Olam Group Limited · SGX:VC2
Olam — H1 2020 Earnings Presentation
51 slides from Olam's earnings presentation, Aug 13, 2020
Slide 1: Half Year 2020 Results Briefing
Half Year 2020 Results Briefing August 13, 2020
Slide 2: Presenters
Presenters Sunny Verghese A. Shekhar N. Muthukumar Co-Founder and Group CEO Executive Director Group CFO CEO, OFI Olam International Limited Results for Half Year 2020 ended June 30, 2020 | August 13, 2020 2
Slide 3: Notice
Notice This presentation should be read in conjunction with Olam International Limited’s Financial Statements and Management Discussion and Analysis for the Half Year 2020 ended June 30, 2020 (“H1 2020”) lodged on SGXNET on August 13, 2020. Olam International Limited Results for Half Year 2020 ended
Slide 4: Cautionary note on forward-looking statements
Cautionary note on forward-looking statements • This presentation may contain statements regarding the business of Olam International Limited and its subsidiaries (‘Group’) that are of a forward-looking nature and are therefore based on management’s assumptions about future developments. • Such forw
Slide 5: Agenda
AGENDA Re-organisation Plan recap and progress update Changes to reporting structure Covid-19 response and outlook H1 2020 Group financial highlights Segmental performance by operating groups Key takeaways
Slide 6: Re-organisation Plan recap & progress update; Changes to reporting structure
Re-organisation Plan recap & progress update Changes to reporting structure
Slide 7: Re-organisation Plan Recap: Over and above Strategic Plan
Re-organisation Plan Recap: Over and above Strategic Plan Olam’s Re- current strong Organisation Strategic Plan foundation (2019-2024) Plan (built over (January 30 years) 2020 onwards) Leading food & agri-business supplying Olam announced its new The Company decided to explore options that food, ing
Slide 8: Bold plan to re-organise current businesses into two distinct operating groups
Bold plan to re-organise current businesses into two distinct operating groups OLAM INTERNATIONAL (OIL) OLAM FOOD INGREDIENTS (OFI) 1. Stewardship • Industry-leading businesses offering sustainable, natural, value-added food ingredients which are • Holding company for OFI & OGA “on-trend” • Parentin
Slide 9: Re-organisation to unlock long-term value
Re-organisation to unlock long-term value • Re-organise the current diverse business portfolio into two new coherent operating groups in line with Simplify • Increased focus will enhance key consumer trends and market performance in each of the our opportunities operating groups portfolio Sharpen •
Slide 10: Stage-gated execution
Stage-gated execution STEP 4 Potential IPO Progress with potential capital raise/ IPO listing on a STEP 3 sequential basis in the Potential relevant market, if key STEP 2 valuation and related STEP 1 Carve-out conditions are met Re-organisation Engage with investors, Re-segmentation Re-organise the
Slide 11: Programme governance in place to effectively execute the Re-organisation
Programme governance in place to effectively execute the Re-organisation Board Board Steering Committee (BSC) Project Team (PT) External advisor support as Project Management Office 1 2 3 Operating & Full Potential Strategy Cost & Capital Organisational Model Functional Separation & Value Creation P
Slide 12: Olam Food Ingredients (OFI)
Olam Food Ingredients (OFI) Approach to Strategy Vision: A global leader offering sustainable, natural, value-added food ingredients, so consumers can enjoy the healthy & indulgent products that they love Focused portfolio: Leadership positions across complementary product groups; delivering to comm
Slide 13: Olam Global Agri (OGA)
Olam Global Agri (OGA) Approach to Strategy OGA will focus on continuing to build its market leading and differentiated global food, feed and fibre agri-business with a particular focus on emerging markets. Compared to most of our peers, OGA has a superior growth and return profile with significantl
