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Jim Woulfe of Dairygold, Presentation at Irish Agri Event in Fermoy 2014
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1st May 2014
Realising the Opportunity in a Sustainable Manner
Jim Woulfe, CEO Dairygold
Realising the Opportunity 1
Realising the Opportunity in a Sustainable Manner
Jim WoulfeCEO, Dairygold
1 May 2014
2
• Dairy Industry - 2014
• Dairy Opportunities:— Global Trends— Dairy Market Supply & Demand
• Realising the Opportunities - Dairygold
• Summary
Contents
EU27 Ireland
Milk Production billion litres 138.7 5.5
Dairy Cows million 23.1 1.1
Average Milk Yield kg/year 6,669 5,355
% of World Wide Milk Production
% 24.4% 0.9%
Exported Volume % 10% 85%
Globally 625 billion litres Milk Produced (Cows)
Dairy Statistics
3
Global Trade
54.0 billion litres
c. 8½%
Reference: FH 2020 and Fonterra
Ireland Dairygold
4.7 billion litres 0.95 billion litres
Global Dairy Traded Market
4
Growing Demand for Food
By 2050 the world needs twice as much
food as today
Reference UN/FAO
5
Virtually all population growth is in developing countries
Reference: United Nations Population Division, World Urbanisation Prospects
Macro Data Indicated Population Growth
6
(200) 0 200 400 600 800 1,000 1,200 1,400
Asia
Sub-Saharan Africa
Latam
N America
Europe
Reference: Population Reference Bureau, 2010 World Population Data Sheet
Population Millions
Population Growth by Region to 2050
7
“In Developing World – e.g. China, urban dwellers consume
6 times more dairy products than rural dwellers”. FAO
In 1950 - c. 80% Rural :
20% Urban
In 2000 - c. 50% Rural :
50% Urban
In 2050 - c. 30% Rural : 70% Urban
Reference: United Nations Population Division, World Urbanisation Prospects
Population Growth – Urbanisation Shift
8
19992000
20012002
20032004
20052006
20072008
20092010
20114,000
6,000
8,000
10,000
12,000GDP/Capita (US$)
Reference: CIA World Fact Book
Growth of Middle Class consumers
Macro Data Indicated Income Growth
9
Adding as many as 1,000 new locations in Europe during 2014.
Plans to open 1,500 new stores in 2014 - half of them will be in Asia
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
Will add at least 700 new outlets in China this year
Changing Consumption Habits – Leading Global Brands Capitalising
10
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-15
2015
-200%
1%
2%
3%
4%G
row
th %
Reference: IDF
2.5% 2.4%
Global Dairy Demand Growth Rates
11
China Russia Mexico Brazil Korea Indonesia0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Self Sufficiency Rates
Emerging Markets have a Supply Deficit
12
Reference: Global Trade Atlas (GTA)
2008 2009 2010 2011 2012 2013 0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Whole Milk Powder (WMP) Imports - China
13
N America
<1%
LATAM
2%
< 1%
Europe
4%
MENA
India
10%
China
7%
1%
OCEANIA
1%
2%
2%
1%
7%
4%
2%
Demand Growth Milk Supply Growth
Reference: Fonterra 2013
Demand Growth & Supply By Region to 2020
14
Global Trade
Reference: FH 2020 and Fonterra
Ireland Dairygold
54.0 billion litres
c. 8½%
80 billion litresby 2020
8.25 billion litres by 2020
4.7 billion litres 0.95 billion litres
1.5 billion litres by 2020
Global Dairy Traded Market to 2020
15
• Global demand growth for dairy c. 2.5% per annum and projected to remain at this level to 2020.
• Demand growth will be dominated by emerging economies which are also predominantly milk deficit regions.
• Global Supply Trend will match demand but with greater volatility.
• Temperate climate countries with surplus dairy supply will benefit from this growth.
Global Dairy Market
16
Realising the Opportunity
Dairygold -“Sourcing Locally & Supplying Globally”
17
Ensure a growing and sustainable Dairygold.
• Develop the required infrastructure and optimal processing capacity
• Ensure a sustainable financial plan
• Retain Member Control over the business
• Develop a robust strategic plan that is flexible, focussed on growth, while minimising risk.
“Our single purpose is to maximise our Member Suppliers’ income from farming, by maximising the value we add to current and future milk and grain supply and by minimising the cost of farm inputs, while growing the Net Asset Value of the Business.”
Objective
18
5 Year Financial Performace Overview
19
941 916 959
0
200
400
600
800
1000
1200
1400
1600
Mill
ions
941 916 959 1000
11691239
12951353
14141478
0
200
400
600
800
1000
1200
1400
1600
Mill
ions +537m Litres
Milk Supply – Members’ Forecasts to 2020
20
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2011/13
Grass based production with February Incentive
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%2011/13
Future
Dairygold’s Milk Supply Profile
21
Additional Volume
Product Sector Markets % MilkVolume
Cheese 35%
Milk Powders 65%
Additional Volume R2M
Product Sector Markets% MilkVolume
Cheese
Demin Whey Powder
UK, Mainland EU, MENA and Russia.
Ireland, EU and China
35%
Milk PowdersWMP / FFMP / IMF Base
Infant Milk Formula & IMF Ingredients
EU, Middle East, North Africa, Latin America, China / Asia
Asia & Baby Food sector
65%
2013 Product Portfolio/Additional Volume R2M
22
20082009
20102011
20122013
20
22
24
26
28
30
32
34
36
38
40
33.4
21.8
29.4
33.6
30.9
38.1
Cen
ts p
er L
itre
6 Year Weighted AveragePrice of c. 31.5 CPL
Market Returns/Dairygold’s Milk Price Tracker 2008-2013
23
2015/’16+ 7.5 ML
2020
52.9 ML
2019/’20+ 7.5 ML2011
29.0 ML
2012-13 +3.7 ML
2014+5.2 ML
Cheese & Whey Processing
Phase IMitchelstown
Phase IIMallow Stage A
Phase IIIMallow Stage B
Peak Week Processing - Million Litres (ML)
Involves €200m Capital Investment over seven years to 2020
Increasing Processing Capacity by 23.9 MLTo
day
Expansion Programme
24
• Market Returns / Milk Price Volatility
• Financing & Cashflow Management
• Land Availability & Mobility
• Sustainable Dairy Assurance Scheme
Dairygold is working with Industry Stakeholders to address the above issues and is progressing initiatives to support its Milk Suppliers
Key Challenges Faced by Expanding Milk Producers
25
Mitchelstown HQ - 2013
Mallow Development
– 2014/15
Castlefarm – 2014
Shaping our Future Together
26
• World Dairy Demand is projected to continue to grow.
• Ireland’s natural competitive advantages positions us to take advantage of the increasing demand.
• Dairygold:• is well prepared to avail of the opportunities.• expansion plans are modular and aligned to Milk Supplier Forecasts,• has the appropriate financing in place (Members and Banks).
• Investments are focussed on availing of value added opportunities.
• The increased volumes will generate c. €200m additional revenue for Dairygold Milk Suppliers and a total of c. €350m to the wider community.
Summary
27
28
“Looking forward with optimism”
Thank You