Presentation for Press and Inwestors -...
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Transcript of Presentation for Press and Inwestors -...
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PrePressentaentationtion for for PrPressess and and InwestorInwestorss
Taking full control over Taking full control over NetBrokersNetBrokers
Investment projectInvestment project ––BiBioetoethhanolanol plantplant
DecemberDecember 2006 2006
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Presentation overview
I. General information about PKM Duda S.A.
II. Taking full control over of NetBrokers
III. Investment project – Bioethanol plant
IV. Rights issue
Appendices: Boards of PKM Duda S.A.
Financial data
Disclaimer
Contact
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Part 1General information about PKM Duda S.A.
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PKM Duda – track record
Specialization in slaughter and meat dissection
Acquisition of companies operating in production, agricultural and service sector
Development of Polski Koncern Mięsny (Polish Meat Company) with high profile in distribution sector
1990
Foundation of a Company
IPO – PLN 20m (1m shares)
XII 2002 X 2003
Secondary offering –PLN 43m
(1m shares)
X 2004
Secondary offering in
order to finance the acquisition
of Makton
2005
Further acquisitions in
distribution sector
2006
- Overseas expansion- Asian contracts
- Ukraine- Game meat
- Announcement of new share issue
- Further acquisitions- Biofuel
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PKM Duda – value creation for shareholders
02
46
810
1214
1618
2003-01-312003-04-302003-07-312003-10-312004-01-312004-04-302004-07-312004-10-312005-01-312005-04-302005-07-312005-10-312006-01-312006-04-302006-07-312006-10-31
72.5 m PLN
1.45 bn PLN*
Capitalization
PLN
Share price
Capitalzation
Information about significant
acquisition (Makton)
Julius Baer becomes a shareholder of
PKM Duda
PZU exceeds a threshold of
10% of shares
Decrease of financial forecast
Financial results for IV Q 2006, entry into game sector
Share split 1 :10 Investment in Ukraine
Publication of financial forecast for 2006
Financial results for II Q 2006
Information shown separately on slide
No 7
Debut on WSE –issue share price PLN 1
Offering series C – share issue price
PLN 2.15
Publication of financial results for III Q 2004 and announcement of
forecast for 2005
Financial results for I Q 2006 – global drop on major world
stock exchanges
* Market Cap. of PKM Duda S.A. at closing on Tuesday, the 11th Dec. 2006
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Significant events in environment of PKM Duda since 30th September 2006
• Agreement for EU subsidies (PLN 4.2m in total)• Agreement with PKO Bank Polski S.A. for granting a multi-goal credit in amount of PLN 50m for PKM Duda• Announcement of key development directions of PKM DUDA S.A. and publication of details of rights issue • Purchase of 100% shares of Ukrainian production complex ZSA "Świniokompleks ZORIA". Finalizing of acquisition is
the next step to establish the livestock base in Ukraine. • Inflow of subsidies from European Union (PLN 4.5m)• Excess of 5% of GSM of PKM Duda by BZ WBK AIB • Very good financial results in III Q 2006 and increase of financial forecast for 2006• A GSM’s resolution concerning increasing of share capital by new rights issue of G series shares for outstanding
shareholders • Appointment of new member of Supervisory Board• Trade agreements with domestic and foreign appiontment customers for sale of pork half-carcasses. Estimated
contract value of PLN 416m with execution up to 31 December 2008. • Mr. Maciej Duda, the President of PKM Duda, is a winner of the IV edition of Polish competition arranged by
Ernst&Young and the title owner of „THE ENTERPRENEUR OF 2006”. This reward was posted for an effective business strategy based on family power. Maciej Duda got also a prize in the category: Production. A final judgement was made by an independent Jury with presidency of Jan Krzysztof Bielecki.
• Announcement of acquisition of: Stół Polski, ZM Biernacki and ZPM Biernacki• Purchase of 12,2% shares in PKM Duda by institutional investors from Duda Family’s Members• Taking full control over NetBrokers• Investment project –Bioethanol plant • Purchase of PKM Duda shares by members of Supervisory Board and Board of Directors (139k shares in total)
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Shareholder structure and corporate governance of PKM Duda
BZ WBK AIB 5.3%
AIG PTE5.3%
OFE PZU14.1%
Others38.4%
Duda's Family, Supervisory Board and
Management23.3%
Julius Baer Int. Equity Fund5.6%
Julius Baer Investment Management LLC
8.0%
Source: PKM Duda
Shareholder structure before applying for rights issue
OFE PZU14.1%
AIG PTE5.3%
BZ WBK AIB 5.3%
Others36.8%
Duda's Family, Supervisory Board and
Management24.9%
Julius Baer Int. Equity Fund5.6%
Julius Baer Investment Management LLC
8.0%
Shareholder structure after allotment of rights issue
Duda Family’s, Board of Directors and Supervisory Board Members plan to execute issue rights G series shares
• The company accepted the Corporate Governance Code.
