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Kniazi Lani LLC, 26k ha Farm

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Management Presentation for 26k ha Farm in Western Ukraine in which a 70% stake was recently purchased by a strategic investor.

Management Presentation for 26k ha Farm in Western Ukraine in which a 70% stake was recently purchased by a strategic investor.


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  • 1. 1
  • 2. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 2
  • 3. Strategic background Overview of the agricultural market in Ukraine (1/5) Current situation Yields and productivity rate of major cereal After the collapse of the Soviet Union, Ukrainian crops in Ukraine, 1990-2007 60000 4 agriculture declined for a long time as a result of cuts in 3,51 3,46 3,21 3,5 state support and lack of investment incentives. According 50000 2,79 2,83 to USDA estimates, the Ukrainian grain production 2,65 2,68 2,71 2,73 2,6 3 40000 2,43 2,45 2,41 decreased by 50% over the period 1990 – 2000 and 2,08 1,97 2,18 2,5 1,96 1,94 fertilizer use fell by 85% during the same period 30000 1,82 2 As a result, the Ukrainian Ministry of Agriculture developed 1,5 20000 the Countryside Development Program (CDP) in order to 1 rebuild agricultural sector, which according to EIU forecast 10000 0,5 will stand at 10% of the country’s GDP in 2009 0 0 The implementation of the CDP was expected to result in a 100% increase in farming exports and 60% increase in the total volume of agricultural production during the Harvested, Yields, period from 2005 – 2015 tons ton/ha Source: Ukrstat, 1990-2008 3
  • 4. Strategic background Overview of the agricultural market in Ukraine (2/5) Advantages and disadvantages of agriculture in Crop harvesting in Ukraine by major plant Ukraine families, 2008 Vegitables Apart from convenient geographical location, mild climate 7 965,10 and on-going economic development, the Ukrainian 8% agricultural sector has the following key comparative advantages: Potatoes − soil quality 19 545,40 19% − availability of vast areas of arable land Cereals & − potential for low cost farming legumes Sunflower 53 290,10 − prospects of productivity improvement 6 526,20 53% 7% Currently, the major weaknesses attributable to the agricultural industry in the Ukraine are: Sugar beets − low crop productivity 13 437,70 13% − lack of proper inputs such as chemicals and machinery Source: Ukrstat, 2008 − existing infrastructure − lack of experience in profitable farm management − insufficient legislative support in development and implementation of state policies and regulations − absence of land reform − lack of rural financing 4
  • 5. Strategic background Overview of the agricultural market in Ukraine (3/5) Soil quality Humus content in soils by districts of agricultural Ukraine owns wide areas of chernozem, a black coloured area of Ukraine soil, characterised by exceptional fertility. According to US Department of Agriculture, about one-third of the world’s supply of chernozem is located in Ukraine Chernozem contains a high percentage of humus, an organic material essential to the fertility of soils, which grants a comparative advantage in crop production A humus layer of the soils in Ukraine varies in depth from 15 cm to 150 cm and sometimes more, which is one of the highest indicators in the world, according to Food and Agriculture Organisation of the United Nations The high content of humus in the soil produces above Humus content (%) 1.3% - 2.1% (low) average agricultural yields as it: 2.1% - 2.9% (average) − provides micro-organisms necessary for healthy level of 2.9% - 3.7% (increased) 3.7% - 4.9% (high) soil life Source: Ministry of Agrarian Policy of Ukraine − allows to preserve nutrients vital for plant growth − absorbs moisture up to 80%-90% of its weight, protecting the soil from drought conditions − grants greater aeration of the soil 5
