Plant Impact Share Discussion Threads

[cerrito] 04/7/2016 12:00

These are my notes.
First time I have made one of these for three years; as will be apparent I made a bit of a mistake in that I was sucked in so much by the v high quality presentations by very good people that I rather lost track of some of the key financial issues.
Great that they are concentrating on US to get geographical diversification and Argentina also will be important given its agronomical differences with Brazil. Reliance on Brazil unhealthy ..still not exactly clear to me what impact exchange rates have..important as the Real is now 3.24 and at the start of the year was 4…what would be the impact of a cold snap in spring in Parana? Did not come out much wiser on these 2 key issues though in Brazil they do have some climatic diversity as they operate in three different regions..Parana; Mato Grosso and the North East.
Happy to have errors and omissions pointed out by others who were there.
Finance
There was no discussion at all on financial aspects/figures and forecasts-or at least if there was I did not participate in any of them.
Confirmed that the following from the Feb 2015 Rights Issue statement continued to hold true:
Quote
Plant Impact expects to invest, over the forthcoming three years, approximately £11.0 million in the development of new products and technologies to improve the yield and resilience of soy and wheat production.
Unquote
I did not gather if this figure includes the substantial staffing costs-ie the new recruits mentioned in the Friday RNS. Also no discussion of the extra up to $6m of milestone payments from Bayer-see Feb 2015 RNS. As far as I can see nothing apart from the initial $3m has been paid.
I was not involved in any discussion as to possibility of another equity raise. Of course they had £7.1m at the end of April 16 so not an immediate issue even if this balance was down from the £8.6m at the end of Jan-be interesting to know how they got through £1.5m of cash in three months.
I hope that some of you who were there were more on the ball in asking key questions than I was.
The new CFO who has been in situ for 6 weeks came across well
Market Background
Session started with the Chairman giving overview of world agri sector and need to increase production/yield and stating that there was a decline in increase in crop yield, partially because the big 6 are not focusing on it. Comment that more people die of obesity than starvation-not sure if that was in whole world or just developed world. Reviewed Dow/Dupont tie up as well as Bayer/Monsanto.
Four segments: Feed pants-fertilizers; combat pests-agro chemicals; improve seeds; and where PIM is Crop Enhancement.
Soybean acreage in m hectares; US 35; Brazil 33; Argentina; 19; Paraguay 3.2. The US figure varies as farmers will decide at the start of the season whether to grow corn or soy depending on prices and Brazilian farmers do not have this flexibility.
Brazil
The growers own 90%+ of the land wheareas in Argentina they tend to rent it. The average yield is 3(not sure what unit of measurement) and a realistic aim is 5.4.
In the 13/14 season they had 556 growers; 14/15 1700 and 15/16 5000 covering 6m hectares.
In Brazil soybean rust is a major problem and so the product is sprayed on at the start of during the flowering season mixed with the Bayer product Fox. 5% average yield increase which as a rule of thumb translates into a 20/30% increase in profitability.
Their realistic goal is to have their products used in 10/20% of total area planted. Making a conscious decision to focus in on the more technologically advanced farmers. Inertia of farmers the main problem.
Last season harvest affected by weather problems in the North East.
Have 2/3 staff in Brazil liaising with both Bayer people and end users. Some comment made on need to chivy Bayer people up but big picture is that relationship seems to be working very well.
Argentina
As opposed to Brazil 70% rented rather than owned; what I think I gathered was that farmers renting tend to buy less than farmers owning because of need to pay rental. Wide variety of size of farmers. 80% of production in Provinces of Santa Fe, Cordoba and Buenos Aires.Planting December and harvesting May if I remember right.
Fortalis used about a fortnight later in the growing cycle than Veritas.
Argentina soil better than Brazil ie has higher nutrients.Argentina a herbicide market; Brazil and Paraguay fungicide markets. We were told this several times but did not gather the significance but I think the reason they are going with Fortalis in Argentina and Veritas elsewhere.
Paraguay
Not much specific discussion on Paraguay except for the comment that agronomically basically the same as Brazil-whereas Brazil and Argentina are agronomically different.
US
85% of farms family owned; do not have rust and thus different from Brazil. Distributor are big and financially strong..ie one of the many reasons that in South America PIM have partnered with Bayer is that Bayer takes the credit risk and also finances the long credit terms that growers need-ie they do not have money till the harvest. Per above PIM can in theory work distributors rather than with a Bayer. As far as I gathered decision on this still to be taken.
Have been doing trials in US in areas from Minnesota to Mississipi; were told that sales will be well within 2 years which I take to mean the 2017 season.
Cocoa
We were told shortage of good cocoa and cocoa buyers delighted that PIM focusing in on this crop as it does not attract much attention. 70% of production in West Africa.Told yields of 0.5(not sure how measured)were average and that 3 are possible.
Two challenges. One how to communicate with the thousand of small farmers-average farm size is 3 hectares. They are working with cooperatives as much as possible-especially as these are the growers who have Fairtrade type certifications. Second challenge is to how they get paid for it and told they are working with the trading houses who provide funding to the growers-actually interesting as we were told the reason they work with Bayer is that they take the credit risk and this suggests that Arysta does not.
My notes say that spraying season over 4 months but did not get in which months.
No figures were given but my impression is that cocoa will be a nice earner but nothing dramatic.
F1
A new product to be sold in Brazil with Bayer and getting the patents sorted out. To be launched in the 2nd half of next year.
Misc
No discussion of their traditional business of fruit etcet as that is not where there focus is on.
Recognize that to the extent that the Bayer/Monsanto deal goes through going to be a pain as Bayer people who they work with in product development will be tied with the integration.
Asked about impact of Brexit. In the short term given few sales in Europe and fact that virtually all sales are in US$ will be beneficial but long term a good deal will depend on their ability to get world class talent in their UK HQ.
We had a presentation from the head of R&D. Commented on the Advisory Board-see RNS April 20.
John B was asked about wheat; he confirmed that work was proceeding on this but shut down discussion on what going on-see RNS March 16. Incidentally no one asked what if anything they are doing on corn.
John B very clear that they aim to outsource as much as possible- very clear in manufacturing. They have three manufactures who make the stuff which explains why they have no inventory on their balance sheet. They are very comfortable with the way this is working and do not see any risks/threats.