• At least the half of the Supervisory Board members should consist of the independent Board members - all members of the Supervisory Board are independent.
• Two members of the Supervisory Board can be appointed by small shareholders (with less than 10% votes on the General Meeting)- at least one of them has to accept the appointment of the auditor (professional accounting controller) and any agreement between the company and associated persons.
• Limitation of votes execution above 50% of existing votes at the General Meeting day.
• The company maintains broad investors relationships- meetings with investors are held at the occasion of publishing of periodical reports (quarterly and annual) and important current announcements.
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PKM Duda - control over all segments of the value chain in the meat sector
Specialization
Agricultural and Livestock base
Slaughter, meat dissection and storage
Meat processing
Distribution
Co-operation Specialization
PKM Duda S.A. – Group leader
Agro-Duda
Wizental
PZZ Dystrybucja
Rolpol
Bioenergia
Agroprof
Po
lan
d
Agrohop
PKM Duda
Hunter Wild
Euro-Duda
Meat Service
PolskaWołowina
Borys Ukraina ZORIA
Makton
Fedrus
PKM Duda Distribution
NetBrokers
Eurosmak
Overs
eas
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PKM Duda – one of the biggest and most attractive meat capital groups in Poland
Attractive positioning
•No. 3 on Polish meat market, however:
•Specialization in slaughter – No. 1
•Strengthening position in the distribution sector – No. 1
•An attractive consolidation partner for smaller companies
•The perspective of revenues and profit growth of PKM Duda capital group
Polski Koncern Mięsny Duda
Activity: livestock farming, slaughter, red meat dissection and packaging, distribution of meat and meat processed products
Revenues 2005: PLN 870mEBITDA 2005: PLN 53.7m
Revenues 2006E: PLN 1,000m, EBITDA 2006E: 72 – 75m
Main competitors
Sokołów S.A. (HK Ruokatalo, Danish Crown)
Activity: red meat production and processing, pet food production
Revenues 2005: PLN 1.5bn
Animex Sp. z o.o. (Smithfield Group)
Activity: red and poultry meat production and processing, production of feeds
Revenues 2005: PLN 2.1bn
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Financial forecast for 2006
Net profit in PLNm
Source: PKM Duda
Revenues
EBITDA
Net profit
Forecasted results (PLNm)
PKM Duda Group
Revenues in PLNm
• In opinion of Board of Directors the following aspects justify the increase of forecast:
- expected increase in volume of slaughters in IV Q 2006,
- further export growth,
- very good results in agricultural segment and
- increase influence of own grown livestock on generated margins
• Referring to the above mentioned, Board of Directors of PKM Duda decided to increase consolidated financial forecast
• The Company will assess the possibility of the forecast delivery and, in case of a need will make quarterly revisions if necessary periods
• The Board of Directors of PKM Duda S.A. currently does not identify any circumstances that could cause risk for the increased forecast
533.4
40.2
23.3
2004
870.0
53.7
27.1
2005
327.8
26.0
12.7
2003
950 – 1 000
69 - 71
43 - 45
2006 E*
27.123.3
2004 2005
12.7
2003
+83%
+81%
49.0
2006E*
+16%
Source: PKM Duda
533
870
2004 2005
328
2003
+63%
+63% 1 000
+15%
2006E** Arythmetical average of forecast range
** New forecast (current financial report 88/2006)
* Primary forecast (current financial report 37/2006)
1 000
72 - 75
48 - 50
2006 E**
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PKM Duda – I-III Q 2006 segment results*
30.020.0
8.2
5.7
4.6
-0.3
-10,0
0,0
10,0
20,0
30,0
40,0
50,0
I-III Q 2005 I-III Q 2006
production service and distribution agriculturl
43.130.2
13.3
8.5
7.8
4.9
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
I-III Q 2005 I-III Q 2006production service and distribution agricultural
354502
367
38835
21
0
300
600
900
1 200
I-III Q 2005 I-III Q 2006
production service and distribution agricultural
Source: PKM Duda
Total segment revenues of PKM Duda (in PLNm)
756912
Source: PKM Duda
43.7
64.2
Total segment EBITDA of PKM Duda (in PLNm)
Source: PKM Duda
Production
PKM DUDA
Polska Wołowina
Eurosmak
Borys Ukraina
Hunter Wild
25.5
42.8
Total segment net profit of PKM Duda (in PLNm)
Segment’s line-up
* In order to compare with 2005 data, 2006 EBITDA and net profit were corrected (increased by PLN 4,332k - costs of management stock option program)
Agriculture
Agro Duda
Agroprof
PZZ Dystrybucja
Rolpol
Wizental
Bioenergia
Agrohop
ZORIA
Service and distribution
Makton
Fedrus
NetBrokers
Euro-Duda
PKM Duda Distribution
Meat Service
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PKM Duda forecast delivery after III Q 2006
1 000
Revenues
75775.7%
73.5
EBITDA
60.0 81.6%
49.0
Net profit
37.2 75.9%
Annual forecasts in comparison to results published in financial statement for III Q 2006 (in compliance with IAS)*
• PKM Duda Group’s forecasts were prepared in compliance with IAS (incl. PLN 6m costs of management stock option program)
• The Board of Directors of PKM Duda, having analysed results in III Q 2006 and in period of I-III Q 2006 confirms that the forecast announced will be exceeded
• The Board of Directors foresees no obstacles in successful delivery of increased annual forecast, additionally the results of EBITDA and net profit indicate possible forecast exceeding