  • 6. Strategic background Overview of the agricultural market in Ukraine (4/5) Existing infrastructure Availability of vast areas of arable land The Ukraine possesses a developed transportation It should be noted that based on Dragon Capital Report network including rail, road and inland / sea waterways for there are 42.9 million ha of agricultural land (71% of total the movement of crops within the country land area) in Ukraine Ukrainian port facilities include 17 seaports equipped to With a high supply of available land, domestic agricultural handle grain with storage capacity for 1.2 million tons and companies have the opportunity to consolidate their land with a throughput capacity of about 16 million holdings compared to those in EU countries. According to tons, according to AAFC market research Eurostat, the average agricultural company in the EU Most large arable farms have access to storage facilities owned 20.7 ha. of land in 2005. According to DerzhZovnishInform, a Ukrainian analytical agency, the average Ukrainian agricultural company operated 72 ha. in Please also refer to Appendix 5 for precipitation and 2005, resulting in a larger base for the distribution of fixed average temperature maps costs Recent developments indicate that a number of private companies tend to lease smaller farms in close to form large-scale agricultural production units operating on a scale of 30,000 to more than 200,000 ha. each 6
  • 7. Strategic background Overview of the agricultural market in Ukraine (5/5) Potential for low cost farming Prospects of productivity improvement Major local factors indicating opportunities for low cost We draw your attention to the fact that as a result of lower harvesting in the Ukraine are: level of fertilization treatment of land, machinery utilisation − the average rental cost for agricultural land was around and lack of experienced farm managers; current UAH300 - 400 per ha. in 2009 productivity in the Ukraine is below the level of the EU, regardless of the availability of rich soil and favourable − Ukraine has the cheapest labor among its competitors climatic conditions − chernozem soil requires less mineral fertilizers and According to Eurostat, during the last three years lower refinement Ukrainian farmers, engaged in harvesting arable crops and According to analytical agency AAA, the average vegetables, achieved productivity level of 2.6 tons per production cost of wheat in Ukraine was in the range ha, which is much lower than in the EU (average of 5.9 USD75-110 per ton in 2007. For comparison, production tons per ha.) cost of wheat in the UK and the USA averaged USD160 On the other hand, large private Ukrainian enterprises per ton in 2006, according to Scottish Agricultural College have begun to apply modern fertilization and chemical spray protection as well as investing in machinery in order to improve harvesting yields 7
  • 8. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 8
  • 9. Project description Description of the Company Target Farm Holding Profile Kniazi Lani LLC (hereafter referred to as FH, the “Company” or the “Farm”) currently operates three locations with the total land bank circa 26 th. ha. Two locations in Lviv and one in Zhytomir region The Company owns two elevators (storage capacity: 30 and 40 th. tons) and has an opportunity to acquire a small elevator (storage capacity: 5 th. tons) in Zhitomir to support local production for circa USD150 thousand. The Farm also has additional opportunities to acquire extra 10 th. ha. of farm land in Ivano-Frankivsk with a new Cimbria elevator facility for circa USD4.5 million The Company is currently in the process of acquiring another 4 th. ha. Land Bank inside their territory, for the Management: price of re-registering the land (USD50 thousand) Strong management team in place with well developed political and financial connections Production: 26 th. ha of excellent soil with the potential increase up to 30 th. ha.) Modern technology in place Storage capacities: 70 th. tons of elevator storage capacity 9
