Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

THE POWER OF COLLABORATION AND ECONNECTIVITY

Kenny Cordell, CEOPinnacle Operating Corporation

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Pinnacle Operating Corp

Strictly Confidential

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Becoming a national crop input distributor

Pinnacle is a market leader Supported by a growing distribution platform

Currently, one of the six largest crop input retailers in the United States; #1 or #2 market share in core states

Geographic expansion outside our core footprint provides weather and crop mix diversification and will drive further operational leverage and working capital improvements

Leading customer base of over 16,000 customers with an extensive network of 170+ distribution & storage facilities

Pipeline of actionable opportunities allows for accretive near-term growth despite the current challenging operating environment

Economies of scale continues to improve relative cost positions and bargaining power with suppliers

Grower consolidation is creating larger, more sophisticated buyers of crop inputs who are increasingly reliant on retail distributors that offer “one-stop” supply solutions

Completed 42 tuck-in acquisitions and 30 greenfields in the last 2 years to grow the footprint from one exclusively focused on the mid-south to being a national distributor

Independents30.0%

Co-Ops25.0%

CPS17.0%

Helena7.0%

Gromark6.0%

Willbur-Eillis5.0%

CHS4.0%

Pinnacle3.0%

Simplot3.0%

Source: Croplife.

Primary

Consolidation

Opportunity

Within a highly fragmented market

Original Sanders footprint2013 Expansion2014 Expansion2015 ExpansionAdditional Whitespace Opportunity

Becoming a National Crop Input Distributor

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Pinnacle Maintains An Essential Position in

The Agriculture Supply Chain In

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ers Small Local

Retailers

Large Agricultural

Co-operatives

Regional Retailer

Distributors

The agricultural input distribution industry remains highly fragmented

The recent trend toward consolidation is expected to continue

Customers value service and tend to be relationship-focused

National Retailer Distributors

Reported United States farm expenditures

increased ~2% to $66 billion in 2014(1)

Agriculture inputs supply chain Input manufactures

(1) USDA National Agricultural Statistics Service and includes only Agricultural Chemicals, Fertilizer, and Seed.

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Long-term demographic trends . . .

A Growing World Population Increasing Caloric Intake

7

4

2

Beef Pork Poultry

0.8 1.0 1.31.7

2.5

6.16.9

9.1

1750 1800 1850 1900 1950 2000 2010 2050

2,947 3,065 3,206 3,380 3,440 3,500

2,054 2,152

2,450 2,681 2,850 2,980

’64-’66 ’74-’76 ’84-’86 ’97-’99 2015 2030Developed Developing

3% 6%

13%

4%

15%

23%

33% 38% 39%

33%

Beef & Veal Pork Poultry Butter Cheese

OECD Nations Developing Nations

Consumption (kcal/day/capita)(Billion people)

Source: USDA.

Source: Food and Agriculture Organization of the United Nations. Source: Food and Agriculture Organization of the United Nations.

(Kilograms of Grain)

Source: Potash Corp.

Consumption Growth by Type of Food (2009 – 2019P) Kg of Grain Required for 1Kg of Meat

Long-Term Demographic Trends . . .

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

5 5 6 6 7 7 8 8 9 9 10 10 11 13 15 16 16 18 21 22 22 9 10 11 10 11 10 10 10 10 10 11 13 13 18

23 20 21 25

29 28 28

7 8 9 8 9 9 9 9 8 8 9

9 9

10

12 12 11

12

14 15 16

$22 $23 $26

$24 $27 $26 $26 $27 $26

$28 $30 $32 $33

$40

$49 $47 $48

$55

$64 $65 $66

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Seed Fertilizer Crop Protection Chemical

. . . Drive long-term demand for crop inputs

Increase in Crop Inputs Spending

($ in billions)

Source: USDA National Agricultural Statistics Service and includes only Agricultural Chemicals, Fertilizer, and Seed.

The driver for our business is the need for higher food / grain production globally

Per capita income growth in developing countries in the past decade has been the highest ever supporting increased caloric / protein consumption

− World population is projected to increase by 75mm people per year, to reach 8bn by 2025

Arable land availability remains limited

− Arable land on a per capita basis is expected to decline by 10%

Results are needed to improve crop yields

. . . Drive Long-Term Demand For Crop Inputs

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Distributors Must Focus On

Increased Efficiencies

Industrial distribution companies continue to focus on improving distribution networks to enhance service, drive profitability and lower working capital needs

− To truly be a leading industry, agricultural input distributors must learn from other distribution businesses where companies can service their customers with far fewer locations and significantly lower working capital needs

This can be achieved in a number of ways including more efficient distribution networks (i.e. spoke and hub distribution), the elimination of two-step distribution, and the overall consolidation of the industry

− With an estimated 9,000 retailers across the United States, agricultural input distribution is far too fragmented to allow for just-in-time inventory systems and efficient logistics networks

− Working capital typically represents a significant investment for most input distribution companies

An improved distribution network will provide significant benefits to the customers through enhanced service, better pricing and improved availability of products

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Industry Efficiency Will Require Significant

Consolidation

Independents30.0%

Co-Ops25.0%

CPS17.0%

Helena7.0%

Gromark6.0%

Willbur-Eillis5.0%

CHS4.0%

Pinnacle3.0%

Simplot3.0%

Source: Croplife.

Primary

Consolidation

Opportunity

Estimated US Market Share

Conference 2015: “Business Agility – The Power of Collaboration and eConnectivity”

Increased Focused On Technology To Drive

Efficiencies For Farmers

Collaboration and E-Connectivity is vital to continued success of the grower

But, are we as an industry focused on sharing costs for the mutual benefit of all?

Precision Ag is in its infancy, although very sexy, millions of dollars being spent through the supply chain to gain a competitive advantage

− Is the grower truly receiving unbiased data

True shared costs for the mutual benefits of the grower the only answer.

− The question remains, can we as an industry do that?, We have not accomplished it in becoming a more efficient distribution channel…..

− AgGateway can be the path with true participation from the industry with the common goal of helping the grower