S&W Seed Company (NASDAQ: SANW) Management Interview


S&W Seed Company
President and CEO: Mark Grewal
COO: Dennis Jury
CFO: Matthew Szot


WSA:  Good day from Wall Street.  This is Juan Costello, Senior Analyst with the Wall Street Analyzer.  Joining us today are Mark Grewal, President and CEO of S&W Seed Company, as well as the company’s Chief Operating Officer, Dennis Jury.  The company trades on NASDAQ, ticker symbol is SANW.  Thanks for joining us today, gentlemen.

Mark Grewal:  You’re very welcome.

Dennis Jury:  Thank you.

WSA: For some of our listeners that didn’t catch our interview from last year, can you provide us with an intro and overview of the company?

Mark Grewal: Certainly.  S&W Seed Company is the largest producer and distributer of alfalfa seeds in the world.  We produce our growth seed in the western United States, Canada, and Australia.  Our seed varieties are sold in more than 30 countries across the globe.  For those people who are not familiar, alfalfa seeds are utilized to grow alfalfa hay that is primarily used as forage for dairy and beef cattle and other livestock.  It is the fourth largest crop in the world and that would be behind corn, wheat, and soybeans.  There are approximately 70 million acres of alfalfa planted globally each year.  And we’re thankful we’ve got Dennis here from Australia.  He just came in, so if there are any specific questions, he’ll be able to answer those from our Australian operation.

WSA: Sure.  So in terms of some of your recent news, can you guys talk about the recent agreement for Ukraine and Russia, as well as the acquisition earlier of SV Genetics?

Mark Grewal:  Yeah I’m going to turn it over to Dennis.  Dennis was the lead on the SVG acquisition located out of Brisbane and I’ll let him take over that.  Go right ahead.

Dennis Jury:  Thanks, Mark.  We recently expanded into the heart of the sorghum and sunflower seed markets.  Sunflower, in particular — approximately 60% of the global sunflower market is inside two countries, Ukraine and Russia.  A few weeks ago we announced a new license agreement for the production and marketing of two sunflower varieties for the Ukraine and Russia, as well as Belarus, Georgia, and Kazakhstan.  It was for a seed company with significant distribution throughout that region.  This license agreement company chose to move forward with our variety due to the diversity and strengths of the two varieties and the breeding program as a whole.  In addition we believe it’s essential to move forward and then to expand our alfalfa positions as well, highlighting the complementarity between these crops from a distribution point of view.

WSA: So what are some of the key trends that you’re focusing on right now in this sector and how is the company positioned to capitalize?

Mark Grewal:  Well as always, it’s about population growth.  It’s a protein play.  So the most important items are that it’s estimated that the world will need to increase food production between 60 and 100% by 2050 to meet a roughly 30% increase in the overall population.  So there’s a disconnect between the amount of food needed and what we have today.  Global distribution is probably the most paramount question on what’s going to happen in the next 30 years.

Juan Costello: Definitely, for sure.  So what are the key factors that you feel make S&W unique from some of the other players in the sector and able to capitalize on that?

Mark Grewal: What’s unique about us is that we focus on crops in the world that are needed for protein, the forages to compliment our approach to the protein play, but can be grown in more marginal soils, salt, separate water conditions, and even some of the cropping that Dennis has got us in, use less water than other crops and yet you still maintain the same types of yields on a per-acre or per-hectare basis.  So I think our focus is into where the expansion is going to be in the world, Africa and South America, some parts of Asia, the tropical environments, the desert environments, and areas where water is not of the best quality and how are we going to grow crops and feed the animals and the humans in those areas.  So that’s our main focus.

Juan Costello: Certainly.  What are the key goals and milestones that you guys are hoping to accomplish over the course of the next six-to-twelve months?