Slide 14: Olam International Limited (OIL)
Olam International Limited (OIL) Approach to Strategy Unlocking value for Olam Group As parent company of OFI and OGA, OIL plays a key role to unlock the full value of the Olam Group by: Providing active stewardship to the new operating groups, Responsibly divesting the de-prioritised assets, Nurtur
Slide 15: We have made good progress in executing the Re-organisation Plan
We have made good progress in executing the Re-organisation Plan Senior management and executive teams for the respective operating groups have been appointed Operating and Organisational Model Design – Initial hypothesis established, including the country / regional structure and corporate function
Slide 16: New operating groups, new segments and key performance metrics
New operating groups, new segments and key performance metrics Guiding principles used to determine new segmentals and metrics Strong alignment to the equity story and strategy of each 1 operating group 2 Relative saliency of segments 3 Reduce complexity (lesser number of segments and fewer metrics)
Slide 17: Changes in segmentation and metrics
Changes in segmentation and metrics Strong alignment to the business strategy of each operating group Operating Strategic Positioning Segments Groups A global leader offering sustainable, 1 Ingredient Sourcing & Supply Chain: Tracks sustainable farming, natural, value-added food sourcing to factory
Slide 18: Changes in reporting segments & key performance metrics
Changes in reporting segments & key performance metrics Operating groups Segments Key performance metrics 1) Ingredient Sourcing & Segment-level Operating Group-level * Olam Food Supply Chain Volume, Revenue, EBIT, EBIT + ROIC, ROE, FCF from Operations Ingredients 2) Value-added Food Ingredients Mar
Slide 19: Covid-19 response and outlook
Covid-19 response and outlook
Slide 20: Covid-19: Potential Impacts
Covid-19 : Potential Impacts Demand side Supply side Financial markets Potential demand destruction Potential forced factory Liquidity crunch, higher and consequent volume closures as a result of spreads and liquidity volatility; commodity price containment measures; premiums with consequent volatil
Slide 21: Covid-19: Demand side Impacts
Covid-19 : Demand side Impacts • Food service demand declining: Steep decline in dine-in & out of home consumption; demand for delivery spiked but not enough to make up for decline in dine-in • Grocery retail demand growing: Packaged foods/grocery retail growing strongly; online groceries growing ev
Slide 22: Covid-19: Our response
Covid-19 : Our response 5 PRIORITIES Primary focus has been to ensure health and safety of our 1 employees and food safety of our customers Business Continuity Plans activated in all key countries and sites 2 in Africa, Americas and Asia To mitigate impact on demand, supply and financial markets, we
Slide 23: Supporting farmers and rural communities
Supporting farmers and rural communities US$5.7 million in financial and in-kind donations for healthcare and food relief Supporting public awareness and Providing medical relief and supporting Donating food and supporting food community support campaigns healthcare provision relief activities Reach
Slide 24: Outlook
Outlook • With 80-85% of our revenues in the food category where demand is less sensitive to recession or economic downcycles, we believe we will be able to better navigate the demand led uncertainties around COVID-19. • However, the impact of COVID-19 on the rest of the year remains uncertain with
Slide 25: Group H1 2020 financial highlights
Group H1 2020 financial highlights
Slide 26: Group H1 2020 results at a glance
