Olam Group Limited · SGX:VC2
Olam — Olam International — FY2006 Earnings Presentation
73 slides from Olam's earnings presentation, Aug 28, 2006
Slide 1: 0
0
Slide 2: Team Introduction
Team Introduction Sunny Verghese Group Managing Director & CEO (Executive Director) K. Ravikumar Chief Financial Officer S. Suresh General Manager, Corporate Affairs 1
Slide 3: Fourth Quarter & Full Year FY2006 Results Briefing
Olam International Limited Fourth Quarter & Full Year FY2006 Results Briefing 28th August 2006 Singapore 2
Slide 4: Presentation to be read with Q4 FY2006 results statement
This presentation should be read in conjunction with Olam International Limited’s Fourth Quarter, FY2006 (Q4 FY2006) and Full Year FY2006 Financial Results Statement for the period ended 30th June 2006 lodged on SGXNET on 28th August 2006. 3
Slide 5: 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 forward
Slide 6: Results Presentation: Outline
Results Presentation: Outline Market Review & Analysis Results: FY2006 - Consolidated P&L Analysis Results: FY2006 - Segmental Analysis Results: FY2006 - Balance Sheet Analysis M&A Update Shareholding Structure Outlook & prospects Q&A 5
Slide 7: Market: Review & Analysis
Market: Review & Analysis The Brand Behind The Brands
Slide 8: Trading Conditions: Performance of Commodity Indices
Trading Conditions: Performance of Commodity Indices 1 Jul 2005 30 Jun 2006 % Change GSCI (softs) 574.13 590.42 2.84 Reuters CRB (softs) 354.44 468.69 32.23 RICI (softs) 1,026 1,019 (0.70) DOW JONES-AIG (softs) 71.13 72.11 1.38 OLAM’S BASKET 14.86 Farm commodity prices today are at its lowest relati
Slide 9: Olam's Basket: Volume weighted
Olam’s Basket: (Volume weighted) 1 Jul 2005 30 June 2006 % Change Rice (US$/ton) 285.0 312.0 9.47 Sugar (US$/ton) 267.6 461.4 72.42 Cocoa (US$/ton) 853.0 959 12.43 Coffee (US$/ton) 1,239.0 1,258 1.53 Cotton (US¢/lb) 54.47 51.95 (4.63) Cashew Kernel (US$/lb) 2.40 2.05 (14.58) Sesame (US$/ton) 679.0 7
Slide 10: Results: Full Year FY2006 Consolidated P&L Analysis
Results: Full Year FY2006 Consolidated P&L Analysis 9
Slide 11: Consolidated P&L Analysis: Sales Volume
Consolidated P&L Analysis: FY2006 Sales Volume: 3.172 million metric tons 24.2% growth over FY2005 Volume growth across all 4 segments 10
Slide 12: Sales Volume Growth: Segmental Contribution
Sales Volume Growth: Segmental Contribution Sales Volume growth 24.2%, 618,858 mts $3200 152.5 3,172.2 234.0 3000 145.9 2800 86.4 25% 2600 2,553.3 38% 2400 14% 23% 2200 2000 1800 Sales Volume 1600 (1,000 Mts) 1400 1200 1000 800 600 400 200 0 FY2005 Edible Nuts, Confectionery Food Staples & Fibre & W
Slide 13: Consolidated P&L Analysis: Total Revenue
Consolidated P&L analysis: FY2006 Total Revenue: S$4,361.1 million 29.4% growth over FY2005 12
Slide 14: Sales Revenue Growth: Segmental Contribution
Sales Revenue Growth: Segmental Contribution Sales revenue growth 29.4%, S$991.9 million 329.3 4,361.1 $4,400M 4,200 275.8 4,000 365.3 3,800 33% 3,600 3,369.2 21.5 28% 3,400 3,200 3,000 2% 37% 2,800 2,600 2,400 Sales 2,200 Revenue (S$ M) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 FY2005 E
Slide 15: Sales Revenue Growth: Sources
Sales Revenue Growth: Sources Sales revenue growth 29.4%, S$991.9 million $4,500M 148.2 4,361.1 4,250 843.7 4,000 15% 3,750 3,500 3,369.2 3,250 3,000 85% 2,750 2,500 Sales 2,250 Revenue (S$ M) 2,000 1,750 1,500 1,250 1,000 750 500 250 0 FY2005 Volume Price FY2006 14
