Transcript Slide 1
The Australian Sugar Industry
Sucrogen – more than sugar
We think so!
CSR Sugar “Sucrogen” participates across the value chain
Growing
7 Farms in
Burdekin region
Harvesting
2 harvesting
groups
Milling
7 mills
14Mt cane
2Mt sugar
45% of
Australian
production
Logistics
Industry owned
port terminals
(STL)
Marketing
Marketing
Agreement with
QSL
Refining
Sugar Australia
(75% Sucrogen)
New Zealand
Sugar (75%
Sucrogen)
3 Refineries
970kt sugar
Molasses
Cogen
171MW
generation
across 7 mills
105MW export
capacity
420 kt molasses
Sold to Ethanol,
domestic and
export markets
Ethanol
Fertiliser
Produce 60Ml
ethanol
290Ml fertiliser
Sucrogen participation
Third Party supply
3
Sucrogen is Australia’s leading sugar producer and 7th largest in
world
Sucrogen is a world scale raw sugar producer, and the second largest
exporter of raw sugar in the world
In Australia, Sucrogen is the largest raw sugar producer
Sucrogen exports of ~2Mt are greater than 50% of Australia’s sugar
exports
Major Global Producers (Raw Sugar Equivalent, M tonnes)
Raw Sugar Production by Miller, M tonne, 2008 Season
7
# of Mills
3
5
1
1
2
3
1
Source: Company filings
1
1
Source: ASMC, CSR Analysis
4
… large even Vs Brazil
Sucrogen is a large-scale miller, even when compared to the
Brazilian sugarcane industry
Despite higher in-field cane costs, Sucrogen is competitive with Brazil
due to lower cane and sugar logistics costs and comparable milling
costs
Sucrogen’s milling business is as large as the 5th largest Brazilian
Miller
Relative Cost of Sucrogen is Competitive With Brazil (Centre
South)
Capital
Fobbing
Milling
Cane - in field
Brazil (CS)
CSR
Sucrogen
Source: CSR Analysis
5
Sucrogen is a significant producer of renewable energy—ethanol
The largest Australian producer
of sugar-based ethanol
A significant and growing
fertiliser market share in major
Queensland farming areas with
innovative “Liquid One Shot”
products
Significant potential for
growth—potential to make up to
100 ML of ethanol using
molasses
Sugar cane
Liquid fertilisers
(made from
byproducts of the
ethanol distilling
process)
SugarCo’s
ethanol is a
renewable and
sustainable
process
Raw sugar
Molasses
(a byproduct of the raw
sugar milling process)
Fuel ethanol
(distilled from
molasses)
6
Sucrogen is Australia and New Zealand’s leading Refiner
Refining
Food & Beverage
#1
Retail
Foodservice
Containerised Exports
#1
#1
#1
Bulk Exports BiBo
#1
Three refineries, 70% of Australia and New Zealand’s refining capacity
The #1 supplier across all channels
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The Australian Sugar Industry needed to adapt
Australia still important in world
trade but Brazil displaced
Australia in 1996 as key exporter
Australian production has
dropped but mainly from smaller
producers due to:
– Sugar price
Traded Sugar Supply by Country
Source: USDA
Australian Cane Crushed by Company
– Urban encroachment
– Alternative crops
Source: BSES, CSR Analysis
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How we adapted
Cane Crushed by Region
50
Mt
31
No. of mills
NSW
40
Central
20
– Gap to Brazil has narrowed in
recent years (due to exchange
rate)
– Although still higher than
Brazil
North
10
26
Herbert/Burdekin
0
1990 1992 1994 1996 1998 2000 2002 2004 2006
25
Source: BSES, CSR Analysis
Cost of Production – Full Economic, FOB basis, 07/08
Index (World Average = 100)
Australia’s best regions are low
cost by world standard, and
29
28
27
South
30
30
World cane average
120
100
80
60
40
20
0
Fobbing
Admin
Factory
Field
Brazil (CS)
Aust - HBT/BKN
Aust - Other
Source: LMC
9
No. of Mills
Milling consolidation has
occurred in recent years as cane
supply reduced
Industry Restructuring
Industry restructuring has allowed the industry to respond dynamically
to a changing environment
– Deregulation
– Farm consolidation
– Mill consolidation
– Grower pricing
– QSL privatisation & commercialisation
– STL industry ownership
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Cogen investments aid capital returns
Sugar Industry Renewable Electricity Capacity
Cogen capacity has increased in
response to government policy
settings (MRET)
Sucrogen has added 100MW over
last 15 years. Has potential to add
a further 300MW bagasse-based
capacity
Source: ORER, CSR Analysis
Potential of Sucrogen cogen supply
600
500
400
300
200
100
0
MW
Trash
Further Bagasse
Current Bagasse
Current Export
Potential Bagasse Potential Bagasse
based
and trash
11
Australian Ethanol Market is developing
Ethanol supply has doubled over
the last decade as the fuel ethanol
market has developed
Sugar industry has potential to
supply large amounts of ethanol.
