 0%
Malaysia 0%
The Philippines 38% (sensitive list), will reduce
to 5% in 2015
Indonesia 30-40% (sensitive list), will
reduce to 5-10% in 2015
CLMV Cambodia 5%
Lao 5%
Myanmar 13% (sensitive list), will reduce
to 0-5% in 2015
Vietnam 5%
Source: International Sugar Organization
บริษัท น ำ้ตำลครบุรี จ ำกัด (มหำชน) KHONBURI SUGAR PUBLIC COMPANY LIMITED
Thank You
Q&A
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