ISAGRO, GLOBAL INDEPENDENT ORIGINATOR FOR CROP PROTECTION. Status of the Isagro project. STAR Conference. London, October 23-24, 2018

Transcription

1 ISAGRO, GLOBAL INDEPENDENT ORIGINATOR FOR CROP PROTECTION Status of the Isagro project STAR Conference London, October 23-24, 2018

2 Agenda 1 THE CROP PROTECTION MARKET AND ISAGRO 2 FINANCIAL RESULTS 3 PERSPECTIVES 4 GROWTH SHARES 2

3 THE «GAP» BETWEEN DEMAND AND SUPPLY OF FOOD Today: imbalance between Demand and Supply of food 800 million people with inadequate access to food because, in spite of an important increase of the Supply, the Demand has grown more than proportionally (for human and animal feeding and for industrial/energy uses) % in 50 years (per capita production of corn/soybean/wheat/rice) (world population, billion people) Sources: ONU, FAO, elaboration of ONU and FAO data 3

4 WILL FURTHER INCREASE IN THE NEXT DECADES: A CHALLENGE FOR AGRICULTURE Over the next thirty years the world population is expected to reach over 9 billion people with an unavoidable reduction of «farming land» per capita ,400 2,500 1,900 1, E 2050E (estimate of world population growth, billion people) (square meters of farming field per capita) IT IS NECESSARY TO FURTHER (AND SIGNIFICANTLY) INCREASE YIELD PER HECTARE Sources: ONU, FAO, World Bank 4

5 CROP PROTECTION PRODUCTS PLAY A KEY ROLE IN AGRICULTURE Unavoidable losses ~ 40% Losses avoided thanks to Crop Protection Products ~ 30% Production without Crop Protection Products ~ 30% Potential production (100%) Actual production (60%) Source: Agrofarma 5

6 AND REPRESENT A GLOBAL MARKET Breakdown by region NAFTA 19.8% EC +1.8% Europe 22.8% EC +4.8% * At ex-manufacturer level and by product category Central and South America 23.4% EC +4.1% Africa and Middle East 3.9% EC +4.8% Asia and Oceania 30.1% EC +3.2% 2017 data Source: Phillips McDougall 6

7 BASED ON INNOVATION Time to Market: years Full development cost for a new molecule: 150 to 250 USD million Being Originators implies a long-term advantage Patented Off-patent of which: Still traded only by the first Originators Traded also by other players 2016 data Source: Phillips McDougall 7

8 WITH TWO CATEGORIES OF PLAYERS With «Molecule Discovery» Without «Molecule Discovery» M&A in progress Bayer CropScience Monsanto BASF DowDuPont FMC Sumitomo Chemical Japanese R&D companies ISAGRO (2) (1) 12.9 Sales ($ bn) Syngenta leach 0.2 Adama Nufarm UPL Platform Albaugh Sipcam Oxon* Redsun* Gowan* Sinochem* * 2016 data (2017 data) Sales ($ bn) 3.3 (1) Nihon Nohyaku, Kumiai, Nippon Soda, Mitsui Chemical, Ishihara, Nissan: generally selling mostly in their domestic Source: Phillips McDougall, Kleffmann Group markets (50%-65% of their Sales) (2) Selling in 80 countries (with domestic market accounting for 20% of Sales)

9 AND CONCENTRATED, YET WITH ROOM FOR A PLAYER LIKE ISAGRO 7 «BIG PLAYERS» (1) OTHER OPERATORS Completely integrated ~ 74% (40 $BL) ~ 26% (14 $BL) Generally not integrated and without discovery, but with development capabilities Originate and develop new molecules autonomously and sell through their own distribution networks With the strategic need to gain access to new molecules / innovative products 2017 data Agreements on a selective basis ISAGRO Independent Global Originator (1) Shall become 6 for the undergoing merger between Bayer CropScience and Monsanto New molecules / innovative products 9

10 ISAGRO S KEY FACTS & FIGURES When our Innovation was founded (Montecatini/ Montedison origin) Integration through acquisitions (India, Italy, Spain) Redefinition of strategy and partnership with Gowan Turnover ~ 200M 2016 data Start-up of Isagro project, with a turnover below 50M IPO on the Milan Stock Exchange Turnover ~ 150M (80% of which outside Italy) 10

11 OUR STRATEGIC PROJECT To build a long-term business model of Global Independent Originator in the Crop Protection Industry Isagro being: an ORIGINATOR of new molecules/products based on Innovative Research and on agreements with Third Parties for their exploitation a GLOBAL player (from supply-chain to sales), given the resources and the time-to-market associated with the discovery/development of new molecules/products an INDEPENDENT company, having a Controlling Subject granting the necessary managerial autonomy 11