  • 10. Project description Advantages of the Company The Farm benefits from the following advantages: − Close location of the Company’s Land Bank to − Favourable Company’s location - close proximity to Landkom International could provide opportunity to major shipping routes and international grain trading merge with the listed Company which will provide hubs immediate liquidity and an exit opportunity − Secured large areas of high quality, contiguous Land harvested and yields agricultural land via long-term lease agreements Land Bank 2009/10, Yields, suitable for a wide range of crops ha tons/ha − Excellent soil structure (pH, humus, calcium and Winter OSR 6,688 3.39 potash), producing high yields Winter Wheat 6,688 4.52 Spring Wheat 803 3.77 − Flat fields, which are large enough to allow widest Winter Barley 4,013 3.94 equipment available Spring Barley 2,675 3.65 − Modern technology in place Corn 3,210 8.89 − Storage and logistics availability: Buckwheat 1,338 0.79 Soya 535 0.99 Currently, the Company has its own drying and Winter Oats 268 4.00 storage capacity, which is sufficient to support current land bank of 26 th. ha. Peas 268 2.53 Forage 268 n.a. The Company owns and maintains a substantial fleet Total 26,750 of its own grain trucks, lowboys, and trailers, capable of servicing current production. Additional needs for logistics are usually outsourced 10
  • 11. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 11
  • 12. Asset based valuation Valuation of the Farm Based on our market research we have identified, that current prices for land lease rights Valuation summary for large, well-managed farms, in Ukraine, are in the range from USD150 to USD300 per Land assumptions ha. Based on our experience and expert opinion we think that the fair value of the land Existing land bank, ha. 26,750 lease rights for the land controlled by the Farm is at the upper range per ha. To be obtained, ha. 4,000 Land bank, ha. 30,750 The Company has two elevators (storage capacity: 30 and 40 th. tons) and several Price per ha, USD 250 support bases. Its handling facilities include 2 RIELA dryers and 1 large CIMBRIA dryer (all Value (in USD million) less than 3 years old) We consider that the fair value of the elevator capacity and several Land bank 7.7 support bases approaches its Net Book Value (NBV) in the range of USD7.5 million Storage facilities 7.5 Due to the fact that major part of the Company’s equipment is new and well maintained, we Machinery and other 5.2 take NBV of the equipment other than storage to be in line with the Fair Value of these Biological assets 2.7 equipment – USD5.2 million Management stewardship 1.9 The Farm has seeded 5,150 ha with winter rape equalling an investment of UAH1,700 per Enterprise Value 25.0 ha. The Company also invested approximately USD1 million in winter barley seeding. This Loan with local banks (7.0) makes fair value of Biological Assets USD2.7 million. (this amounts ware confirmed by Equity Value 18.0 SAC) In addition, intangible assets such as current management’s expertise and good Company’s reputation should be evaluated. Due to good reputation of management the Company has over EUR1 million in supplier credit available at any given time. We estimate it to be in the range of USD1.9 million In order to derive the Equity Value we have deducted book value of the Company’s debt with several prominent local banks used for CAPEX (not working capital or acquisition of the land bank) of circa USD7.0 million Based on the above we think that indicative value of 100% of the Farm shares is USD18.0 million 12
  • 13. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 13
  • 14. Economics Key assumptions (1/7) Projected For the purposes of the DCF method of valuation, the forecast period represents the period from 1 Oct 2009 to 31 Dec 2015. period Forecast interval is 1 year It was assumed that the Company would receive cash flows steadily over each period. Therefore, for discounting purposes we proceeded on the assumption that free cash flows occur at mid-period. All cash flows are discounted to the date 1 Oct 2009 Projection Financial projections and the assessment of terminal cash flows were prepared in UAH, since Company’s prices as well as expenses currency are largely set in UAH. Then all figures are translated to USD using 8 UAH/USD exchange rate Type of cash Due to high uncertainty as for the inflation rate during the forecasted period, the projections were prepared in real terms, with no flow accounting for inflation. Therefore, the discount rate used was also calculated in real terms Discount The Company’s forecast of terminal cash flows were discounted to their present value as at the Business Plan preparation date using rate a discount rate that reflects the risks related