1 / 26

Farmers Cooperatives 2001 October 8, 2001

Farmers Cooperatives 2001 October 8, 2001. CHS Cooperatives - Land O’Lakes. Data Base. 560 Cooperatives 16 states. Industry Trends. Continued emphasis on critical mass Continued use of E-Business Continued analysis of service income vs. product margins

francis-floyd
Download Presentation

Farmers Cooperatives 2001 October 8, 2001

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CH-757PE-017cgMK Farmers Cooperatives 2001October 8, 2001

  2. CH-757PE-017cgMK CHS Cooperatives - Land O’Lakes

  3. CH-757PE-017cgMK Data Base • 560 Cooperatives • 16 states

  4. CH-757PE-017cgMK Industry Trends • Continued emphasis on critical mass • Continued use of E-Business • Continued analysis of service income vs. product margins • Constant challenge to find, hire, and retain quality people • A general trend of greater returns being generated by larger operations

  5. CH-757PE-017cgMK Local Cooperative Issues • Build a unified cooperative system • Ability to generate adequate returns and cash flow • Enhance marketing strategies and skills • Human Resources programs and development • Develop and implement coordinated E-Commerce strategy

  6. CH-757PE-017cgMK Total Profitability 560 Local Cooperatives

  7. CH-757PE-017cgMK Financial Analysis of 560 Local Cooperatives • 2000 • Number Profitable 73% • Trends Total • Sales volume down (2.9)% • Margins up 4.5% • Expenses up 5.7% • Local savings down (10.8)% • Patronage down (22.3)% • Total savings down (17.3)%

  8. CH-757PE-017cgMK Local Co-op Trends

  9. CH-757PE-017cgMK Local Ownership/ Term/ Local Net Worth • Local Ownership 38.4% • The guidelines for the ratios are: • 50% = strong • 35-50% = acceptable • < 35% = concern • Term Debt/ Local Equity 44.4% • The guidelines for the ratios are: • < 35% = strong • 35 - 75% = manageable • > 75% = concern

  10. CH-757PE-017cgMK Market Segmentation and Cooperatives

  11. CH-757PE-017cgMK Market Segmentation • What is your market? • What will your market be? • What should your market be?

  12. Local Cooperative Analysis CH-757PE-017cgMK

  13. % of % of Average Average Size of Number of % of Total Total Sales Profit Account Accounts Accounts Sales Profit (million) (million) Over $100 million 11 1.9% 15.1% 12.1% 172 1.5 $75 - $100 million 10 1.7% 6.6% 8.8% 83 1.2 $50 - $75 million 37 6.6% 18.1% 23.3% 61 .8 $25 - $50 million 84 15.0% 24.1% 24.2% 36 .4 $25 and below 418 74.8% 36.1% 31.6% 11 .1 560 100.0% 100.0% 100.0% 22 .2 CH-757PE-017cgMK Profits by Size of Co-op Financial Summary 560 Cooperatives

  14. Total Range Size of Number of Sales Total of Account Accounts Volume Profit Profitability (million) Over $100 million 11 1,890 16.1 3.9 - (1.4) $75 - $100 million 10 829 11.7 2.0 - .2 $50 - $75 million 37 2,254 30.9 3.7 - (1.1) $25 - $50 million 84 3,004 32.1 2.3 - (1.0) $25 and below 418 4,466 41.6 1.7 - (1.0) Total 560 12,443 132.4 3.9 - (1.4) CH-757PE-017cgMK Profits by Size of Co-op Financial Summary 560 Cooperatives

  15. CH-757PE-017cgMK State Analysis560 Cooperatives

  16. CH-757PE-017cgMK Local CooperativesTop 10 Per State/Region - 90 Cooperatives

  17. CH-757PE-017cgMK Key Findings • Although local co-ops destroy value in the aggregate, a significant fraction do create value on an individual basis • Although a sample of 500 local co-ops destroyed $105 million in 1999 on $2.2 billion invested, 30% of the co-ops created value • Operational efficiency and capital utilization are the most significant drivers of whether a local co-op creates value • Co-op performance improves substantially with scale

  18. CH-757PE-017cgMK Value Creation at Co-ops • Cumulative local value created at sample co-ops* • $ Millions • Although local co-ops destroy value in aggregate . . . • On $2.2 billion in capital invested, $105 million of value was destroyed • . . . a significant fraction do create value individually • 30% of co-ops created value on an individual basis • Value created by these co-ops equals $28 million on $0.7 billion invested • 30% of co-ops create value • Cumulative capital invested • $ Billions * Survey of approximately 500 CHS co-ops Source: Member co-op survey; team analysis

