PowerPoint Presentation€¦ · and all of the other "Risk Factors" set out in the Company's...
Transcript of PowerPoint Presentation€¦ · and all of the other "Risk Factors" set out in the Company's...
June 2017
Forward looking statements
This presentation contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict" , "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form and management's discussion and analysis for the year ended December 31, 2016, which is available electronically at www.sedar.com. Actual results may differ materially from any forward looking statement. Although the Company believes that the forward looking statements contained in this presentation are based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.
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Market Facts
PRICE
TSX:VFF
OTCBB:VFFIF
CDN$1.90
MARKET CAPITALIZATION
~CDN$74M
SHARES OUTSTANDING
38.8M (basic)
41.0M (diluted)
52 WEEK HI/LOW
CDN$1.99
CDN$1.18
MANAGEMENT & BOARD
OWNERSHIP
~30%
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LISTING SYMBOL
(As of June 6, 2017)
Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing
10.5 M (240 ACRES) OF
GREENHOUSE CAPACITY
TECHNOLOGICALLY ADVANCED
GREENHOUSE FACILITIES
IN PRODUCT QUALITY & SAFETY
750 YEARS OF EXPERIENCE
sq. ft.
30 YEARS IN OPERATION
2016 REVENUE1
2016 EBITDA1
C$206M
C$12.5M
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1. Converted to Canadian dollars at $0.75.
MASTER GROWER TEAM WITH
INDUSTRY LEADER
Vertically-integrated provider of premium produce to grocers across North America
Greenhouse growing produces a more consistent, higher quality product that customers demand and that commands a premium price
Exclusive varieties address consumer demand in the specialty growth segment
Strategically located greenhouses and logistics and distribution chain ensure the freshest, highest quality produce
Marquee customers across the U.S. and Canada
Premium Produce Grown In the Most Sustainable, Resource-Efficient Manner 5
Strategically Located Operations and Distribution Network
3 facilities / 110 acres
(4.8M sq. ft.)
British Columbia
VF Owned
4 facilities / 130 acres
(5.7M sq. ft.)
Texas
VF Owned
Ontario
Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S.
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Partner Greenhouses
Ontario: 65 acres
British Columbia: 25 acres
Mexico: 50 acres
Mexico
Financial Profile 7
(All figures in Canadian dollars unless otherwise stated)
At March 31, 2017
Cash: $5.2 M
Long-Term Debt: $59 M
FY 2016
Revenue: $209 M (US$156 M)
EBITDA: $12.6M (US$9.4)
EBITDA Margin: 6%
EBITDA (C$ MILLIONS)
$13.8
$10.1
$14.1 $12.6
$11.6
$0
$5
$10
$15
2013 2014 2015 2016 LTM Q1/17
REVENUE (C$ MILLIONS)
$147.2 $158.9
$196.9 $209.1 $210.7
$0
$50
$100
$150
$200
$250
2013 2014 2015 2016 LTM Q1/17
CANNABIS JOINT VENTURE: A TRANSFORMATIONAL OPPORTUNITY
Low Cost, Industry-Leading Scale with Speed To Market
Projected shortfall of supply based on current capacity and
market demand
Apply low-cost, high tech greenhouse growing expertise
4.8M sq. ft. of existing
greenhouse capacity
(potential yield of 300,000 kg)
1. Medical and non-therapeutic adult use markets. Does not include export market Source: Deloitte Report: “Recreational Marijuana – Insights and Opportunities.
.
Market Need Transformational
Opportunity
Canadian Cannabis demand estimated to grow to
~600,000 kg by 20211
Potential to address substantial portion of the market
9 Ability to Capitalize on Market Opportunity
Complementary Partners
Initial Contribution:
1.1 M sq. ft. (25 acre) greenhouse (leased to JV)
50% Ownership
Initial Contribution:
$20M cash
High-tech, low-cost greenhouse growing &
agricultural product safety expertise
Cannabis industry compliance and licensing expertise
Joint Venture
for large-scale, high quality,
low-cost cannabis
production
50% Ownership
Options to lease additional 3.7 M sq. ft. (85 acres) of growing capacity
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Cannabis IP, including portfolio of high-quality genetics
Emerald Health Therapeutics
Uniquely focused on application of cannabis to improve conventional pharmaceutical therapeutics
Direct cannabis industry experience
• Licensed producer under ACMPR – 8th licensed issued
Proven management team with extensive experience in pharma and agri-business
Well capitalized: $40M in treasury
(TSXV:EMH) 11
Leaders in High-Tech, Low Cost Greenhouse Growing
Passionate about growing
Combined 750 years of master grower experience from multiple growing regions around the world
Have achieved record production yields for the industry
Experts in agricultural product safety
Leader in agricultural research and foremost in North America for developing improvements in greenhouse production technology
Applied Research Division continually making advancements in Climate Engineering, Plant Biology & Pathology, Entomology, and Ecology
Deep Greenhouse Growing Experience
Advanced Greenhouse Technology
• Biological control • Pesticide registrations
Cannabis is an agricultural product like any other
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Ingrained culture of high-quality, low-cost production built over decades
Greenhouse growing provides significant capital and operating cost efficiencies
• Lower energy needs
• Greater economies of scale
• Allows for greater scale
GOAL: Be the Low-Cost Cannabis Producer in Canada
Existing state-of-the-art greenhouses with significant scale minimizes capital costs and provides faster time to market
conservative target of
<$1.00/gram vs. industry avg. of
$2.25/gram1
Village Farms is one of the lowest-cost greenhouse growers of tomatoes & cucumbers in Canada/U.S.