• The results delivery after III Q 2006 in relation to the average of annual forecast (in PLN m) is given in the chart above (in PLN)
* The forecast given in the chart represents arithmetical mean of forecast range for 2006
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Recently announced potential acquisitions*
On November 28th 2006 PKM DUDA signed the agreement for purchase of 100% shares in Stół Polski Sp. z o.o. and on November 28th 2006 PKM Duda signed term sheet concerning the acquisition of business activities of: Zakłady Przemysłu Mięsnego Biernacki i Zakłady Mięsne Biernacki
ZPM and ZM Biernacki
ZPM Biernacki – Slaughtering and meat dissection, domestic leader in beef slaughtering and
pork production
ZM Biernacki – Storage and refrigerating services
2005 consolidated pro forma revenues : PLN 275m
Stół Polski Sp. z o.o.
Second biggest meat and processed meat distributor in voivodeship
mazowieckie
Producer of processed meat (premium brands)
2005 Revenues: PLN 219m
PKM Duda is on the verge of starting production in Ukraine (negotiations and due dilligence under way)
– Building strong position of PKM Duda in the new market* Basic information about planned acquisitions – ZPM Biernacki, Stół Polski, Ukrainian market are given in presentation from 29th November 2006.
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New investment projects
• On 11th of December 2006 PKM DUDA, in compliance with sale of share agreement, purchased 40% shares in NetBrokers from ComArch
• On 11th December 2006 PKM Duda signed an agreement with Lurgi S.A. concerning investment in bioethanolplant
Instalation for production of bio-ethanol from corn
grain(with a capacity of 100k t of
bioethanol p.a.)
Capital cooperation with LURGI
Estimated annual revenues: ca. PLN 300m
NetBrokers Sp. z o.o.
Taking full control over
Internet trade platform
2005 revenues: PLN 41.1m
PKM Duda – organic growth and through investments- value creation for shareholders
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Part 2Taking full control over of NetBrokers
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Areas of operations of PKM Duda S.A. vs.NetBrokers
Distribution and Service sector
Agricultural sectorProduction sector
Distribution of meat and processed meat
Pork Plant production
Act
ual b
usi
ness
lin
es
Storage and refrigerating services
Beef Breeding
FatteningGame meat Meat dissection services
Internet trade platform
Fodder productionTaking full control over
NetBrokers enables a very dynamic development of internet platform in the
future
Meat processing -“premium” brand
New
bu
sin
ess
li
ne
Biofuels and biogas-plants*
* Business line contains biofuel production. Revenues from biofuel farming components are given in the plant production business line.
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NetBrokers – overview
• Internet trading in food and agricullture products:
– free accessible information service
– bid-offer database for registred users
• Trade in food and farm produce as an intermediary and on its own account:
– agriculture stocks of Agricultural Market Agency and Material Reserves Agency (brokerage commissons on Warsaw
Commodity Exchange)
– import and export of agriculture products
34.9
29
41.1
33
3.90.7
39.3
0
10
20
30
40
50
2001 2002 2003 2004 2005 I Q- III Q2005
IQ-IIIQ 2006
+25%
+20%
NetBrokers’ sales revenues in 2003-2005and in IQ-IIIQ 2005 and 2006 (in PLNm)
source: PKM Duda
Kraków
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NetBrokers – internet trading platform
• Currently, NetBrokers internet trading platform is major platform for companies operating in food and agriculture production in Poland
• Purpose of internet trading platform is providing sector with information and a tool for trading (direct trade sales without intermediaries)
• Sources of revenues:
– monthly subscriptions for access to internet bid-offer database
– advertising revenue www.netbrokers.pl website
Scope of activities
• Number of users: currently 3 500 registered users (subsectors: meat, cereals, fruits&vegetables)
• The total value of bids and offers is ca. PLN 180 to 220m, of which 75% are offers and 25% are bids
• In 2004, in cooperation with ComArch, a new, more efficient revision of platform was launched, that saves user’s time while exploring
and modifying their own bids/offers
• In 2005 new mainframes were installed to improve efficiency and stability of the system
Platform users
NetBrokers – striving to become the biggest European platform for the food business companies
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NetBrokers – trading food and agriculture products
Scope of activities
• NetBrokers is shareholder of Warsaw Commodity Exchange (WGT) acting as a broker on commodity exchange market
• Sources of revenues:
– transactions on its own account (purchase and resale)
– intermediary (brokerage commissions)
• NetBrokers takes part in tenders for agriculture products and stocks of Agricultural Market Agency (brokerage commissions revenues), total share of NetBrokers in commodities purchase amounts to 10% (cereals) and 35% (meat)
• Due to Poland’s access to the EU, turnover on WGT significantly decreased; as a result, NetBrokers focused on intra-communitytransactions (transactions on its own account):