to the achievement of cash flows, thereby forming the present value of the Company The Cost of Invested Capital was used as the discount rate and was calculated as the weighted average cost of invested capital (WACC), taking into account the required return on equity and the effective interest rate on borrowed funds Terminal To determine the terminal cash flows, we assumed a stable growth level of free cash flow on invested capital from 2015 to infinity. cash flows When calculating terminal cash flows we assumed that depreciation will equal to capital investments and change of working capital was assumed to be zero Long-term growth rate of terminal cash flows was assumed to be 0% Tax rates The Company is subject for corporate profit taxes (CPT). Although the Company could claim exemption from such a tax in Ukraine and become a fixed agricultural taxes (FAT) payer which is calculated based on 0.15% of the cadastre value of land used In this model we have used CPT at 25% rate to be more on a conservative side 14
  • 15. Economics Key assumptions (Revenue) (2/7) The Group’s projected sales revenue is based on the Harvested land calculation of expected crop sales as at the Analysis Date, According to Management, the Company seeded / taking into account the Groups’s planed structure of harvested and plans to seeded / harvest land as shown in seeding for 26 th. ha. as at 31 Aug 09 the tale below It should be noted that the sales revenue projection was performed separately for each crop types harvested Planting, ha 2008A 2009A 2010F From 2011F All crops are harvested during the third and fourth quarters Winter OSR 4,304 6,293 6,688 7,688 and the Company’s Management believes that all Winter Wheat 3,355 5,270 6,688 7,688 harvested crops will be sold in three months after being Spring Wheat 565 663 803 923 harvested. No unsold crop inventory is expected as at year Winter Barley 892 2,047 4,013 4,613 end Spring Barley 1,421 2,937 2,675 3,075 Total sales revenue for each harvested crop is the product Corn 4,000 3,577 3,210 3,690 of volume of crop sold and crop prices in the third and Buckwheat 175 1,141 1,338 1,538 fourth quarters Soya 85 565 535 615 Winter Oats 38 306 268 308 Volume of crops sold during the third and the fourth Peas 346 150 268 308 quarters equals to volume of crops produced which is the Forage 575 325 268 308 product of: Total 15,756 23,274 26,750 30,750 − harvested land for each crop Source: Company’s Management A – actual data; F – Forecast − yield per crop 15
  • 16. Economics Key assumptions (Revenue) (3/7) Yield per crop Yields, tons/ha The projected yield per crop of the Company in 2010 and 2008A 2009A 2010F 2011F 2012F 2013F 2014F 2011 were performed by agronomy of the Company. Winter OSR 3.39 3.00 3.39 3.42 3.46 3.49 3.53 Yields projection for the following years was performed Winter Wheat 4.48 4.48 4.52 4.57 4.62 4.66 4.71 based on (see graph to the right) was based on the Spring Wheat 3.73 3.73 3.77 3.80 3.84 3.88 3.92 product of the following factors: Winter Barley 3.90 3.90 3.94 3.98 4.02 4.06 4.10 − yield projection for 2011 Spring Barley 3.61 3.61 3.65 3.68 3.72 3.76 3.79 Corn 8.80 8.80 8.89 8.98 9.07 9.16 9.25 − average forecast y-o-y change of the yield in Ukraine Buckwheat 0.78 0.78 0.79 0.80 0.80 0.81 0.82 projected by FAPRI Soya 0.98 0.98 0.99 1.00 1.01 1.02 1.03 We consider that the above approach to be more Winter Oats 3.96 3.96 4.00 4.04 4.08 4.12 4.16 conservative as the Company expects to continue Peas 1.02 2.50 2.53 2.55 2.58 2.60 2.63 Source: Company’s Management investing in modern land cultivation technologies thereby A – actual data; F – Forecast attaining the average yield per crop levels in major EU countries 16