Mark Grewal: Well we can’t be too much forward looking and declare what our strategy is, but if you look at the past history of what we’ve done together.  If we go backwards and look at going public in 2010, purchasing Imperial Valley Seeds in 2012 — and taking out our distributer Genetics International prior to that, purchasing the germplasm from Geertson Seed Company, Dennis joining us in 2013 as we acquired Seed Genetics International, and then Pioneer in December 2014 and their alfalfa portfolio.  And now Dennis just completed SVG.  You can see the trail and the path that we’re taking in seed companies.  I think the most important thing to understand is that as we build our proprietary seed business, the critical components of this would be IP and plant patents or licensing rights.  These will all enhance our global distribution into the world and make us much more valuable to those five-to-seven majors that own 70% of all the seed companies in the world.

WSA:  Great.  Perhaps you guys can talk a little bit about your background and experience and the new management team?

Dennis Jury:  All of us in the senior management team have been in the seed industry for a long time, 25 to 30 years, so we’ve got a real depth of experience there.  And all of us have been particularly focused on the export market, which is a unique market to deal with.  The domestic market is fairly straight forward, but dealing in the export markets in the Middle East and North Africa presents challenges — but all of us have got very good experience there.  And then with SVG again, we brought in two industry stalwarts that know the growing sorghum and sunflower markets really well and have got distribution channels into new areas such as Eastern Europe and through into Ukraine.  So they have potential for alfalfa from S&W as well, going into new markets for the company as a whole.  Mark, you might want to comment more about the regional S&W management yourself.

Mark Grewal:  Yeah, it’s obviously exactly what Dennis said.  In our vocation and area of expertise we’re second to none.  We’ve picked up excellent management capabilities out of the Pioneer, excellent capabilities out of Seed Genetics, excellent capabilities out of Imperial Valley, and all the top managers out of S&W Seed.  And you form that team and it’s kind of like a Lebron James team or a Jack Welch General Electric team.  We’re very proud of the management, their capabilities and leadership, their education, and their experience in the alfalfa and forage programs of the world.

WSA:  Great.  When it comes to investors and the financial community, what are some of the drivers there that you wish perhaps investors better understood about the company?

Mark Grewal:  So the biggest thing is that we get tied to corn a lot of times and with our product line, we should really not be tied to corn.  So if you traced the corn and it’s pricing up and down, it’s not really in concert with what Dennis and I deal with in the alfalfa regions of the world.  There are approximately 75 million pounds of alfalfa seeds in the non-dormant areas that are sold each year and there are another 75 million of the dormant alfalfa seeds sold each year, so that’s 150 million pounds of seeds sold every year.  And then we are sitting here in the state of California and it’s the second largest crop in the entire state — behind almonds.  There’s a million acres of hay here.  So these are very large crops.  There are 20 to 24 million acres of alfalfa hay growing in the United States alone.  It takes a lot of seed.  So we can’t be tied up with other commodities.  We’re a separate cropping that goes on every single year.  The dairy cows have to have alfalfa hay in their diet.  They eat about eight-to-ten pounds of hay every single day of their lives and this is a bigger play than “do you want to use corn?” or “do you want to use wheat?” or “do you want to use some other product as a mix or a feed blend, depending on pricing?” They’re going to have hay in that diet no matter what.

WSA:  Right.  So once again, joining us today are Mark Grewal, the President and CEO of S&W Seed Co, as well as the company’s Chief Operating Officer, Dennis Jury.  The company trades on NASDAQ, ticker symbol SANW.  Currently trading at $4.29 a share.  The market cap is north of $70 million.  And before we conclude here, gentlemen, to recap some of your key points, why do you believe investors should consider the company as a good investment opportunity today?

Mark Grewal:  I think it’s an extremely solid value in the market place right now.  Our assets range from Australia through Idaho into California and our global reach and distribution is second to none in alfalfa.  So I think it brings a lot of high-value opportunity and as we expand and [inaudible] seeds with our propriety varieties, I think that’s going to add the IP and the technical side that people are looking at when they want to buy a stock.

WSA:  Well we certainly look forward to continuing to track the company’s growth and reporting on your upcoming progress.  I would like to thank you guys for taking the time to join us today and update our investor audience on S&W Seed Co.  It’s always good to have you on.

Mark Grewal:  Thank you very much.  We appreciate your efforts and time.

Dennis Jury:  Thank you.

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