Oil Palm Strategy Presentation (2)

Xonyx Oil Palm Production Concept for M.I.C August 29, 2009

…the next frontier

NEXTZON BUSINESS SERVICES LIMITED

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Business Concept  The business concept is based on the demand – supply gap for oil palm products due to difficulties experienced by current players in the sector in getting adequate quantity of fresh fruit bunches (FFB), thereby forcing most processing plants to operate far below production capacity 

Nigeria used to be the largest exporter of oil palm products until 1934 when the country was surpassed by Malaysia. Africa led the world in production and export of palm oil throughout the first half of the 20th century, led by Nigeria until the discovery of crude mineral oil that eventually led to the abandonment of this sector.

 The total annual market demand for palm oil in Nigeria is estimated to be 1.9 million tons, while the country’s production is estimated to be 850,000 tons thereby, leaving a deficit of about 1.05 million tons which is being offset by importation and smuggling. (figures deduced from NIFOR’s report)

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NEXTZON BUSINESS SERVICES LIMITED

Business Model Oil Palm Cultivation (FFB Production) Partner with Belgians for overall management and control Power Generation

Land preparation Seedling sourcing Nursery Maturity Harvesting

Make use of a Malaysian Technical partner

Oil Palm Processing

Utilizing wastes from the FFB to fuel a bio power plant.

Crude Palm Oil Refined Palm Oil PKO

Feed Mill

Palm Kernel Meal

Malaysians will oversee operations while Indians will be in charge of engineering

Company Presco

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Analysis of Key Players Profile Staff Strength: 1,500 Revenue: N2.3Billion PAT: 37.27 Million Production Capacity: 9,700 Hectares of Oil Palm Palm oil mill with a capacity of 24T FFB/Hr Refinery with a capacity of 60T/day PKO crushing plant with a capacity of 45T/day

Business Model Products Palm oil Refined Bleached and Deodorized Oil (RBDO) Palm Fatty Acid Distillate (PFAD) Palm Olein Palm Stearin Crude Palm Kernel Oil (CPKO) PKO Power Generation

Okomu Oil Palm Plc Staff Strength: 1,300Products permanent & 3,000development Palm oil processing contract staff. Revenue: N4.7Billion PKO PAT: N 1.21 BillionRubber Processing Palm Kernel Cake (2008) Production Capacity: Power Generation 25,000 Hectares of Oil Palm & Rubber Palm oil mill with a capacity of 30T FFB/Hr PKO crushing plant with a capacity of 60T/Week

Strength  Large Staff base  Access to fund from overseas  Strong management team with vast experience in agroallied business  Industry leader  High financial turn over  Big asset base  Technology

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Large Staff base Access to fund from overseas Strong management team with vast experience in agroallied business Technical alliance with foreign partners High financial turn over Big asset base Technology

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Analysis of Key Players Company

rofile Okitipupa OilFinancial Palm Plc Performance: Revenue:N214 Million

Business Model

 Products development Palm oil processing Edible grade PAT: 12.7 Million PKO Bio diesel  Corn oil  Coconut oil Groundnut oil Jatropha oil  Soya bean oil Bio diesel oil Vegetable oil

trength eaknesses Wide Product Poor offerings Management  Just Technical alliance with resuscitating foreign from partners financial Big asset base mismanage Technology ments  Low turn over as a result of past financial misappropria tion

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Key Success Factors  The following key success factors have been identified among the leading industry players:  Strong capital base  Strong management team  Good logistics  Good Planning  Size of plantation  Technical expertise

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Potters Analysis Moderate threat of New Entrants •Very low regulatory requirements •The market is big enough for so many players •Very few serious players •The industry is highly capital intensive •Moderate industry High Suppliers regulation bargaining power of + suppliers •Very few major players •Moderate effect of substitutes •Growing market •Alternate use as bio fuel

Low bargaining power of buyers

+ Entrants

Competitive Rivalry relatively low •Low exit barrier

+ Buyers

Substitutes

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Moderate threat from substitutes

•E.g groundnut, rape, soy oil, etc •Substitute not as efficient in terms of

productivity

•Multi use of oil palm unlike substitute

•Weak buyers (price) •Fragmented (many but different) •Demand far exceeds supply •Increasing customer sophistication

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Planned Implementation Strategy