12 FOCUS ORIGINATOR: BASED ON THE DISCOVERY OF NEW MOLECULES Isagro is the only non-large Crop Protection company operating globally based on its own Innovative Research ~ 15 M annual expenditure in R,I&D ~100 People working in R,I&D Benalaxyl (divested) Biofungicide Biostimulants/Pheromones Dimethoate (divested) Fluindapyr (under co-development) Kiralaxyl Novaluron (divested) Orthosulfamuron (divested) Tetraconazole Valifenalate (divested) 12

13 FOCUS GLOBAL: WORLD-WIDE PRESENCE ~ 150 M turnover Sales in 80 countries Direct distribution in Brazil, Colombia, India, Spain and USA 2017 data 610 employees 13

14 FOCUS INDEPENDENT: A CLEAR CONTROLLING STRUCTURE Listed on the Milan Stock Exchange (STAR* segment) Italian holding company indirectly controlling Isagro * High Requirements Stock Segment 14

15 OUR BUSINESS MODEL We are an integrated player based on Discovery, originating new molecules / solutions for Crop Protection worldwide ALONE THROUGH PARTNERS AND/OR M/L AGREEMENTS RIGHTS ALSO THROUGH PARTNERSHIPS/ AGREEMENTS MOSTLY THROUGH PARTNERS INNOVATIVE RESEARCH DEVELOPMENT CHEMICAL SYNTHESIS (active ingredients) FORMULATION (finished products) INT L MARKETING AND LOCAL DEVELOPMENT DISTRIBUTION 1 R&D CENTER AND 1 FIELD TRIAL CENTER (ITALY), 1 PILOT PLANT (INDIA) 5 MANUFACTURING PLANTS (4 IN ITALY AND 1 IN INDIA) DIRECT PRESENCES IN: DIRECT PRESENCES IN: BRAZIL, COLOMBIA, INDIA, SPAIN AND USA 15

16 OUR STRATEGIC GUIDELINES 1 DISCOVERY OF NEW MOLECULES BY OURSELVES 2 DEVELOPMENT OF PROPRIETARY MOLECULES THROUGH AGREEMENTS WITH THIRD PARTIES 3 M/L AGREEMENTS TO WIDEN THE COMMERCIAL EXPLOITATION OF OUR PRODUCTS 4 GROWTH IN THE BIOSOLUTIONS BUSINESS 5 EXPANSION OF OUR GLOBAL COMMERCIAL ORGANIZATION 6 SELECTIVE ACTIONS OF GROWTH THROUGH ACQUISITIONS 16

17 FOCUS M/L AGREEMENTS The competitive picture Isagro s products underexploited, in a market with Players hungry for new molecules/products Our business model Creating partnerships also through attribution of rights to third parties against initial revenues with related mid/long term supply agreements 10 MILLION IN MILLION IN MILLION IN MILLION IN MILLION IN 2017 Total 34 million 7.5 MILLION IN 2018 (first semester) Third Parties M/L Agreements: in addition to initial revenues, generate also future revenues through supply of active ingredients and/or royalties 17

18 Agenda 1 THE CROP PROTECTION MARKET AND ISAGRO 2 FINANCIAL RESULTS 3 PERSPECTIVES 4 GROWTH SHARES 18

19 2017: IN A YEAR STILL DIFFICULT FOR THE CROP PROTECTION MARKET In 2017, still unfavorable conditions for the Crop Protection market to recover: adverse climatic conditions in some key markets low prices of agricultural commodities still high level of inventory at distributor level, especially in Italy Annual sales of main global players (Basf, Bayer, DowDuPont, Monsanto, Syngenta) in line with 2016 in local currency 19

20 ISAGRO CONTINUED TO WORK FOR THE MID-TERM DEVELOPMENT PROJECT R,I&D activities Discovery Projects for both Chemicals and Bio-Products with new Nematicide completing Phase 1 (pre-development) Registration dossier of Fluindapyr (SDHi) submitted in Brazil in early 2018 and to be submitted in EU by this year-end 34 new registrations obtained worldwide Commercial activities Pre-launch of Dominus (fumigant) in Middle-East Start-up of direct sales in Brazil Growth Project for Isagro Asia initiated in 4Q

