Investor Presentaiton
October 12, 2021
RISKS, OPPORTUNITIES, AND THOUGHTS ON ESG
Risks
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GBM
Teak market:
• Proteak's relative quality. Although the company has already established relationships with brokers and buyers in Asia, it is just starting to harvest its
own teak.
⚫ Best farms are still young. The company sowed its first plantations in 2002 when it was still inexperienced. Therefore, the quality of its harvests is poised
to improve over time. As such, results in the medium term may not reflect the company's full FCF generation potential.
• Macro downturn: The furniture market is driven by housing development and overall macro trends. Furthermore, an economic deceleration in the
United States or Europe could hinder Proteak's operations.
MDF
• A surge in imports: The Mexican production of MDF, including Proteak's/TEAK's, has been able to gain share in the domestic market (ca. 50%, per
company estimates), while imports have rebounded to pre-pandemic levels. Nonetheless, the company mentioned there has been a surge in Mexican
imports from China, which, for now, have the same price but lower quality than MDF manufactured locally.
•
Substitution of MDF. Demand for MDF has boomed in the last decade, but consumer preferences could shift to other types of boards, which would
reduce Proteak's total addressable market (TAM).
Overall
• Insurance: Proteak's plantations aren't insured. Widespread fires would endanger the firm's operations. The company has hedged its operations by
owning several nonadjacent farms.
• Debt restructuring: The company is currently in talks with its main creditors (91% of its consolidated debt) to defer the amortizations that should have
started in 2020 but keeping the face value unchanged. Per the 2Q21 earnings call, and considering improving trends, management expects to reach an
agreement in 4Q21.
•
Climate change. Most of Proteak's plantations rely on rainfall and are at risk of catching fire. The latter is mitigated by having their trees in different
plantations.
TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 22View entire presentation