  • 17. Economics Key assumptions (Revenue) (4/7) Price per crop Taking into account that we have projections in real terms we took actual prices per each type of crop based on the information agency ProAgro (www.proagro.com.ua) for Aug 09 We also made analysis of deviation for crop prices for each month as for Aug using all available data of monthly statistics for 2002-2009. And calculated indices. Please refer to the graph on the left Each crop indices per month and prices for Aug 09 we estimated prices per crops for each month Projected price Prices (net of VAT) per crop forecast in 2008 is calculated as the product of 2008A From 2009A the following factors: UAH USD UAH USD Winter OSR 1,975 391 2,245 281 − the ratio between (a) the average price level of crop Winter Wheat 788 156 828 104 futures for the third and fourth quarters of 2008 as at Spring Wheat 884 175 828 104 the Valuation Date and (b) the average price level of Winter Barley 833 165 684 86 crop futures for third and fourth quarters of 2007 Spring Barley 838 166 684 86 (source: FT and APK-Inform) Corn 646 128 870 109 − the historic sales prices of the Company per crop in the Buckwheat 1,111 220 1,667 208 third and fourth quarters of 2007 Soya 1,761 349 2,798 350 Winter Oats 773 153 375 47 To forecast prices per crop for the period 2010-2013, we Peas 1,308 259 1,500 188 used prices identical to prices for 2009 Source: Company’s Management A – actual data; F – Forecast 17
  • 18. Economics Key assumptions (Costs, direct) (5/7) Production (harvesting) costs of the Company are largely Direct costs, UAH/ha attributable to: 2008A 2009A 2010F 2011F 2012F 2013F 2014F − seeds Winter OSR 3,139 3,124 3,126 3,126 3,131 3,131 3,131 − fertilizers Winter Wheat 2,169 2,162 2,176 2,176 2,181 2,181 2,181 Spring Wheat 1,797 1,793 1,794 1,794 1,795 1,795 1,795 − herbicides Winter Barley 1,718 1,724 1,746 1,746 1,749 1,749 1,749 − fuel & oil Spring Barley 1,474 1,479 1,475 1,475 1,478 1,478 1,478 − labour Corn 3,396 3,355 3,350 3,350 3,353 3,353 3,353 − other Buckwheat 1,228 1,237 1,239 1,239 1,240 1,240 1,240 Soya 1,639 1,644 1,644 1,644 1,644 1,644 1,644 The Company’s management has provided us with the Winter Oats 428 431 430 430 431 431 431 average costs per crop types which were used for Peas 2,438 2,433 2,434 2,434 2,434 2,434 2,434 projection period Source: Company’s Management A – actual data; F – Forecast 18
  • 19. Economics Key assumptions (Costs, other) (6/7) Elevator expenses Capital expenditures Based on the information from market players we Due to the fact that we did not projected increase in land identified that in average expenses for running elevator bank of the Group, capital expenditure projections were are in the range of UAH60-70 per tone of storage capacity. made only with respect to the other than land (buildings, We calculated elevator expenses taking average of infrastructure, machinery and equipment). The CAPEX UAH65 per tone of storage capacity could be divided in two parts: − Maintenance capital expenditures Overhead expenses − Development capital expenditures Company’s general and administrative expenses are as Maintenance capital expenditures follows: We assumed that maintenance expenses would be at half − Operating Costs UAH2.860 thousands per annum level of the annual depreciation charge − Audit Costs UAH 160 thousands per annum Development capital expenditures Development capital expenditures could be divided into − Consultants/Lawyers UAH 400 thousands per annum two groups: − CAPEX for storage capacity − CAPEX for other PPE 19
  • 20. Economics Key assumptions (Miscellaneous) (7/7) FAT and CPT The Company is subject for corporate profit taxes (CPT). Although the Company could claim exemption from such a tax in Ukraine and become a fixed agricultural taxes (FAT) payer which is calculated based on 0.15% of the cadastre value of land used In this model we have used CPT at the 25% level to be more on a conservative side VAT In order to simplify the Model We performed our analysis based on the prices net of VAT. Thus no VAT is projected for the Group 20
  • 21. Economics Detailed business plan (P/L) PROFIT AND LOSS Annual in kUSD (@ 8 UAH/USD ex rate) 2009 2010 2011 2012 2013 2014 Revenue 13,519 15,817 18,439 18,985 19,158 19,333 COS (6,968) (7,819) (8,989) (9,003) (9,003) (9,003) Gross profit 6,551 7,998 9,451 9,982 10,155 10,330 Gross profit margin 48% 51% 52% 54% 55% 55% Elevator costs (309) (707) (869) (1,113) (1,113) (1,113) Maintenance expenses (560) (617) (697) (756) (791) (791) Other expenses (1%) (135) (157) (182) (184) (186) (188) Indirect labour costs (1,003) (1,003) (1,003) (1,003) (1,003) (1,003) General and Administrative (428) (428) (428) (428) (428) (428) EBITDA 4,118 5,088 6,272 6,500 6,636 6,809 EBITDA Margin 30% 32% 34% 35% 36% 36% Depreciation Amortization (1,119) (1,234) (1,395) (1,511) (1,581) (1,581) EBIT 2,999 3,855 4,878 4,989 5,055 5,228 EBIT Margin 22% 25% 27% 27% 27% 28% Interest expenses (1,040) (954) (672) (252) (14) - EBT 1,960 2,901 4,206 4,738 5,041 5,228 EBT Margin 14% 18% 23% 26% 27% 28% Taxes (490) (725) (1,051) (1,184) (1,260) (1,307) Net income 1,470 2,176 3,155 3,554 3,781 3,921 Net income % 11% 14% 17% 19% 20% 21% 21