[timbo003] 04/7/2016 10:26

>>>bb

I thought it was all very positive, although perhaps not quite as well attended as last year, maybe 50 PIs plus a spattering of journalists, analysts and fund managers. Quite a bit of new stuff in the pipeline with R&D origins. They will benefit from the weak pound/strong dollar as they do very little long term hedging and receive payment in dollars. I took a lot of notes, but will be more selective with the write up than I was last year, which turned out to be a bit of a Magnum opus.

[here and there] 04/7/2016 10:23

Well….the volume of trading is probably the best indicator….looks like a hold!

[bigglesbingham] 04/7/2016 09:21

Was it positive timbo?

[timbo003] 03/7/2016 18:39

>>>>bb, I'll start on some notes this evening, I've got a bit behind on meeting writes ups recently (I attended 4 last week).

[bigglesbingham] 03/7/2016 18:01

Any feedback on the investor day??

[cerrito] 01/7/2016 18:14

A really first class Investor's Day with a good deal of information to assimilate; what was good was the depth/quality of management both UK and Americas based.
Need to put pen to paper.

[here and there] 01/7/2016 14:58

Looking forward to hearing some feedback from those that went.

new product sounds like an updated version of Veritas…?

[mthead1968] 01/7/2016 10:10

Perhaps we could ask about the competition to Banzai from Ecoculture?

Ecoculture product shipment on a 40 ft container destination to West Africa for cocoa production - check the twitter feed:



I had booked a place at the investor day but can't make it now.

GLA

[timbo003] 30/6/2016 21:40

Another aide memoire for tomorrow:

Remember to ask about Levity and David Marks:

[timbo003] 30/6/2016 20:53

>>bb, Right Ho, enjoy your trip


As an aide memoire (for Q&As) tomorrow:



Brazilian Real/GBP 5 year chart

[bigglesbingham] 30/6/2016 17:44

Hi timbo I'm on a "business trip" in Palma so unfortunately can't get there. Hope they come up with some hard progress details . Regards

[timbo003] 30/6/2016 17:32

>>>>bb, yes, I'll be there (without the niece this time), are you going this year?

[bigglesbingham] 30/6/2016 17:11

Anyone go to the annual bash

[mthead1968] 17/6/2016 09:56

Most likely scenario imv is that Veritas stock from last season needs to be shifted by Bayer before any repeat order can be made. It has already been reported that 55 per cent of soya inputs have already been bought and paid for in Mato Grosso region. And PI has just announced that they have received no orders yet in the 3rd quarter. We will just have to hope that the shortfall can be made up in the final 3 months. It is also to be hoped that 'the upcoming significant promotional campaign' will be helping to shift new product, not just that which is already in the system.

[horace_h] 17/6/2016 09:54

A crucial time for Soyabean prices. The CME Monthly Futures chart shows price has been in a steep uptrend for the last four months with a recent bounce off of the critical $12 level of Supply - back to $11.43 as I type.

If it subsequently gets above $12.50 then the way is clear up to $14.75 - if not it may be expected to fall back to $9.00.

There's also the unknown currency effects on PIM's performance if the United Kingdom votes to leave the Soviet Union - the likely sharp drop in the Pound may help profits but earlier discussions on the Brazilian Real noted that it's somewhat swings and roundabouts.

More questions for July 1st...

[wan] 17/6/2016 09:29

Is there potentially delayed/pent-up buying in the channel, hence PI's "reserved optimism"? Further targeted by the upcoming significant promotional campaign for Veritas given the improving pricing environment -

June 17, 2016

Record High Prices for Corn and Soy in Mato Grosso during May

Domestic soybean prices have also strengthened in Mato Grosso. Farmers in the state have sold 91% of their 2015/16 soybean crop and the average price for soybeans during the month of May was R$ 74.36 per sack ($9.65 per bushel), which was an all-time record high for May. The price per sack increased R$ 10.00 per sack just during the month of May.