– import from Belgium, the Netherlands, Germany, France and Italy (mainly pork and poultry elements and frozen fats) for Polish meat processing and dissection plants
– intra-community export of beef to Austria, the Netherlands and Italy, as well as export outside the EU: half carcass and beef elements to Romania, Croatia, Bulgaria
NetBrokers revenues structure in 2003-2005and in IQ-IIIQ 2006
Source: PKM Duda
0%10%20%30%40%50%60%70%80%90%
100%
2003 2004 2005 IQ-IIIQ2006
Pork Beef Poultry Cereals Services Other
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NetBrokers –flexibility of operations
Taking into account trends in foreign exchange rates, NetBrokers increased import sales
Adaptation to fluctuating market conditions
Geographical structure of operations in 2003-2005 and in 1Q-3Q 2006 EUR/PLN and USD/PLN exchange rates in the period of Jan 2003-11 Dec 2006
Source: PKM Duda Source: NBP
7.28.8
7.5
3.5
0.0
7.2
22.224.3
0
5
10
15
20
25
30
2003 2004 2005 IQ-IIIQ 2006
In P
LNm
Export Import
2
2.5
3
3.5
4
4.5
5
2003
-01-
02
2003
-04-
02
2003
-07-
02
2003
-10-
02
2004
-01-
02
2004
-04-
02
2004
-07-
02
2004
-10-
02
2005
-01-
02
2005
-04-
02
2005
-07-
02
2005
-10-
02
2006
-01-
02
2006
-04-
02
2006
-07-
02
2006
-10-
02
in P
LN
EUR/PLN USD/PLN
Due to flexibility, good market research and well developed business contacts NetBrokers can quickly adjust to fluctuating market conditions and take advantage of arbitrage opportunities
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NetBrokers – financial results
EBIT (2003-2005 and 1Q-3Q 2005 and 2006)* in PLNm Net profit (2003-2005 and 1Q-3Q 2005 and 2006) in PLNm
* EBITDA is close to EBIT due to insignificant amortization (ca. PLN 60k p.a.)
1.20.9
1.41.2
0.2
1.1
-0.3-1
0
1
2
2001 2002 2003 2004 2005 IQ-IIIQ2006
IQ-IIIQ2006
1.00.7
1.11.01.1
0.2
-0.3-1
0
1
2
2001 2002 2003 2004 2005 IQ-IIIQ2005
IQ-IIIQ2006
Source: PKM Duda Source: PKM Duda
• Improved results in 2005 and in the period of IQ-IIIQ 2006 thanks to:
– increasing import
– selection of domestic long-relationship trade partners
– gaining new international trade partners (to become independent from fluctuations on particular EU markets)
– expanding export outside the EU
• Net debt at the end of IIIQ 2006: PLN -1.5 m (net cash)
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• PKM DUDA S.A. purchased of 40% shares in NetBrokers Sp. z o.o. from ComArch S.A.Transaction subject
• Transaction value: PLN 2.43m
• Terms of: within 14 days from the date of signing the agreement (in cash)Price and settlement
• Signing agreement: 11th December 2006Schedule
Terms, conditions and transaction schedule
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PKM Duda – organic growth and through investments - investment decision criteria
Investment decision criteria Condition fulfillment in the project
• Condition fulfilled
• Condition fulfilled
• Condition fulfilled
• N/A
• Condition fulfilled
• Condition fulfilled
• Condition fulfilled
• N/A
• N/A
• N/A
• Strategic fit of the investment target
• Talented, motivated and strong Management team oriented on development and success
• Perspectives of further improvement in profitability
• Usage of the geographic rent effect
• Considerable synergy effects planned for the PKM Duda
• IRR > 15%
• Attractive comparative valuation indicators (P/E, EV/EBITDA)
• Lack of important, impossible to hedge, risks (due diligence process)
• Comparison of acquisition with the green field investment co-financed from the EU Subsidies resources
• Agreement of the Supervisory Board
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Plans and objectives in the business line – internet trading platform
Growth plants Key sucess factorsStrategic goals
• Expansion led growth on Polish and international markets
• Intensifying trade activity by NetBrokers
• Developing high margin products share in product portfolio
• Biofuel components’ trade
• Product range development by high quality imported smoked meats
• Implementation of instruments eliminating currency risk
• Increasing sales
• Diversifying business partners
• Increasing margins on trade activities
• EBITDA margin > 5-6%
• NetBrokers – striving for being the major platform for companies operating in food and agriculture business in Europe
• Exclusive importer of meat products for PKM Duda
• Market share increase
• Effective support of export measures of PKM Duda
• Being coordinator of activities of companies form PKM Duda Group in terms of trade of meat and other agriculture products
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Part 3Investment project – Bioethanol plant
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Activity scope of PKM Duda S.A. vs.bioethanol production
Distribution and Service sector
Agricultural sectorProduction sector
Pork Distribution of meat and processed meat Farming
Act
ual b
usi
ness
lin
es
Beef
Game meat
BreedingStorage and refrigerating services
FatteningMeat dissection services
Internet trade platform
Entry into production of bioethanol - Innovative
approach of PKM Duda to green energy market
and to natural environment
Fodder productionMeat processing -“premium” brand
Biofuels and biogas-plants*
New
bu
sin
ess
li
ne
* Business line contains biofuel production. Revenues from biofuel farming components are given in the plant production business line.