Group H1 2020 results At a glance VOLUME EBIT PATMI 20.1 M MT S$424 M S$333 M +5.0% -18.8% +44.4% Operational Free Cash Gearing PATMI Flow S$202 M +FCFE from 1.28x to -18.5% S$827 M 1.29x Olam International Limited Results for Half Year 2020 ended June 30, 2020 | August 13, 2020 26
Slide 27: Group H1 2020 financial highlights
Group H1 2020 financial highlights Resilient results amid Continues to strengthen Executing on Interim Dividend Covid-19 balance sheet Re-organisation Plan Higher PATMI on continued Steady cycle time despite Accomplished Step 1 and Step Board of Directors declares execution on Strategic Plan higher
Slide 28: Consolidated results by operating groups: H1 2020 at a glance
Consolidated results by operating groups H1 2020 at a glance Volume ('000 MT) Revenue (S$ m) 3.1% 9.1% 5.0% Volume 36.1% OIL ('000 MT) OIL 20,058.4 OFI 17,080.5 20,058.4 OFI +5.0% OGA +7.1% +5.0% OGA 87.8% 58.9% EBIT (S$ m) IC (S$ m) 16.1% 16.8% 26.1% OIL OIL 423.7 OFI 15,538.9 OFI -18.8% OGA +7.0%
Slide 29: Volume grew 5.0%
Volume grew 5.0% Led by Olam Global Agri’s Origination & Merchandising segment Volume by Operating Groups, '000 MT +5.0% 1,076 20,058 -185 67 19,100 H1 2019 OFI OGA OIL H1 2020 Olam International Limited Results for Half Year 2020 ended June 30, 2020 | August 13, 2020 29
Slide 30: EBIT declined 18.8%
EBIT declined 18.8% EBIT by operating groups, S$ million -18.8% 522 82 424 -4 -176 H1 2019 OFI OGA OIL H1 2020 Olam International Limited Results for Half Year 2020 ended June 30, 2020 | August 13, 2020 30
Slide 31: PATMI grew 44.4%
PATMI grew 44.4% Backed by net exceptional gains on divestments PATMI and Operational PATMI, S$ million +44.4% 15 333 148 230 35 3 -98 H1 2019 EBIT^ Net Finance Taxation Exceptional Non-controlling H1 2020 Costs Items Interests Operational 248 -18.5% 202 PATMI (S$ M) ^ Excludes exceptional items Ola
Slide 32: 7.0% increase in invested capital, 10.8% increase in working capital
7.0% increase in invested capital 10.8% increase in working capital • Net Fixed Capital increased by S$378 million on Working Capital Fixed Capital account of acquisitions of Dangote Flour Mills, +7.0% Hughson Nut and Cotonchad, and organic growth in 15,832 15,648 15,539 line with Strategic Plan 14,
Slide 33: Net gearing remains steady at 1.29x
Net gearing remains steady at 1.29x • Higher net debt due to increased working capital Net gearing Adjusted net gearing • Net gearing remains steady despite higher net debt 1.38 as equity also increased 1.28 1.29 0.34 0.26 0.29 30-Jun-19 31-Dec-19 30-Jun-20 Olam International Limited Results for Hal
Slide 34: Free cash flow
Free cash flow Positive FCFE on sharp focus and discipline of investing cash flows Free Cash Flow to Equity, S$ million -37 864 247 25 827 -86 -205 -18 H1 2019 Operating Cash Changes in Tax Paid Capex / Net Interest H1 2020 Flow (before Working Capital Investments Paid Interest & Tax) FCFF 1,128 -62
Slide 35: Ample liquidity
Ample liquidity Total borrowings and available liquidity, S$ Million as at June 30, 2020 Short Term Long Term 7,243 19,889 +4,805 15,084 1,358 5,368 9,127 5,920 5,957 Cash and Short- RMI* Secured Unutilised Available Total term Fixed Deposits Receivables Bank Lines Liquidity Borrowings * RMI: invent
Slide 36: Segmental performance by operating groups
Segmental performance by operating groups
Slide 37: Olam Food Ingredients (OFI)
Olam Food Ingredients (OFI) S$ Million Ingredient Sourcing & Supply Chain Value-added Food Ingredients & Solutions EBIT Invested Capital -0.7% +4.4% +8.9% 793 8,877 8,553 8,755 8,499 8,876 668 678 -40.1% 52% 58% 57% 50% 41% 439 60% 62% 61% 49% 263 59% 48% 36% 50% 42% 40% 38% 39% 43% 51% 64% 2017 201
Slide 38: OFI: Ingredient Sourcing & Supply Chain
OFI: Ingredient Sourcing & Supply Chain S$ Million EBIT Invested Capital Working Capital Fixed Capital +2.7% -1.5% +10.2% 409 5,182 5,468 5,128 5,145 5,070 337 -56.1% 276 3,210 3,160 3,392 3,008 3,156 215 94 1,972 1,968 2,076 2,137 1,914 2017 2018 2019 H1 2019 H1 2020 Dec-17 Dec-18 Dec-19 Jun-19 Jun