Requires:
Australian Ethanol Supply Growth
Source: Biofuels Association of Australia, CSR Analysis
– Further market development
– Supportive government policy
– Attractive price relativities
Potential of Sugar Industry Supply
3000
2500
2000
1500
1000
500
0
Ml
Fed Govt 350Ml
target
100% E10
demand
Current
Potential
Molasses based Molasses based
supply
supply
Potential Juice
based supply
Source: CSR Analysis
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Ethanol Excise
Current government policy
does not differentiate between
carbon intensity of fuels (even
under CPRS)
Maintain existing policy of
energy neutrality of excise, and
then adjust excise based on
carbon intensity of fuel
Sugar-derived ethanol would
attract excise of 6cpl*,
compared to 38cpl for petrol.
*Unadjusted ethanol excise would be 25cpl based only on energy neutrality
3.0
Emissions (t CO2-e/kl)
Sugar-derived ethanol offers
significant CO2 abatement
opportunity
2.5
2.0
1.5
1.0
0.5
0.0
Petrol
Ethanol from molasses
Scope 3 emissions from farming
Scope 3 emissions from prodn & distribution
Scope 1 Emissions
Sources: Energetics 2007 (Peer reviewed by CSIRO)
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Positive market dynamics for sugar and renewable energy
Longer term global sugar
demand remains strong
Carbon constrained economy
expected to drive increased
demand for renewable fuel and
energy
70
60
NY#11, US c/lb
Fundamentals are supportive
for global raw sugar price
World ICE#11 Raw Sugar Price
50
40
30
20
10
0
1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010
Expanded Renewable Energy Target
(Source: Department of Climate Change)
14
Sugar yields are significantly less variable than grain yields
Yield Index (1978-79 = 100)
Index (1978-79 = 100)
160
Coarse Grains
Wheat
Sugar
140
120
100
80
60
40
1978-79
1983-84
1988-89
1993-94
1998-99
2003-04
2008-09
Year on Year % Change in Yield
140%
Coarse Grains
Wheat
Sugar
Orange rust disease in 2000
season
Severe drought in 1990
and 1991 seasons
90%
40%
-10%
-60%
1978-79
1983-84
1988-89
1993-94
1998-99
2003-04
2008-09
Source: ABARE Australian Commodities Dec’09, CSR Analysis. Sugar yield is tonnes of sugar per hectare harvested
*Coarse grains are barley, oats, sorghum and maize
15
Sugar yields are significantly less variable than grain yields
Yield Index (1978-79 = 100)
Index (1978-79 = 100)
160
Coarse Grains
Wheat
Sugar
140
120
100
80
60
40
1978-79
1983-84
1988-89
1993-94
1998-99
2003-04
2008-09
Year on Year % Change in Yield
140%
Coarse Grains
Wheat
Sugar
Orange rust disease in 2000
season
Severe drought in 1990
and 1991 seasons
90%
40%
-10%
-60%
1978-79
1983-84
1988-89
1993-94
1998-99
2003-04
2008-09
Source: ABARE Australian Commodities Dec’09, CSR Analysis. Sugar yield is tonnes of sugar per hectare harvested
*Coarse grains are barley, oats, sorghum and maize
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Conclusion – A profitable industry with growth options
Attractive industry outlook
Increased earnings base from refining and renewables
– Industry has reshaped itself to
be responsive to market drivers
– Opportunities for growth in
renewable energy – ethanol and
electricity
Sucrogen, as the leading
Australian player, is well
positioned to further capitalise on
these opportunities
160
160
140
140
120
120
100
100
EBIT, A$M
– Positive trend for long term
sugar price based on increasing
world sugar and ethanol
demand
Milling
80
80
60
60
Ethanol & Cogen
40
20
40
20
Refining
0
YEM02
0
YEM03
YEM04
YEM05
YEM06
YEM07
YEM08
17
YEM09