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Innovative approach of the PKM Duda to the green energy market and the natural environment
Investments in biofuels and biogas-plants
• Construction of the biogas installations next to the processing plants and pig farms
• Construction of installation for bio-fuel production connected with biogas-plants
• Effective usage of the PKM Duda position created for over 15 years on the agriculture market in Poland
• Investments based on successful technologies only with partners having experience in bio-fuel and biogas production as well as creditworthiness and capital resources
• Considerable costs reduction of the waste materials utilization
• Better usage of the storage base in the elevator and in the farms
• Ensuring sales of own agriculture products
• Taking over of the next margin in the value chain of the agriculture production
• Gaining access to cheap component for the fodder production
• Removing of one of main development barriers by construction of new breeding and fattening farms
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Project summary
• South-West PolandLocation
• Bioethanol – 100 000 tonnes (126 m litres) p.a.
• DDGS – 101 000 tonnes annually fodder (rich in starch)Production
• Corn – demand for 330 000 tonnes p.a.Raw materials
Investment schedule• January 2007 – launch of construction process
• September-October 2008 – launch of production process
Capital expenditures• Required investment funds will be estimated after Pre-Engineering Package [PEP] for
installation of bio-ethanol along with determining details of the investment
Estimated financial results • Revenues – ca. PLN 294m p.a.
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Project concept
• Bioetanol – renewable fuel received from farming production
• Rising ecological awareness of the society stimulates interest in biofuel with ethanol as a component:
• fuels with ethanol reduce emission of exhaust fumes
• high share of oxygen in ethanol (around 30%) reduces carbon dioxide share in exhaust fumes – more efficiently than oxidants added to petrol
• European Union Directive 2003/30 assumes that minimum biocomponent share in petrol and diesel is to be 5,75% in all EU countries in 2010
• Taking into account the above assumption demand for bio-ethanol in Poland should amount to 1.2 m tones in 2010
Investment decision rationale
• The company decided to produce bioethanol because supply of raw materials corn is much greater than the supply of rape that is component of bioesters
• Corn has been chosen as a basic raw material for production. Corn is the base to produce bio-ethanol in the USA
• Corn – sufficient supply in Poland and constantly growing crops
• Corn crop purchase from pig breeders (closer relationship)
• Lurgi – technology provider (experience gained on US market in terms of biofuelproduction facilities)
Project idea
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Bio-fuels production – raw material selection criteria
Plant Starch or sugar share
Ethanol yield per t of raw materials efficiency
Crops Ethanol yield per hectare
Raw methanol per tonne of
ethanol
[%][l/t of raw material] [t/ha] [l/ha] [t/t]
Corn 65.0 393 6.1 2 397 3.21
Rye 62.0 390 2.8 1 092 3.23
Wheat - 340 3.5 1 190 3.71
Sugar-beet 16.0 98 45.0 4 410 12.86
Potato 17.8 120 16.0 1 920 10.50
Source: PKM Duda
• Corn yields the most ethanol from 1 tonne of this raw material
• Higher yield form 1 ha of sugar-beet along with lower efficiency of production from 1 tonne of this raw material means that in order to produce 1 tonne
of spirit, more raw material has to be used (resulting in higher demand for raw material and energy, as well as higher logistics costs)
• Corn based ethanol production is run without production of sewage (as opposed to root plants)
• Additional arguments for selection of corn:
– Corn can be grown on monoculture basis by using simple methods
– Production process waste can be used as fodder (DDGS-drying)
– Constant increase in corn farming area and in yield per hectare (applying new types of corn to produce biofuel that can increase yield in Poland
from current 6.1 t/ha to 14 t/ha)
– Stable price of corn on global markets in the last 5 years (in Poland corn price decreased after EU access)
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Location selection rationale
• Location selection criteria (South-West Poland):
– Supply of corn sources (local farmers), which has significant influence on deliveries continuity and on raw material prices (corn
accounts for 75% of total costs)
– Favorable transportation infrastructure in terms of deliveries of raw material and despatch of finished goods (transportation
network – close to highways and railways)
– Size of real property enables set up of complexed production plant and access to essential production infrastructure as well as the
potential for further production capacity development
• South-West Poland is the region of historic farming culture, which gives the opportunity to develop
efficient system of corn supplies and assures demand for DDGS-drying (fodder component)
• Favourable natural environment (flat and well irrigated land contributes to high crop yields)
• Corn farming in Opolskie, Lubuskie, Lower Silesia, Grater Poland voivodship accounts for over a half
acreage of corn in Poland and assuming corn consumption of 330 000 tonnes that the plant will need,
supplies form acreage of ca. 54 000 ha are required
• In case of insufficient supply of corn of imports form Czech Rep., Hungary, Slovakia and Ukraine is
avaible.
