business overview
TRANSCRIPT
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
1
What Our Clients are Looking For
• Commodity costs are a significant cost of goods sold
• Supplement internal commodity expertise
• Develop and implement a strategic business strategy to manage cost
• Track, report, and forecast key commodity costs
In short:
Become their trusted source for agricultural commodity and energy
information and management processes
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
2
What We Heard
• Commodity cost surprises have impacted results multiple times
• An active search for commodity risk management help is underway
• Exposure to: flour, soybean oil, palm oil, and sugar
• Evaluating the need to establish a margin account
• Would like support during the 2013 planning process
In short:
The issue is on the “radar screen” and solutions are being evaluated
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
3
What is risk to the organization?
• Volume at risk is the mismatch of forward sales and commodity
ownership
• Price risk is the volatility of the market
• Risk = Volume X Price risks
What capability is there to manage risk?
• People, processes, and financial tools
What is our market opinion?
• Research and outlook
What are the benefits?
• Execute and track results
Customized Commodity Solutions
We strive to institute a complete solution Who We Have Helped
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
4
Matt Beeson
• Founder 1995
• Key commodity purchasing roles
– Pillsbury, Brach Candies, KFC (PepsiCo)
• M.S. in Ag Econ University of Illinois
James Stewart
• Energy leader
• Key energy management roles
– Summit Energy, GE Appliances, Integrys Energy
• MBA University of Louisville
• Joined Beeson & Associates, Inc. 2011
Our Team
Blend of experience and education delivers results
Alex Norton
• Director: Risk Management
• Economics: Wake Forest
• MBA U Mass in progress
• Joined Beeson & Associates, Inc. in 2008
Philip Beeson
• Director: Commodity Services
• Finance at Johnson & Johnson
• Finance: Miami of Ohio
• Joined Beeson & Associates, Inc. 2011
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
5
2-day launch
• Learn your business needs
• Get underlying volume information
• Mutually set objectives of the program
Ongoing support
• Weekly market outlook
• Monthly strategy webinar
• Execution of strategies (if desired)
Track the results
• Provide results tracking
• Utilize proprietary web-based reporting Bundle(if desired)
The Process
We end with market outlook What we hear?
“This process changed the way
we think about and manage
the markets.”
“We no longer start with a
panicked feeling about
market direction, but put
together a business strategy
based on market conditions.”
“The positions we do take are
understood, quantified, and
tracked.”
“We have not had an
unmanageable commodity
surprise in the 4 years we
have been using this model.”
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
6
Weekly Update
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
7
Monthly Strategy Meeting
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
8
Example: You See What We See
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
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Example: You See What We See
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
10
Reporting
Comparison vs. Market1000s better/(worse)
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 2011 Total
Flour $363 $372 $538 $308 $243 -$109 $12 $188 $152 -$94 -$72 -$49 $1,851
Palm Oil $90 $225 $368 $391 $418 $522 $197 $227 $314 $89 $97 $81 $3,020
Buttermilk $11 $0 $41 $69 $3 $52 $27 $8 $19 $5 $6 $4 $244
Sugar $30 $41 $83 $63 $33 $49 $36 $57 $78 $84 $41 $41 $635
Natural Gas $0 -$4 -$3 $1 $1 $1 $0 -$1 -$2 -$3 $0 $0 -$10
Total $493 $635 $1,027 $831 $699 $514 $272 $479 $561 $81 $72 $76 $5,740
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
11
Reporting
Comparison vs. Budget1000s better / - worse
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 2011 Total
Flour $79 $84 $90 $28 $37 -$72 -$47 $29 $44 -$50 -$59 -$41 $121
Palm Oil $1 $11 $7 $3 -$1 -$3 -$72 -$75 -$108 -$116 -$86 -$83 -$522
Buttermilk $13 -$2 $20 $34 -$43 -$20 -$38 -$54 -$48 -$49 -$38 -$30 -$255
Sugar -$2 -$3 -$4 -$3 -$3 -$3 -$2 -$3 -$3 $15 -$14 -$14 -$39
Apples $10 $3 $34 -$16 -$15 -$75 -$67 -$34 -$37 -$95 -$95 -$95 -$482
Cherries -$12 -$24 -$34 -$26 -$31 -$36 $16 $0 -$2 -$3 -$7 -$9 -$168
Natural Gas -$2 -$2 -$2 $1 $1 $0 $0 $0 $0 $0 $1 $1 -$2
Total $87 $66 $111 $22 -$55 -$209 -$210 -$135 -$155 -$299 -$298 -$271 -$1,347
Last Month's Update -$1,336
Comparison vs. Budget1000s better / - worse
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 2011 Total
Flour $79 $84 $90 $28 $37 -$72 -$47 $29 $44 -$50 -$59 -$41 $121
Palm Oil $1 $11 $7 $3 -$1 -$3 -$72 -$75 -$108 -$116 -$86 -$83 -$522
Buttermilk $13 -$2 $20 $34 -$43 -$20 -$38 -$54 -$48 -$49 -$38 -$30 -$255
Sugar -$2 -$3 -$4 -$3 -$3 -$3 -$2 -$3 -$3 $15 -$14 -$14 -$39
Apples $10 $3 $34 -$16 -$15 -$75 -$67 -$34 -$37 -$95 -$95 -$95 -$482
Cherries -$12 -$24 -$34 -$26 -$31 -$36 $16 $0 -$2 -$3 -$7 -$9 -$168
Natural Gas -$2 -$2 -$2 $1 $1 $0 $0 $0 $0 $0 $1 $1 -$2
Total $87 $66 $111 $22 -$55 -$209 -$210 -$135 -$155 -$299 -$298 -$271 -$1,347
Last Month's Update -$1,336
Note: several commodities were deleted for confidentiality reasons. Total does not add correctly
www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460
12
Accounting treatment
• Mark-to-market
• Hedge accounting
Cash impact
• Margin can be significant
Training
• Understanding and use of options
Implementation of Margin Account
Is it really necessary? Our Experience
Few of our clients manage their
own margin account
• Vendors will embed option
strategies
• Accounting and cash impacts
are insurmountable
• Most of the risk management
programs do not require it
However, it cannot be debated…
Flexibility of having an account
has advantages!