Slide 39: OFI: Value-added Food Ingredients & Solutions
OFI: Value-added Food Ingredients & Solutions S$ Million EBIT Invested Capital Working Capital +13.5% +7.6% Fixed Capital -5.7% 402 384 3,695 3,806 3,425 3,287 3,354 331 -24.8% 1,892 224 2,147 1,906 1,546 1,611 169 1,548 1,519 1,741 1,743 1,914 2017 2018 2019 H1 2019 H1 2020 Dec-17 Dec-18 Dec-19 Jun
Slide 40: Olam Global Agri (OGA)
Olam Global Agri (OGA) S$ Million Food & Feed - Origination & Merchandising Food & Feed - Processing & Value-added Fibre & Ag Services EBIT Invested Capital +2.7% 330 -0.4% +63.9% 312 +55.4% 16% 2,998 2,972 45% 229 13% 2,618 225 32% 2,122 13% 53% 30% 41% 1,598 147 26% 59% 34% 6% 62% 38% 36% 54% 42%
Slide 41: OGA: Food & Feed - Origination & Merchandising
OGA: Food & Feed - Origination & Merchandising S$ Million EBIT Invested Capital Working Capital Fixed Capital 150 979 +72.3% +19.1% -37.3% 428 +301.7% 94 547 79 66 385 355 50 402 551 185 88 151 145 200 173 204 -85 2017 2018 2019 H1 2019 H1 2020 Dec-17 Dec-18 Dec-19 Jun-19 Jun-20 EBIT/MT 4 3 5 6 6 EB
Slide 42: OGA: Food & Feed - Processing & Value-added
OGA: Food & Feed - Processing & Value-added S$ Million EBIT Invested Capital Working Capital +52.3% 166 -15.8% Fixed Capital +286.3% +31.4% 1,742 1,614 117 442 328 96 1,060 86 1,010 982 333 284 354 1,300 1,286 25 698 706 677 2017 2018 2019 H1 2019 H1 2020 Dec-17 Dec-18 Dec-19 Jun-19 Jun-20 EBIT/MT 6
Slide 43: OGA: Fibre & Ag Services
OGA: Fibre & Ag Services S$ Million EBIT Invested Capital Working Capital 96 -19.4% Fixed Capital -8.5% 73 1,009 +44.5% 63 -10.4% 844 43 593 650 39 836 591 450 405 425 224 173 168 253 226 245 2017 2018 2019 H1 2019 H1 2020 Dec-17 Dec-18 Dec-19 Jun-19 Jun-20 EBIT/MT 70 46 40 48 44 EBIT/IC 9.0% 9.1% 8
Slide 44: Olam International (OIL)
Olam International (OIL) S$ Million De-prioritised/Exiting Assets Gestating Businesses Incubating Businesses EBIT Invested Capital -8.7% 57 -6.1% 4,430 34 3,958 4,138 3,921 4,045 19 0 0 4 -12 -40 1,965 2,101 1,458 -49 -29 2,138 1,674 -67 -117 -19 -27 -45 -33 -64 -68 2,173 2,247 2,329 2,585 1,820 -66
Slide 45: Key takeaways
Key takeaways 01 Resilient financial performance despite Covid-19 02 Acted with speed to keep our people safe, ensuring business continuity, maintaining financial strength, meeting customers’ needs and supporting communities Delivering on Re-organisation Plan • Re-segmented our current business into
Slide 46: Appendix
Appendix
Slide 47: P&L statement
P&L statement S$ million H1 2020 H1 2019 % Change Volume ('000 MT) 20,058.4 19,100.2 5.0 Revenue 17,080.5 15,943.9 7.1 Net gain/(loss) in fair value of biological assets 3.8 (4.0) n.m. Depreciation & Amortisation (272.6) (249.5) 9.3 EBIT^ 423.7 522.0 (18.8) Net Finance costs (230.2) (264.9) (13.1) T
Slide 48: Exceptional items
Exceptional items S$ million H1 2020 H1 2019 Profit on sale of partial stake in ARISE P&L 123.1 - Profit on sale of Far East Agri (PT DUS) 49.9 - Loss on sale of stake in Mungindi gin, Australia (0.9) - Loss on sale of Collymongle gin, Australia - (1.1) Profit on sale of subsidiary (Alimentos) - 0.6
Slide 49: Balance sheet
Balance sheet S$ million Change Change 30-Jun-2020 31-Dec-2019 30-Jun-2019 vs Dec 19 vs Jun 19 Fixed Capital 8,730.9 8,616.0 114.9 8,337.8 393.1 Right-of-use assets 578.0 577.6 0.4 656.4 (78.4) Uses of Working Capital 6,419.4 6,627.8 (208.4) 5,757.2 662.2 Capital Cash 5,920.0 3,179.6 2,740.4 3,697.2
Slide 50: Cash flow statement
Cash flow statement S$ million H1 2020 H1 2019 YoY Operating Cash flow (before Interest & Tax) 683.9 770.0 (86.1) Changes in Working Capital 560.6 765.3 (204.7) Net Operating Cash Flow 1,244.5 1,535.3 (290.8) Net interest paid (239.5) (264.3) 24.8 Tax paid (70.3) (51.8) (18.5) Cash from divestments
Slide 51: H1 2020 Results Briefing
H1 2020 Results Briefing olamgroup.com/investors.html ir@olamnet.com