Acquisition/Leasing of existing palm plantation and processing mill

Land Acquisition/lease and Oil palm cultivation

Land Acquisition

Land Preparation

3 -4 Years Palm plantation

Field growing

Oil Mill

Palm Oil Milling and Refining Out Growers Scheme Formation

Organisation of out growers scheme to boost output from 8 our plantation

Palm Oil Milling

Palm Oil Refining

NEXTZON BUSINESS SERVICES LIMITED

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Entrepreneur's Profile Name : Lawason, Oladipo Akinwale Academic Qualifications : 2003 –2004 University of Lagos, Akoka-Yaba, Lagos Master of Science in Political Science (Public Administration) 1999 –2000 University of Lagos, Akoka-Yaba, Lagos Master of International Law and Diplomacy 1985 - 1990 University of Liberia, Monrovia-Liberia Bachelor of Business Administration (Management/ Public Administration) Professional Qualifications And Affiliations: Nigerian Institute of Management Corporate Member Nigerian Society for International Law Corporate Member Nigerian Institute for Advanced Legal Studies Registered Member Institute of Public Administration of Nigeria Corporate Member Work Experience City Financial Partners (1990 -1993) Business Advisory (Finance) National Poverty Alleviation Programme Lagos Surulere Local Government Total Service Station, Alapere (1993 – 2006) Total Service Station, Alapere Wallam Inc (June 2005 till date) Business relationships Director Xonyx Nigeria Ltd (June 1997 – till date) Business Advisory MD/CEO

Financial Consultant Coordinator Dealer

NEXTZON BUSINESS SERVICES LIMITED

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Oil Palm Hectarage in Nigeria by State State Imo Akwa Ibom Cross River Anambra Oyo Rivers Abia Osun Ogun Ondo Benue Delta Edo Kogi Total Grand Total

Wild Grove (Ha) Small Holdings (Ha) 45,000 27,000 300,000 28,825 250,000 15,800 200,000 12,000 200,000 150,000 7,000 150,000 14,000 150,000 120,000 85,000 4,000 85,000 60,000 8,000 50,000 50,000 2,300,000 117,625

Estates (Ha) 6,000 1,312 20,149 3,000 19,000 2,000 4,500 14,670 6,500 19,334 19,334 96,465 2,514,090

NEXTZON BUSINESS SERVICES LIMITED

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Market Analysis …for the purpose of this concept and considering the business models of key players in the industry, it will be expedient to base our target market segmentation on customer behaviour and geographic attractiveness.

Market Segment

Characteristics

Estimated SizeTotal Market (Nos) Demand Food Industry Demand These are fast moving consumer goodsOver 100,000 manufacturers that use palm oil and its allied 1.9 million products to produce margarine, noodles, pasta etc. Metric tonnes They are more interested in well refined products. This segment includes multinationals (Unilever, Cadbury, Nestle), large local conglomerates (Dangote Industries, Nigerian Flour Mills, Honeywell etc). They are the largest industrial consumer of palm oil. Cosmetic Industry This segment consists of body beauty care productsOver 50 manufacturers. This group requires substantial quantities of palm oil and allied products as major constituents for producing creams, lotions, body oil etc. Soap and Detergent PKO and palm oil are major constituents use by soapOver 100 and detergent industry for the production of different kind of cleaning products Cooking and FryingPalm oil is used for frying and cooking than for anyOver 80,000,000 Demand other purposes. Its uses range from salad and cooking oils in the homes to industrial uses such as frying instant noodles, potato chips, doughnuts, etc. Traditional cooking provides a large market for liquid

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Palm Oil Market Share World Oils & Fats Production Share

 Palm oil is the largest vegetable oil by volume globally; with 27% market share (Soybean oil is next largest with 23%).  Production of oils and fats totalled 159.7 million tonnes in 2008 of which palm oil and soybean production were respectively 43.1 million tonnes and 36.9 tonnes, thus accounting for 50% of the total.  Production of palm oil has grown faster than that of any other oil or fat and overtook soybean as the most produced oil in 2008.

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Approximate Financial requirement Set up cost for a 5 ton FFB/Hr Integrated Palm Oil Mill Processing & Refining Plant Setup Cost Fixed Assets Land Acquisition (500 Hectares) Building, infrastructure and Constructions Tankers (10) Palm oil Processing & Refining Plants Storage Tanks Agricultural Mchineries & Equipment Trucks (5) Motor Vehicle Office Equipment & Facilities Others   Total Fixed Assets   Seedling Acquisition & Land Preparation Seedling 150/Hectare (N500/seedling) Land clearing & Culturing Working Capital Operating cash needs for 1 year Administrative Expenses Total Working Capital   Total Setup Cost

 

   

  75,000,000 21,593,100 60,000,000 385,845,000 30,000,000 75,000,000 30,000,000 25,000,000 8,000,000 0   710,438,100     37,500,000.0 20,000,000.0     250,000,000.0 307,500,000.0    