33
Lurgi – technology provider
• Global provider of technology for refining, petrochemical, chemical and natural gas industries. Innovative technology and experience.
• Expertise confirmed in numerous plants in the USA, where corn processing and production of bioethanol has long tradition (in 2001 - 8 bn liters of bioethanol produced in the USA)
• Lurgi technology has the following specifications:
• High production profitability
• High quality of final product
• Environmentally friendly non industrial waste production
• Ability to fully utilize all production process components
• High production capacity usage (min 333 days/year)
• Low energy consumption
• Experience on the Polish market: PKN Orlen and other plants in Poland (RafineriaJasło, Lotos, Rafineria Jedlicze, Rafineria Czechowice, Rafineria Nafty Glimar)
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Bioethanol – production technology
• License and technology along with technical specifications including topographical features to be provided by Lurgi.
• Currently, Lurgi is carrying out set of services to grant necessary permissions required for initial construction phase.
Bioethanol form corn grain – production process scheme• Technology offered by LURGI includes special requirements of raw
material (corn) by implementation of constant condensation process
and initial sugar extraction combined with half-continuous
fermentation. Initial sugar extraction from starch allows
simultaneous sugar extraction during fermentation process, and
results in lower risk of potential infection and bacteria growth and
gives stable conditions for yeast metabolism.
• Processing of post-fermentation liquid and concentration of slop is
done in moderate temperature. This way, proteins are less
contaminated and more energy is saved.
• For DDGS drying, special dryers have been designed to reduce
odour and redirect fumes for secondary heating and also to produce
DDGS-drying of high quality.
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Market analysis and marketing policy
• Taking into consideration the increase of minimal proportion of biocomponents in liquid fuels (in accordance with Directive 2003/30/CE) the increase of ethanol consumption is anticipated from ca. 400k tons in 2005 to ca. 1 200k tons in 2010.
• Currently negotiations with foreign clients are underway (possible significant contracts)
• The by-product DDGS-drying will be offered to farmers (pig breeders) and fodder mills–signing a long-term contracts for DDGS delivery
• Own fodder mills – to supply a cheap, starch rich raw material for fodder production by PKM Duda
0.4 m t
1.2 m t
+200%
Consumption of bioethanol in Poland
2010F2005Source: European Commission
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Project timetable
Stage I• Preliminary plant localization selection
• Production technology selection
• Commission for working out of preliminary engineering services by technology supplier due to grant necessary permissions required for initial construction phase.
November –December
2006
Stage II• Application for planning permission
• Preparation of raport on enterprise influence on the environment based on preliminary plant construction documentation
January –February 2007
Stage III • Grant of planning permission
• Signing contract for bioethanol delivery
January – March 2007
Stage IV • Signing credit agreement
• Signing agreements for delivery of technical utensilsFebruary – March
2007
Stage V• Building works, setting up and installation works
• Signing contracts for corn supplies
• Signing contracts for supplies of other raw materials
• Signing contracts for DDGS-drying delivery
April 2007 – July 2008
Stage VI• Special permissions and other permissions from administrative authorities concerning plant exploitation
• Plant start-up
• Commencement of bioethanol productionJuly – September
2008
Stage VII • Completion of required building works
• Bioethanol production in compliance with the requirements of technology and license provider
September –October
2008
37
Agreements’ overview
Agreement between PKM Duda S.A. and Lurgi S.A. (11/12/2006)
• PKM Duda is interested in invwesting in bioethanol production plant that would process corn grain at capacity of 100 000 tones p.a.
• Lurgi is able to provide such technology for PKM Duda and both parties have already signed a separate agreement (described below), according to which Lurgi will support PKM Duda in some of engineering and planning activities.
• PKM Duda will be responsible for: purchase of real property, raw materials supply, initial product marketing, acquiring permissions, logistics and necessary activities of construction and operation of the plant.