21 ACHIEVING IN 2017 BREAK-EVEN AT BOTH P&L LEVEL Consolidated data ( million) REVENUES % outside Italy % outside Italy EBITDA EBITDA from products/services EBITDA from M/L agreements RESULT BEFORE TAXES NET RESULT (0.9) (4.3) 21

22 AND FREE CASH FLOW LEVEL Consolidated data ( million) Net Fin. Debt Dec. 31, 2016 TOTAL FREE CASH FLOW 6.5 M Free Cash-flow for ΔNWC 7.4 Net Fin. Debt Dec. 31, 2017 D/E 0.52 Free Cash-flow excluding ΔNWC (0.9) Decreased receivables 6.1 Decreased inventory 1.9 Optimization of stocks Decreased payables (0.6) Ordinary variations D/E 0.47 Memo Net working capital (46.2) 58.5 (52.7) vs. (2.9) of 2016 Out of which 4.0 factoring no recourse 22

23 AND WITH BOOK VALUE OF KEY FIXED ASSETS LARGELY BELOW THEIR INTRINSIC VALUE 145 Net Fixed Assets 84 Of which key-assets (I.P.+plants): Tetraconazole 10.9 Copper 9.2 Biosolutions 8.1 (1) (2) (3) Isagro Asia 5.0 (4) Fluindapyr 20.5 (5) 145 Equity 99 Memo: Market Cap ~52 (6) Net Current Assets 61 Net Invested Capital Dec. 31, 2017 NFP 46 Equity and NFP Dec. 31, 2017 Consolidated data ( million) (1) Generating ~30 m annual sales (4) Generating ~35 m extragroup annual sales (2) Generating ~50 m annual sales (5) New broad spectrum fungicide originated by Isagro and (3) Including Biofumigant (significant sales starting from 18). being co-developed with FMC Corporation, with significant revenues Existing business generating ~20 m annual sales starting from 2022/2023 (6) Based on share prices as at October 18 th,

24 1H 2018: WITHIN A MARKET PICTURE STILL UNCERTAIN In South Europe, a raining 2Q facilitated 2017-end stock consumption, with limited new sell-in to distributors in the period In South America, drought in Brazil delayed the start of the commercial season Major Industry players reported 1H sales around -7% vs. 1H2017 in EUR currency (+4% in USD currency) 24

25 ISAGRO REPORTED RESULTS IN LINE WITH 2017 THANKS TO M/L AGREEMENTS Consolidated data ( million) REVENUES % outside Italy % outside Italy In yellow: Revenues/ EBITDA from M/L Agreements EBITDA H13 1H14 1H15 1H16 1H17 1H18 1H13 1H14 1H15 1H16 1H17 1H18 RESULT BEFORE TAXES NET RESULT H H14 1H15 1H16 1H17 1H18 1H H14 1H15 1H16 1H17 1H18 (5.9) (6.6) 25

26 1H 2018: REVENUES VARIATION Consolidated data ( million) (5.4) +3.5 (3.5) Italy and South EU Rest of EU Others M/L Agreements H 2017 actual REVENUES FROM PRODUCTS & SERVICES 1H 2018 actual 1H 2018 same exch. rates of 2017 REVENUES FROM M/L AGREEMENTS 26

27 1H 2018: EBITDA VARIATION Consolidated data ( million) (3.8) Contrib. margins (0.8) Fixed costs (0.9) (0.6) Allowances R,I&D M/L expensed Agreements H 2017 actual EBITDA FROM PRODUCTS & SERVICES 1H 2018 actual 1H 2018 same exch. rates of 2017 EBITDA FROM M/L AGREEMENTS 27

28 1H 2018: FREE CASH FLOW Consolidated data ( million) Net Fin. Debt Dec. 31, 2017 Free Cash Flow for ΔNWC (7.3) Net Fin. Debt Jun. 30, 2018 D/E 0.48 Free Cash-flow excluding ΔNWC 6.2 Trade receivables (8.7) Trade payables 8.4 Inventory (7.0) D/E 0.47 (46.2) vs. 5.5 of 1H 2017 (47.3) Note: All variations are calculated consistently with the B/S as of Dec. 31, 2017 restated as at Jan. 1, 2018 after having incorporated the adjustments as per IFRS 9 28

29 Agenda 1 THE CROP PROTECTION MARKET AND ISAGRO 2 FINANCIAL RESULTS 3 PERSPECTIVES 4 GROWTH SHARES 29

30 PERSPECTIVES FOR 2018 AND MID TERM Full year 2018 Full year 2018 results are expected to improve vs thanks mostly to higher initial revenues from M/L Agreements Mid Term Confirmation of the target of 200 m consolidated Revenues by , to be achieved through the development of sales of both Chemicals and Bio-Solutions, including external growth 30