  19. CH-757PE-017cgMK Value Created Across Local Co-ops • Value created/ invested capital • Percent • Cost of capital • Percent • Revenue** • $ Millions • Value created** • $ Thousands • ROIC • Percent • Quartile* • 1 • 14.2 • 9.2 • 2 • 6.3 • 9.3 • 3 • 1.8 • 9.5 • 4 • -9.3 • 9.4 • -18.7 • Total • 4.6 • 9.4 * Segmented by value created/invested capital ** Mean values for co-ops in quartile Source: Member co-op survey; team analysis

  20. Q1 Q4 Top quartile Bottom quartile CH-757PE-017cgMK Drivers of Value Creation • Mean metrics for co-ops segmented by local performance* • COGS • Percent of sales • Pretax operating profit • Percent of sales • Q4 • Q3 • Q2 • Q1 • Operational efficiency • Co-ops in top quartile expended almost 5% less in expenses than those in the bottom quartile • Expenses • Percent of sales • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 • Pretax ROIC • Percent • Q4 • Q3 • Q2 • Q1 • Net PP&E • Percent of sales • Capital utilization • Bottom quartile co-ops are 3% more capitalized than those in the top quartile • EP/IC** • Percent • Capital turnover • Ratio • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 • Working capital • Percent of sales • WACC • Percent • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 * Co-ops segmented by level of value created/invested capital ** Numbers may not add due to rounding Source: Member co-op survey; team analysis

  21. CH-757PE-017cgMK Leverage Ratios for Local Co-ops • Revenue** • $ Millions • Value created** • $ Thousands • Long-term debt to equity • Quartile* • Current ratio • 1 • 2 • 3 • 4 • Total * Segmented by value created/invested capital ** Mean values for co-ops in quartile Source: Member co-op survey; team analysis

  22. CH-757PE-017cgMK KEY FINDINGS • Although local co-ops destroy value in the aggregate, a significant fraction do create value on an individual basis • Co-op performance improves substantially with scale • While smaller co-ops benefit from larger gross margins . . . • . . . the advantage is eroded by subscale operations and overcapitalization

  23. CH-757PE-017cgMK Scale Impact on Co-op Performance • Return on invested capital at sample co-ops* • Percent • Key metrics for co-ops segmented by revenues • Operating margin • Percent • Revenue*** • $ Millions • ROIC • Percent • Quartile** • 1 • 2 • 3 • -0.2 • 4 • -0.7 • Co-op revenue • $ Millions * Survey of approximately 500 local co-ops ** Co-op segmented by annual revenue *** Average for co-ops in quartile Source: Member co-op survey; team analysis

  24. Q1 Q4 Top quartile Bottom quartile CH-757PE-017cgMK Drivers of Scale Impact on Performance • Mean metrics for co-ops segmented by revenue* • COGS • Percent of sales • Pretax operating profit • Percent of sales • Q4 • Q3 • Q2 • Q1 • Expenses • Percent of sales • Operational efficiency • Top quartile co-ops expended 8% less in expenses than those in the bottom quartile • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 • Pretax ROIC** • Percent • Q4 • Q3 • Q2 • Q1 • Net PP&E • Percent of sales • Capital utilization • Bottom quartile co-ops are 4% more capitalized those in the top quartile • Capital turnover • Ratio • Q4 • Q3 • Q2 • Q1 • Working capital • Percent of sales • Q4 • Q3 • Q2 • Q1 • Q4 • Q3 • Q2 • Q1 * Co-ops segmented by level of value created/invested capital ** Numbers may not add due to rounding Source: Member co-op survey; team analysis

  25. CH-757PE-017cgMK Effects of Scale on Operational Efficiency andCapital Utilization • Expenses • Percent of revenue • Capital turnover • Ratio • Co-op revenue • $ Millions • Co-op revenue • $ Millions Source: Member co-op survey

  26. CH-757PE-017cgMK Successful Co-ops • Vision and Mission • Outstanding Management/Staff • Understand the producers’ needs for value-added strategies • Efficient, profitable • Manage equity and capital for long-term success • Integral piece of co-op system

More Related