Presentation Transcript

1. Company Overview A leading grower & marketer of branded, high-quality hydroponic greenhouse grown produce in North America Fresh vine ripened tomatoes, bell peppers & cucumber varieties Approaching 25th Year of Operations Annual sales of over $135m Listed on TMX (Toronto Stock Exchange) – VFF Member of TMX Clean Technology Market Index Vertically integrated year-round direct supplier to leading retail grocers Largest hydroponic producer in Canada and 2nd largest in North America Strong reputation as industry leader in quality and service Highly Sustainable “Local” source produce supplier Small carbon and physical footprint Highly productive compared to field farming Operating and marketing in Canada, US, Mexico and DR Greenhouse facilities owned – BC (110 acres), TX(110 acres) New 30-acre GATES® greenhouse completed – end of 2011 Four distribution centers Exclusive marketing arrangements with US, Mexican, Canadian & DR growers
2. Experienced Management Team Mike DeGiglio – Chief Executive Officer and Director Co-Founder; Served as Chief Executive Officer since inception 27 years intensive agricultural experience in controlled environmental growing – former CEO of two other industry related companies in greenhouse and agriculture biotechnology Served on active duty in the United States Navy as an officer and jet aviator (1976 – 1983), and the Naval Air Reserves (1983 – 2001), retiring at the rank of Captain Stephen Ruffini – Chief Financial Officer Joined Village Farms in January 2009 Previously at HIT Entertainment PLC where he served as Chief Financial Officer 25 years of extensive financial, operations, investor relations and mergers and acquisitions experience with leading international companies
3. Greenhouse Produce – A Premium Product Retail consumers pay a premium for Greenhouse produce Offers more consistent quality, taste, appearance and food safety than field grown produce Vine-Ripened Tomatoes Consistent quality Longer growing season Multiple varieties Flavor fully develops/better taste English Cucumbers Thin dark green skin Unwaxed/not coated Seedless Peppers Vibrant colors, firm skin Free of spots & blemishes Stems; green and fresh Sweet taste
4. Key Customer Relationships Relationships with Marquee Customers Winco Foods
5. Size of Produce Markets
6. Retail Tomato Market Retail Tomato Dollars Retail Tomato Volume (lbs)
7. Greenhouse Capacity (U.S. & Canada) 318 220 208 155 110 Greenhouse tomato capacity in Canada and the U.S. is approximately 2,343 acres1 1,334 acres in Canada 1,008 acres in United States Significant Canadian & U.S. Producers (in Acres) 2 3 3 2012 Village Farms AIF Purchased by NatureSweet through bankruptcy in early 2013 VFF management estimates of assets owned Note: North American capacity excludes Mexico
8. Strategically Located Operations Greenhouses Partners Distribution Centers Corporate Offices 4 VFF has the logistics and distribution capabilities to ensure fresh high quality produce that meets consumer demands. Over 60% delivered direct to retailer from greenhouses. Partnerships Greenhouses
9. Recent Initiatives New US/Mexico Suspension Agreement Place season minimum pricing on imports of Mexican Tomatoes Distinction between field and non-field product – mislabeling no longer allowed Stronger enforcement on both sides of the border Implementation of Certified Greenhouse Association Technology Founding member of Certified Greenhouse Vegetable Producers Association Qualified facilities may designate product with CGA logo Next step enhanced definition and enforcement of greenhouse definition – federal and consumers Hail storm took out 82 acres of production on 5/31/12 – Marfa, Texas Received net Insurance proceeds through June 2013 of $36.5m Final settlement of $11.25m – September 2013 Settlement of Insurance Claim Due to hail storm impact – One lender tried to force an early exit Restructured Long Term Debt – March 2013 $58m , LIBOR+, 5 years, 14- year amort. New Operating Line – September 2013 $10m, LIBOR+, 3 years Restructure of Company Debt
10. Financial Performance VFF revenue negatively impacted by Loss of Acreage Hail Storm in May 2012 – took out 82 acres – reducing production thus revenues 40 Acres up and operational late 2012 Another 20 acres up and operational in Spring/Summer 2012 VFF EBITDA impacted by Poor Pricing in late 2011 through September 2012 Hail Storm Proceeds in 2012 Revenue (US$ millions) EBITDA (US$ millions)1 See EBITDA Support Schedule
11. Capitalization High Low Current (1) $1.08 $1.08 $1.08 Price (2) 38.9 F/D Shares Outstanding F/D Market Capitalization $ 42.0 (3) $ 55.4 Net Debt $ 97.4 Enterprise Value (3) LTM TEV / EBITDA 4.2x (4) 8.3x Price / EPS Net Debt / EBITDA 2.4x (1) Close price as of 09/17/2013 (2) Calculated using the treasury stock method; includes exchangeable shares (3) As of 6/30/2013; rolling LTM EBITDA (incl. Ins. Proceeds) (4) Diluted earnings per share Capitalization Improved financial performance has driven share price appreciation VFF currently trades at 4.2x EV / LTM EBITDA Repair of 20 acres in Marfa, Texas in 2014 Proving out GATES®technology a potential catalyst for improved valuation / share price performance Two Year Price and Volume
12. Significant Insider Ownership Insiders hold an economic interest in Village Farms of approximately 29.8% Shareholder Overview Includes outstanding options 2 Management estimate
13. Key Trends Driving Greenhouse Development Forecasted Water Scarcity, 2050 Population Density, 2025 Carbon Dioxide Emissions, Today Water and Land Scarcity Greenhouses have higher production volumes per acre of land Water can be precisely measured and applied to plants Safer, Locally Grown Food Greenhouses can be located anywhere, esp. to serve densely populated regions Controlled environment reduces chance of disease Reduced GHG’s Combined heat and power systems on greenhouses are over 40% more efficient 47% reduction in CO2 99% reduction in SO2 93% reduction in NOx
14. GATES® – Extreme Growing Greenhouse Advanced Technology Expert System (“GATES®”) Millions of dollars invested to develop the next generation, closed system greenhouse Employs new concepts in greenhouse design technology, climate control and crop management Successful pilot plant in Marfa, Texas sets the stage for growth Consumer Demand Drivers GATES®1Facility Focus on “food miles” Reduced carbon footprint Reduced spoilage Supply in close proximity to local markets Food safety Ability to locate in non-traditional locations: closer proximity to key markets Advanced climate control with improved monitoring capabilities CoGen partnerships further improve economics and provide environmental benefits
15. Growth Initiatives Repair Damaged acreage in Marfa, Texas Repair 20 acres of hail storm damage – Spring 2014 Rebuild of another 20 acres – 2015/16 Expand Production Capacity Higher yields – year round (lowering costs per pound) Enhance existing acreage with lights More flexibility on crop selection Lower labor costs due to technology Expand US/CA regional markets Buy ‘local’ trend – retailers and consumers Improve retailer ‘shrink’ due to fresher product Freight advantages - cost savings
16. Investment Highlights Greenhouse Produce Industry Leader Vertically integrated year-round direct supplier to leading retail grocers Largest hydroponic producer in Canada and 2nd largest in North America Strong reputation as industry innovator in quality and safety Advanced Greenhouse Technology Track record of improvements in greenhouse production technology GATES®technology / Extreme Growing Repairs at Marfa facility will utilize some enhancements learned from GATES® “Local source” produce supplier – market is short of US supply Small carbon and physical footprint Highly productive compared to field farming Value-Add and Sustainability Story Increased EBITDA since the acquisition of Hot House in 2006 Reduced financial leverage Increased operating capacity and crop yield Significant alignment of interest – Management holds 30% ownership Successful Track Record of Value Creation
17. EBITDA Support Schedule