  • 22. Economics Detailed business plan (B/S) BALANCE SHEET Annual in kUSD (@ 8 UAH/USD ex rate) 2009 2010 2011 2012 2013 2014 Non-current assets Land 2,250 2,000 1,750 1,500 1,250 1,000 Fixed Assets, gross 9,031 11,477 11,733 12,571 11,240 9,909 Total Non-current assets 11,281 13,477 13,483 14,071 12,490 10,909 Current assets Inventory 7,942 8,913 10,246 10,262 10,262 10,262 Biological assets 3,834 4,303 4,946 4,954 4,954 4,954 Other inventory 4,108 4,610 5,299 5,308 5,308 5,308 Trade receivables 3,583 4,155 4,824 4,873 4,921 4,970 Cash and cash equivalents 1,438 14 15 16 5,247 10,811 Total Current assets 12,962 13,082 15,085 15,151 20,430 26,044 TOTAL ASSETS 24,243 26,560 28,568 29,222 32,920 36,952 EQUITY Share capital 1,803 1,803 1,803 1,803 1,803 1,803 Retained earnings 7,378 9,553 12,707 16,260 20,040 23,960 Total EQUITY 9,181 11,356 14,510 18,063 21,843 25,763 Non-current liabilities Loans and borrowings 7,000 5,852 3,200 193 - - Total Non-current liabilities 7,000 5,852 3,200 193 - - Current liabilities Trade payables 8,061 9,349 10,855 10,963 11,073 11,184 Total Current liabilities 8,061 9,349 10,855 10,963 11,073 11,184 TOTAL EQUITY and LIABILITIES 24,242 26,558 28,565 29,218 32,916 36,947 22
  • 23. Economics Detailed business plan (CFS) CASH FLOW STATEMENT Annual in kUSD (@ 8 UAH/USD ex rate) 2009 2010 2011 2012 2013 2014 Cash flow from operating activities Net income 1,470 2,176 3,155 3,554 3,781 3,921 Depreciation 1,119 1,234 1,395 1,511 1,581 1,581 Change in working capital (1,164) (255) (496) 44 61 62 Inventory Biological assets (1,034) (469) (643) (8) - - Other inventory (1,108) (502) (689) (8) - - Trade and other receivables (783) (573) (669) (48) (49) (49) Interest Accrued - - - - - - Trade and other payables 1,761 1,288 1,505 109 110 111 Cash flow operating activities 1,425 3,154 4,053 5,109 5,423 5,564 Cash flow from investing activities Capex - (3,430) (1,400) (2,100) - - Cash flow from investing activities - (3,430) (1,400) (2,100) - - Cash flow from financing activities Loans Raised - - - - - - Loans Repaid - (1,148) (2,652) (3,008) (193) - Cash flow from financing activities - (1,148) (2,652) (3,008) (193) - Cash increase/(decrease) 1,425 (1,423) 1 1 5,231 5,564 Cash at b-o-p 13 1,438 14 15 16 5,247 Cash at e-o-p 1,438 14 15 16 5,247 10,811 23
  • 24. Economics WACC analysis Risk-free rate is based on the yields of a 20-year US Calculation of the discount rate Treasury bond. As at 30 Sep 09 the nominal annual return Risk-free rate 4.14% for this US Treasury bond was 4.02% Equity risk premium 5.73% According to SBBI Valuation Edition 2009 Yearbook, long- Unlevered beta 0.72 horizon expected risk premium (supply side) large Levered beta 0.81 company stocks total returns minus long-term government Size premium 3.74% bond income returns was 5.7% Country risk premium 6.36% Cash-flow currency correction 1.0471 In order to account for the operating risk of the entities, the Cost of equity 24.49% unlevered betas of 0.8 was used based on the market Cost of debt (nominal pre-tax) 4.80% data for listed companies operating in the industry with Tax rate 25.00% SIC 0 (according to Damodaran, 2009) Cost of debt (nominal post-tax) 3.60% The size premium for a company in the deciles Micro- Weight of debt 14.55% Cap 9-10 (Market capitalisation USD1.6 million to Weight of equity 85.45% USD453.3 million) was equal to 3.74% (SBBI Valuation WACC nominal 21.45% Edition 2009 Yearbook) WACC real 13.83% The country risk was determined based on the rates of return as at 31 Aug 09 of a 15-, 16- and17-year Ukrainian Eurobond and a 20-year US Treasury Bond The Company’s projected cash flows were prepared in real terms, and therefore the nominal WACC rate should be adjusted using Gordon's formula to arrive to Real WACC rate 24