                      710,438,100               307,500,000   1,017,938,100

NEXTZON BUSINESS SERVICES LIMITED

Revenue Analysis for CPO Only POPM Throughput Average Extraction Ratio Value of Crude Palm Oil (CPO) Ratio of Nuts to FFB Residual Value of Palm Nuts Cost of Fresh Fruit Bunches (FFB) Production Costs Turn Key Capital Cost of Mill

Utilisation FFB Processed Total CPO Produced Total of Residual Nuts Total Value of CPO Total Value of Residual Nuts

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Palm Oil Processing Mini-Mill (POPM) 5 Metric Tonnes (mt) FFB per Hour mt FFB / Hour 5.00 Oil to FFB 16.0% Naira /mt 105,000 Nuts to FFB 16.2% Naira /mt 5,250 Naira /mt 7,500 Naira /mt 3,000 Naira 183,750,000 Variables Per Hour Per Day Per Month Per Year Hours 22 12 1 8 mt 5.00 40.00 880 10,560 mt 0.80 6.40 140.80 1,689.60 mt 0.81 6.48 142.56 1,710.72 Naira 84,000 672,000 14,784,000 177,408,000 Naira 4,253 34,020 748,440 8,981,280

NEXTZON BUSINESS SERVICES LIMITED

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Why will the Project Work? This project is presumed to succeed because of the following reasons:  The promoter’s entrepreneurial drive.  Promoter’s access and relationship with men of repute and clout o The above attribute can be leveraged to facilitate fund raising.

 Promoter’s business advisory and finance background  Alliances and partnership  Prevailing market situation i.e. huge demand – supply gap

NEXTZON BUSINESS SERVICES LIMITED

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Actions taken to date  The promoter and Nextzon met with the Economic Adviser to the Governor of Ogun State and we agreed the following:  The economic adviser is compiling a list of the Oil Palm zones and estates in the State and their status to give us information  We intend to use this information to determine our take-off strategy and how to proceed

 We are also researching technical partners and conditions of bringing them on board of this project  We are also researching sources of Agriculture funds to aid set up when time comes

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Actions taken to date S/N 1.

Fund Provider Fund Characteristics/ and attributes International Fund for Agricultural Development

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Agricultural Foundation

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 IFAD in July 2009 gave a loan of USD40 million to the Farmers in Nigeria The grant is in support of the  Federal Government’s Rural Financing Institution Building  Program (RUFIN) 1. Its targeted at 12 States in 2. the six geopolitical zones in Nigeria 3. 4.

Fund Beneficiaries

Major beneficiaries are the people farmers who have no access to funds. With about 345,000 house holds to benefit Other beneficiaries include: 70 Micro Finance Banks 70 Non Bank Micro Finance Institutions Central Bank of Nigerian Agricultural Cooperative and Rural Development Bank 5. Research Institutions The grant will finance a fund  The foundation recently gave for buy back, allow farmers grants to Da All Green Seeds buy improved inputs; Limited (DAGS) in Kaduna It will also be used for State  DAGS produces sorghum capacity building for farmers, radio adverts etc seeds for farmers on credit, The grant from USAAF will the farmers cultivate these be for five years seeds and sell back the harvest to the company

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Actions taken to date S/N Fund Provider Fund Characteristics/ and attributes  3. Mechanized Agric  The organization is an Micro Credit Investment Scheme

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Agricultural fund raiser in Nigeria Recently it made USD 1 Billion available to Nigerian  farmers The funds were/are made available by investors in South Africa and Dubai who are interested in Agriculture  in Nigeria The investors desire to transform crude farmers to mechanized farmers 

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4.

CDC Group

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CDC is a fund of funds investing their capital with

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Fund Beneficiaries The fund will be made available to micro farmers with a minimum of N500,000 and maximum 10,000,000 for each farmers The funds will be available for farmers who can plant and harvest any crop between 6 to 12 months It is required that the beneficiaries open an account with a micro finance bank and also contribute 6% of the desired loan Also the loan applicant must join a recognized cooperative society. The interest rate will be between 7.5% to 15% per annum, depending on the micro - finance institutions SMEs in Emerging economies

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Actions taken to date S/N Fund Provider Fund Characteristics/ and attributes  For-profit private companies  5. AECF

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 which have, or intend to, start business enterprises in   Sub-Saharan Africa in the field of agriculture, agribusiness, rural financial services and media and information services to these sectors. Provides grants and repayable grants (zero interest loans) up to a maximum of USD $1.5m per company (the average grant size will be US$D750, 000) to the most innovative proposals that are adjudged to have the greatest impact on the largest number of rural poor people.

Fund Beneficiaries Agribusiness Rural financial services Rural media other information services