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1. Source: Public company filings and Office of the Parliamentary Budget Office - Legalized Cannabis: Fiscal Considerations.
Phase 1: Delta 3 Greenhouse
>50%
1.1 M sq. ft. of greenhouse capacity
75,000 kg annually
projected EBITDA margins of
vs. mid-single digits for produce in Canada
potential to generate revenue of
10-15x that of produce
Significantly more profitable use of existing greenhouse assets
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(25 acres) conservative projected yield of
Step-Function Future Growth Opportunity
4.8M sq. ft. (110 acres) of total growing capacity
conservative projected yield of
300,000 kg annually
Delta 2 Delta 3 Delta 1 1.1 M sq. ft.
(25 acres) 1.1 M sq. ft.
(25 acres)
2.6 M sq. ft. (60 acres)
JV has options to lease Delta 1
and Delta 2 greenhouses
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Critical Path and Key Milestones
June 6, 2017 June 2017
Completion of Tomato
Crop
First Cannabis Revenue
Commence Conversion of
Delta 3 Greenhouse
Obtain Cultivation
License
Completion of
Conversion to Licensing Standards
Summer 2017 Target: March 2018
JV Created Initiate Cultivation
License Process
November 2017 Expect to begin growing
by late 20181
Obtain Selling License
1. Subject to receipt of cultivation and sales licenses.
Use of existing greenhouse facilities provides JV with speed to market
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Canadian Cannabis Market Fundamentals
Medical Market
Canadian industry for legalized medical cannabis was born in the early 2000s +
Currently 45 registered LPs (owned by 37 companies)
• Registered patient base has grown 10% month-over-month and 200%+ annually since June 2014
• Average price across public LPs is ~$8.00/gram
Currently regulated by the Access to Cannabis for Medical Purposes Regulation
Poised to grow 10-fold to $1.3 B by 20241
Non-therapeutic Market
Legislation tabled for the legalization of non-therapeutic
cannabis
$5to $9B market opportunity2
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Estimated that >30% of Canadians would use cannabis
if it was legalized1
1. Health Canada. 2. Deloitte Report: “Recreational Marijuana – Insights and Opportunities.
Projected Near-Term Shortfall of Supply in Canada
JV Has the Potential to address ~1/2 of the overall market
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Estimated Existing Industry Production Capacity:
~80,000 kg
Estimated Demand by 2021:
600,000 kg
Industry Capacity 19
JV will be a large-scale producer of cannabis
Capacity and Announced Future Capacity of Public LPs with Market Capitalization Greater than $200 million
As at June 5, 2017. In C$ millions. Source: Research analyst estimates and company filings based on last reported capacity and disclosed growth strategy (1) Fully diluted market capitalization calculated using treasury method
Market Cap (C$MM)(1) n/a $769 $732 $1,202 $392 $858 ~$256 avg. Capacity Growth 19x 9x 2x 42x 5x 6x
300,000
100,000 75,000
57,000 50,000 35,000 78,000
Joint Venture Other
Current Capacity (kg) Future Capacity (kg)
JV can quickly become the largest scale producer of
cannabis
Existing LPs will attempt to meet demand through greenfield development requiring
hundreds of millions of dollars
v
Significantly De-Risked Opportunity
30-year operating history as high-quality, low-cost
greenhouse grower
Cannabis is an agricultural product
like any other
Greenhouse growing has significant quality, scale,
and cost benefits
High barriers to entry to greenhouse growing due
to capital costs and requisite expertise
Partner with direct cannabis industry/licensing experience and portfolio of high-quality
genetics
Growth opportunity through lease options on additional
existing greenhouses
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Use of existing, state-of-the-art greenhouses
Agricultural product expertise
v Speed to market to address
non-therapeutic opportunity
JV Provides Strengthened Ability to Execute on Produce Growth Strategy
Organic initiatives to expand capacity at U.S. operations
Well positioned to lead consolidation of a fragmented industry
• Only greenhouse grower in North America to have completed a major acquisition
Village Farms will continue to be one of the largest, highest-quality, lowest-cost greenhouse growers of produce serving national grocers in the U.S. and Canada
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Investment Proposition
Solid produce business as one of the largest, most experienced, high quality, low-cost greenhouse growers
Diversification into cannabis is a transformational opportunity
JV creates large-scale, greenhouse-grown cannabis entity with the goal and capability of being the low-cost producer in Canada
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Use of existing greenhouse facilities for cannabis production provides advantage of speed to market to address near-term supply shortfall
Growth opportunities in both existing produce and cannabis JV
June 2017