Farmers have also forward contacted 21% of their anticipated 2016/17 soybean production at an average price of R$ 69.94 per sack ($9.08 per bushel).

For any farmer still holding old crop soybeans, they should have excellent sales opportunities over the next few months. This year in Brazil, the right marketing decision was to hold onto the soybeans as long as possible.

Full story -

[wan] 17/6/2016 07:22

John Brubaker's speech coverage at the Agrimoney Investment Forum in London -

16th Jun 2016, by Mike Verdin
New wave of crop products 'could solve food supply gap'

Fears of world food shortages would be resolved if farmers could get anywhere near fulfilling the potential of seeds, which are producing far lower yields than they are capable of, the head of Plant Impact said.

Farmers have made significant headway in boosting yields, helped by improvements in both agronomic practices and crop inputs, John Brubaker, the Plant Impact chief executive, said, flagging the boost from 30 bags (1.8 tonnes) per hectare to some 50 bags per hectare in average Brazilian soybean yields over the past 30 years.

Full story -

[here and there] 16/6/2016 12:05

Trading update was OK. Veritas continues to make great strides forward in Brazil. Argentina and the USA to come in next few years so should keep growing.

Apples market is still a bit disastrous due to cheap European apples killing the market. My apple farmer friend was planting orchards a few years ago due to cider drinking trend. he is now grubbing up orchards, not picking apples and binning stored apples…….so apple product will probably suffer.

Banzai will be small revenues for some time, a slow grower as the farmers are nearly all small/poor small holders.

Company still v dependant on Veritas……;.will they pull a juicy RNS out of the hat on investor day…i.e. launch of new broad acre product???

[bigglesbingham] 16/6/2016 09:51

Down 3% on a £1500 purchase!! Bloody market makers cheese me off

[cerrito] 15/6/2016 10:09

I agree with your 832 wan that it will be great when they can get good sales outside Brazil…and I hope on July 1 I will be able to get a better handle on what drives sales in Brazil..to what effect is it impacted by the weather? By the amount of agricultural bank credit available? By currency rates?
Even increased sales in Argentina and Paraguay will reduce the risk before we get to the holy grail of the US.
Also to make sure I understand the balance sheet impact…I assume that by Jan 1 when they publish their interims they have collected the bulk of their Brazilian sales.

[wan] 15/6/2016 07:13

14th Jun 2016, by Mike Verdin
Plant Impact sees signs of ag price recovery boosting profits hopes

Is the downturn for ag groups such as spray, seed and machinery manufacturers drawing to a close?

One of the sector's smaller members, Plant Impact, offered hope that the recovery in crop prices, which helped make many among of the top investments of 2016, was seeding improvement in prospects too for farm input groups.

"Recent improvements in the global soybean price," combined with stability in Brazil's currency, "provide an improving foundation" for the Plant Impact's fortunes in the 2016-17 Brazilian growing season, said the group, whose chief executive, John Brubaker, is speaking on June 15 at the Agrimoney Investment Forum in London.
Full story -

Interesting comment from the IC -

Crop enhancement specialists Plant Impact (PIM) have put out a good third quarter trading update stating the group is “on track” to achieve its full year expectations. Revenue is significantly ahead of the comparable period last year, and the group has disclosed that it is actively discussing plans for its flagship product Veritas with Bayer in Brazil, and expects a large shipment before the year end. Shares are up 1 per cent and we retain our buy recommendation.

[wan] 14/6/2016 17:04

I thought the Trading Update was OK and broadly inline, but I was expecting a clearer indication from the outlook statement. So, one assumes there is some uncertainty in the Brazil channel somewhere (which given the backdrop is perhaps understandable), but things have been improving somewhat and indeed PI note the "improving foundation" that this provides.

In the relative near term I would like to see territory expansion for Veritas along with a notable increase in Banzai sales. And given the continued positive commentary on R&D and commercial trials, a milestone payment from Bayer would provide for some icing on the cake!

I don't hold out much hope for middle east sales going forward (who would want to rely on those?), in fact I see them as a distraction, but Europe could and must surely do better given recent hiring.

In short, important as it is, this is not just about existing product sales, but it is also about what PI have in their pipeline e.g. territory expansion (which could increase Veritas sales overnight) and indeed the pipeline of new products/technologies, and we know that Bayer saw something they liked in this regard.

I appreciate that the current general uncertainty in the market will cause some investors to reconsider their holdings (generally), but I remain content with my investment in PI, albeit I will continue (try) to be both vigilant and perceptive.

[freddie01] 14/6/2016 10:48

If you're that concerned sell. Simples.

[mthead1968] 14/6/2016 10:47

I am concerned with the lack of Veritas sales in Brazil for the 3rd quarter (purely on the basis of the report last month that 55% of Brazilian Soybean inputs had already been ordered/purchased for the coming season). I note also that the trading update has mention of 'existing channel inventories'. If these are in any way significant, then it will necessarily have an adverse impact on 2016/17 sales.