• Budget including licence, basic and technical project, finalizing supplies and construction completion will be delivered by Lurgi.
• The parties declare the will to establish investment company (called ‘Company’), in which Lurgi will have 10% share, whereas PKM Duda - 90%.
• PKM Duda has an option to introduce another strategic shareholder.
• The agreement is legally binding until Company is established but no longer than 6 for months.
The agreement: initial engineering services for bioethanol plant in Poland (11/12/2006)
• Lurgi will carry out initial engineering services so that PKM Duda can grant necessary administrative permissions for the initial construction phase as well as present capex requirements for construction of bioethanol plant in Poland.
• Bioethanol production plant (in Poland) is to be continuous operating unit, processing corn grain. Engineering works will address PKM Duda and administrative requirements as well as and topographical requirements of real property.
• Lurgi technology uses corn grain as a raw material by implementation of constant condensation process and initial sugar extraction combined with half-continuous fermentation.
38
Goals and plans of business line – biofuel and biogas plants
Strategic goals Development plans Key success factors
• Introduction of innovative production technologies in order to develop margins
• Active cooperation with farmers (pig breeders) already cooperating with PKM Duda
• Optimalization of logistics for stock minimalization
• DDGS-drying for fodder production
• Implementation of instruments eliminating currency risk
• Long-term agreements withsuppliers of corn and DDGS-drying buyers
• Increase of raw material supply contracts
• Sales volume increase
• Increase of processing margin
• EBITDA margin> 30-35%
• Full production capacity to be achieved soon (100k t of bioethanol p.a.)
• Capacity > 95-100%
• Keeping stock on a low level
• Economies of scale
• Optimal production capacity utilization
• Export development
• Production facilities development
• Margin maximization of sales to most prospective customers
39
PKM Duda – organic growth and through investments - investment decision criteria
Investment decision criteria Condition fulfillment in the project
• Condition fulfilled
• Condition fulfilled
• N/A
• Condition fulfilled
• Condition fulfilled
• Condition fulfilled
• Condition fulfilled
• N/A
• N/A
• Request on further stage of the project
• Strategic fit of the investment target
• Talented, motivated and strong Management team oriented on development and success
• Perspectives of further improvement in profitability
• Usage of the geographic rent effect
• Considerable synergy effects planned for the PKM Duda
• IRR > 15%
• Attractive comparative valuation indicators (P/E, EV/EBITDA)
• Lack of important, impossible to hedge, risks (due diligence process)
• Comparison of acquisition with the green field investment co-financed from the EU Subsidies resources
• Agreement of the Supervisory Board
40
Part 4Rights issue
41
Conditions of the new shares issue for the present shareholders
Wielkość Oferty
Notowania
Rodzaj OfertyOffer structure • G-series shares issue for the outstanding shareholders
• 1 share gives right for purchase of 1 share from the new issue
Size of the offer • Number of new shares: 48 200 000
Offering broker/ Financial advisory
• Dom Maklerski IDM S.A. (offering broker)
• IPOPEMA Securities S.A. (financial advisor)
Listing• Rights issue, rights to the issued shares
• Shares on the Warsaw Stock Exchange
NWZAEGM• On the 7 November 2006 the EGM of PKM Duda’s shareholders decided
about G-series share issue. Issue price of 3 PLN was set by the Supervisory Board
Record day • Record day is the 8 December
Prospectus of G-series shares of PKM Duda S.A. was filled with Polish Financial Supervision Authority adjustment of the management program to the capital changes, connected with the rights issue
42
Planned investment targets
Investment target Estimated value
Acquisition of companies with the profile comparable
with the PKM Duda (beef and pork) – alternative
negotiations with two further entities
- ZPM and ZM Biernacki
PLN 95-130m
< PLN 95m
Acquisitions of companies in the meat and processed
meat distribution segment
- Stół Polski
PLN 45-50m
PLN 27.5m
Biofuel and biogas-plant* PLN 30-40m
Pigs farms in Ukraine PLN 35-40m
Acquisition of companies with the profile comparable
with the PKM Duda in Ukraine – high production
standards (pork) PLN 40-60m
Pigs and piglets farms in Poland PLN 50-60m
TOTAL PLN 295 - 380m
Po
lan
dO
vers
ees
* PKM Duda’s planned equity founding
43
PKM Duda – organic growth and through investments- value creation for shareholders
Mission of the PKM Duda S.A. is to assure the increase in investments value for the shareholders,
expressed as the sum of all dividend pay-outs and the share value increase with assumption of the
company’s value appreciation accomplishing investments on the level enabling taking of the
leading position (concerning the market share and the know-how level) in the domestic meat
production sector.
k PLN
66 190
601 525
1 301
723
723
0
200
400
600
800
1 000
1 200
1 400
1 600
IPO 2003 2004 2005 2006* 2006**
Capitalization Theoretical value of rights to the issued shares
1 446
Calculation based on weighted average number of shares of PKM Duda and share price at the end of the period* Market Capitalization as for 8th of December 2006** Market Capitalization at 11th of December 2006 with assumption of subscription of all G-series shares and the issue price of 3 PLN
44
Appendices
Boards of PKM Duda S.A.Financial dataDisclaimerContact
45
Boards of PKM Duda
President of the BoardMaciej Duda
Vice-President of the Board
Bogna Duda-Jankowiak
Vice-President of the BoardRoman Miler
Board MemberFinancial Director
Rafał Oleszak
Board of Directors of PKM Duda S.A.