  • 25. Economics DCF (@ WACC=16%) Valuation summary Annual in kUSD (@ 8 UAH/USD ex rate) SUMMARY 2010 2011 2012 2013 2014 EBIT 3,854 4,877 4,989 5,054 5,227 IT Expenses (725) (1,051) (1,184) (1,260) (1,307) Depreciation 1,234 1,395 1,511 1,581 1,581 Change in Working Capital (255) (496) 44 61 62 Capex (3,430) (1,400) (2,100) - - Free Cash Flow 678 3,324 3,260 5,437 5,563 Discount rate (WACC) 14% 14% 14% 14% 14% Discount period 0.50 1.50 2.50 3.50 4.50 Discount factor 0.94 0.82 0.72 0.64 0.56 Discounted cash flow 635 2,737 2,358 3,455 3,106 Sum of discounted cash flows 12,292 Terminal value 40,234 Discount factor 0.56 Discounted terminal value 22,464 Enterprise value 34,756 Debt (7,000) Cash and cash equivalents 1,438 Equity value 100% 29,194 25
  • 26. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 26
  • 27. Risk analysis Sensitivity analysis Sensitivity analysis was performed to analyze influence of Sensitivity analysis (in USD Million) changes in external factors on net present value (NPV) of WACC 0 the Project TV (2%) (1%) - 1% 2% Changes in this investment indicator were caused by 0 (2%) 31.24 28.42 25.96 23.81 21.90 changes in the following factors: (1%) 33.36 30.20 27.47 25.10 23.01 Financial - 35.84 32.25 29.19 26.56 24.26 1% 38.78 34.66 31.19 28.23 25.68 − Discount rate 2% 42.31 37.50 33.52 30.16 27.30 − Terminal value Operational Sensitivity analysis (in USD Million) − Sales Sales 0 COS (10%) (5%) - 5% 10% − COS 0 (10%) 30.12 30.12 30.12 30.12 30.12 (5%) 29.65 29.65 29.65 29.65 29.65 - 29.19 29.19 29.19 29.19 29.19 5% 28.75 28.75 28.75 28.75 28.75 10% 28.30 28.30 28.30 28.30 28.30 27
  • 28. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 28
  • 29. Disclaimer This document is provided on the basis that it is kept In providing this document, Kniazi Lani LLC reserves the CONFIDENTIAL and its circulation and use are right at any time to make changes or fully replace it. RESTRICTED. It should not be copied or sent to any other Nothing in this document may and should be deemed to person/party without the express permission of the be or interpreted as an obligation or promise regarding the Company future This document has been prepared because Kniazi Lani LLC intend to find strategic investor This document includes the basic information, estimates and forecasts, which have been prepared by Kniazi Lani LLC. This document is provided exclusively to assist interested party in making decision on the advisability of further study of the investment opportunity. Any recipient of this material should conduct its own analysis of the potential investment, and understand that the receipt of this material from Kniazi Lani LLC in no way signifies confirmation that the Transaction is justified Kniazi Lani LLC will not be liable in any way for any representations or warranties directly or indirectly contained/arising from this material 29
  • 30. 1. Strategic background 2. Project description 3. Asset based valuation 4. Economics 5. Risk analysis 6. Disclaimer Appendices 30
  • 31. Appendix 1 Air temperature 31
  • 32. Appendix 1 Precipitation 32
  • 33. New Zealand 7,7 Zimbabwe 10,0 Source: Source: Egypt 6,5 New Zealand 8,0 Switzerland Switzerland 6,0 Saudi Arabia USDA, 2008 USDA, 2008 EU-27 4,3 EU-27 Croatia Croatia 5,5 5,4 5,4 5,3 4,2 Mexico Chile 4,0 China Appendix 2 China 3,9 Chile Norway 3,7 Zambia Korea, South Norway 3,7 4,9 4,7 4,7 4,6 4,5 Argentina Uzbekistan 3,6 Zimbabwe United States 3,5 Japan 4,4 4,2 4,1 Japan 3,5 Serbia Uruguay 3,4 Belarus Serbia Korea, South 3,3 Sudan 3,8 3,6 3,6 3,5 Egypt 3,2 South Africa Uzbekistan 3,2 Albania Albania 3,0 Uruguay Belarus Ukraine 3,0 United States Brazil 2,9 India Canada 2,9 Azerbaijan South Africa 2,8 Argentina Mexico Kyrgyzstan 2,6 Bosnia and Herzegovina Bosnia and Herzegovina 2,5 Pakistan 3,1 3,0 3,0 2,9 2,9 2,9 2,8 2,8 2,8 2,7 2,7 Macedonia 2,4 Productivity rate of Wheat & Barley by country, 2009/10 (tons per ha) Lebanon Ukraine 2,4 Bangladesh Productivity rate of Wheat by country, 2009/10 (tons per ha) Productivity rate of Barley by country, 2009/10 (tons per ha) Azerbaijan Moldova 2,2 Colombia Macedonia 2,0 Canada Lebanon 2,0 Armenia Moldova 2,0 Morocco 2,6 2,5 2,4 2,3 2,3 2,2 2,2 Kyrgyzstan 2,0 Brazil India Nepal 1,9 Turkey Iran 1,9 Colombia 33 Tajikistan 1,8 Iran Russia 1,8 Russia 2,1 2,1 2,1 2,0 2,0 2,0