31 3 MESSAGES TO INVESTORS Current market cap (52 M) < Equity book value (101 M) < N.A.V multiples indicate stock price penalization vs. peers EV/Sales EV/EBITDA P/E FMC Corporation* 5.5x 25.2x 35.5x DowDuPont Inc.* 2.2x 12.0x 20.0x ISAGRO** 0.7x 7.8x nm Moreover, unjustified spread (currently 16%) between Ordinary and Growth Shares ( Azioni Sviluppo ) Memo: Growth Shares yield a 20% extra-dividend vs. Ordinary Shares and are automatically converted into Ordinary Shares if the Controlling Subject loses control and in any case of compulsory public offer * Source: Banca IMI ** Based on stock prices as at October 18 th,

32 Agenda 1 THE CROP PROTECTION MARKET AND ISAGRO 2 FINANCIAL RESULTS 3 PERSPECTIVES 4 GROWTH SHARES 32

33 GROWTH SHARES, A NEW CATEGORY OF SHARES FOR THE FORTH CAPITALISM COMPANIES SPECIAL SHARES ISSUABLE FROM COMPANIES HAVING A CONTROLLING SUBJECT Idea born in Isagro, developed with the Stock Exchange, approved by the Italian SEC and, as of today, utilized only by Isagro 20% vs. Ordinary Shares, in the case of Isagro Not relevant for a minority shareholder In any case of loss of controlling stake and/or of compulsory Public Offer 33

34 GROWTH SHARES 1/3: A NEW CATEGORY OF SPECIAL SHARES TAILORED FOR COMPANIES HAVING A CONTROLLING SUBJECT AGAINST THE ABSENCE OF VOTING RIGHTS A PREMIUM AND AN INNOVATIVE PROTECTION MECHANISM FOR INVESTORS: AN «EXTRA DIVIDEND» VERSUS ORDINARY SHARES (1) THE AUTOMATIC CONVERSION INTO ORDINARY SHARES IN THE RATIO 1:1 WHEN HOLDING ORDINARY SHARES BECOMES FINANCIALLY RELEVANT FOR THE INVESTOR, I.E.: WHEN THE CONTROLLING PARTY LOSES CONTROL (2) IN ANY CASE OF COMPULSORY PUBLIC OFFER (1) The «extra dividend» versus the Ordinary Shares is defined, case by case, in the By-Laws of the issuing company (2) The controlling threshold is defined, case by case, in the By-Laws of the issuing company and it must be not lower than 30% of voting rights 34

35 GROWTH SHARES 2/3: THE VOTING RIGHTS, IN A COMPANY HAVING A CONTROLLING SUBJECT, BY FACT ARE NOT EXERCISED BY MINORITIES THE EXPERIENCE OF ISAGRO No. of 4 Shareholders % of equity 0.1% 0.9% 0.2% <0.1% <0.1% <0.1% <0.1% 0.1% <0.1% <0.1% <0.1% <0.1% <0.1% 1.4% 5.1% Attending of Minority Shareholders (thus excluding Holdisa) to Isagro annual Shareholders Meeting 35

36 GROWTH SHARES 3/3: SHARE PRICE DEPENDS ON CORPORATE RESULTS THE EXPERIENCE OF ISAGRO /share Blu line: Isagro ordinary share price Red line: net result (million of Euro) /million Memo: Corporate results are adjusted to exclude the effects of divestments 36

37 THANK YOU FOR YOUR ATTENTION For information: Ruggero Gambini Chief Financial Officer tel. (+39) Erjola Alushaj IR Manager & Financial Planner tel. (+39)

38 «Disclaimer» Estimates, considerations, statements and opinion, except for what referring to actual figures, are to be considered as data, estimates, considerations, statements and opinion regarding future, and have been elaborated and stated on the basis of available information and/or on the basis of those information considered the most reliable and/or the most reasonable. Such data, estimates, considerations, statements and opinion could prove to be incomplete and/or wrong and they incorporate elements of risk of uncertainty, beyond the company control. For such reasons, actual results may prove to differ versus data, estimates, considerations, statements and opinion contained in such presentation. Any reference to Isagro products is to be considered exclusively as general information about the group activity and is not to be intended, under any circumstances, as invitation to employ or propose the employment of such products. Such data, estimates, considerations, statements and opinion are not to be considered as a proposal of investment, under any circumstances, in Isagro s shares. 38