Supervisory Board of PKM Duda S.A.
Chairman of the Board: Rafał Abratański
Board Member: Marek Dybalski
Board Member: Grzegorz Leszczyński
Board Member: Tomasz Łuczyński
Board Member: Rafał Tuzimek
Board Member: Maciej Zientara
46
Financial data
2005 I H 2006 I-III Q 2005 I-III Q 2006
870 019
765 408
12.0%
33 620
49 083
21 908
2.5%
20 310
3 490
38 728
4.5%
7 303
13 558
32 477
6 060
27 103
3.1%
496 221
442 165
10.9%
18 625
20 695
14 736
3.0%
12 406
1 548
25 594
5.2%
6 548
4 709
27 433
4 089
23 245
4.7%
630 032
549 178
12.8%
36 901
25 609
18 344
2.9%
13 187
1 941
25 590
4.1%
3 754
9 053
24 291
4 277
21 123
3.4%
757 138
662 981
12.4%
29 908
34 729
29 520
3.9%
17 552
2 006
45 066
6.0%
6 814
6 937
44 943
7 343
37 200
4.9%
Revenues
Cost of goods sold
gross margin on sales
Sales costs
General and Administrative Expenses
Profit on sales
margin on sales
Other operating income
Other operating costs
EBIT
EBIT margin
Financial income
Financial costs
Gross profit
Income tax
Net profit
net margin
PROFIT AND LOSS STATEMENT PLN ‘000
Consolidated data. Source: PKM Duda S.A.
47
Financial data
BALNCE SHEET
466 981
269 436
197 545
58 921
104 736
466 981
206 425
1 065
103 028
139 307
17 156
530 380
312 276
218 104
60 533
118 565
530 380
235 288
1 864
109 256
167 318
16 654
2005 I H 2006 I-III Q 2005 I-III Q 2006
444 873
262 670
182 203
49 771
89 847
444 873
209 825
1 152
99 888
124 862
9 146
546 687
316 288
230 399
64 884
123 093
546 687
257 678
692
98 746
173 589
15 982
PLN ‘000
ASSETS
Non current assets
Current assets, incl.
Inventories
Receivables
EQUITY & LIABILITIES
Shareholders’ Equity
Provisions
Long-term liabilities
Short-term liabilities
Accruals and deferred income
Consolidated data. Source: PKM Duda S.A.
48
Disclaimer
• The following document concerning potential investment targets of PKM Duda wad prepared by PKM Duda („the Company”)
• The following documents contains presentation of only the key elements of transaction’s structure and the basic transaction’s conditions connected with the potential investment targets. The following document does not present the whole and comprehensive picture of the potential investment targets, as well as the position and perspectives of the Company. The following documents and the accompanying slides and their description may present statements concerning future. Statements concerning future does not guarantee fulfillment of expectations about the future results and are connected with risk and uncertainty and real financial situation of the PKM Duda group in the future may differ considerably from the expectations described or presumed from the abovementioned statements concerning the future.
• The Company conveys existing picture of potential investment targets, prepared according to the best knowledge of the Board of Directors, with the reservation, that it is not possible to give full information concerning financial statements and operational data of the potential investment targets. The realization of the transactions, described in the following document depends on the fulfillment of many conditions, that may not be fulfilled.
• With respect to the comprehensibility or the reliability of information presented hereby the Company cannot grant any guaranteesor statements. The Company cannot take any responsibility from any reason connected with using the following document. The following document was prepared solely for the information and promotion sake and may be treated neither as a purchase or sales offer nor as an offer aiming at gaining any offer for purchase or sales of any kind of securities or financial instruments or participation in any trade enterprise. The following document is not an offer or invitation to purchase or subscribe for any kind of securities in any jurisdiction and no decision included in it cannot be base for any agreement, liability or investment decision and one should not rely on it in connection with any agreement, liability or investment decision.
49
Contact
Grąbkowo Production Plant
Polski Koncern Mięsny DUDA S.A.
Grąbkowo 73, 63-930 Jutrosin
tel./fax (+48) 65 547 70 00
Headquarters
Polski Koncern Mięsny DUDA S.A.
ul. Taśmowa 3, 02-667 Warszawa
tel. (+48) 22 621 49 27
www.pkmduda.pl