Slide 16: Consolidated P&L Analysis: Gross Contribution
Consolidated P&L Analysis: FY2006 Gross Contribution (GC) : S$343.1 million 41.6% growth over FY2005 GC growth across all segments 15
Slide 17: Gross Contribution Growth: Segmental Share
Gross Contribution Growth: Segmental Share GC growth 41.6%, S$100.8 million $350M 30.9 343.1 340 320 22.0 300 36.4 280 31% 260 11.5 22% 242.3 240 36% 220 11% 200 Gross Contribution 180 (S$ M) 160 140 120 100 80 60 40 20 0 FY2005 Edible Nuts, Confectionery Food Staples & Fibre & Wood FY2006 Spices &
Slide 18: Gross Contribution Growth: Sources
Gross Contribution Growth: Sources GC growth 41.6%, S$100.8 million $350M 39.6 343.1 61.2 300 39% 250 242.3 61% 200 Gross Contribution (S$ M) 150 100 50 0 FY2005 Volume Growth Margin Growth FY2006 17
Slide 19: Interest Costs
Interest Costs Total increase in interest costs S$34.3 million or 69.5%. FY2006 FY2005 Increase % Increase (S$’000) (S$’000) (S$’000) Interest Expenses 83,623 49,345 34,278 69.5% Sales 4,361,102 3,369,237 991,865 29.4% Interest Rate 5.42% 4.58% 0.84% 18.3% Interest variance due to interest rate incr
Slide 20: Consolidated P&L Analysis: Net Contribution
Consolidated P&L Analysis: FY2006 Net Contribution (NC) : S$259.4 million 34.4% growth over FY2005 NC growth across all segments 19
Slide 21: Net Contribution Growth: Segmental Share
Net Contribution Growth: Segmental Share NC growth 34.4%, S$66.5 million $280M 22.6 259.4 260 240 13.3 22.8 220 34% 7.7 20% 200 193.0 180 34% 12% 160 Net Contribution 140 (S$ M) 120 100 80 60 40 20 0 FY2005 Edible Nuts, Confectionery Food Staples & Fibre & Wood FY2006 Spices & Beans & Beverage Packa
Slide 22: Net Contribution Growth: Sources
Net Contribution Growth: Sources NC growth 34.4%, S$66.5 million $275M 17.3 259.4 250 49.1 225 26% 200 193.0 175 74% Net Contribution 150 (S$ M) 125 100 75 50 25 0 FY2005 Volume Growth Margin Growth FY2006 21
Slide 23: Impact of FRS 102
Impact of FRS 102 The following two Schemes under the ambit of FRS 102: Employee Share Subscription Scheme (ESSS) Employee Share Options Scheme (ESOS) The impact of FRS 102 on the Financial Statements is as follows: Prior Year S$’000 FY2006 Balance C/F Total Adjustment ESSS 931 982 544 2,457 ESO
Slide 24: Consolidated P&L Analysis: SG&A
Consolidated P&L Analysis: FY2006 SG&A increased by 36.5% to S$162.7 million in FY2006. FY2006 FY2005 Change SG&A (S$ million) 162.7 119.2 (36.5%) SG&A / Sales ratio 3.73 3.54 Accelerated investment/ramping up in key geographies - South America, U.S., China, Brazil, India, Russia, Nigeria and Cote d
Slide 25: Consolidated P&L Analysis: NPAT and EPS
Consolidated P&L Analysis: FY2006 Net Profit After Tax (NPAT): S$87.2 million 32.3% growth over FY2005 Earnings per Share (EPS) 9.8% growth in EPS on the basis of: 5.61 cents/share in FY2006 vs 5.11 cents/share in FY2005 (based on weighted average no. of shares) 32.3% growth in EPS on the basi
Slide 26: Results: FY2006 Segmental Analysis
Results: FY2006 Segmental Analysis 25
Slide 27: Segmental Analysis FY2006: Summary
Segmental Analysis FY2006: Summary Olam Consolidated • Turnover S$4,361.1 million • Volume 3.172 mmts • NC S$259.4 m • NPAT S$87.2 m Edible Nuts, Spices Confectionery & Food Staples & Fibre & Wood & Beans Beverage Ingredients Packaged Foods Products • Turnover $588.3 m • Turnover $1,711.3 m • Turnov
Slide 28: Segmental Analysis: Edible Nuts, Spices & Beans
Segmental Analysis: Edible Nuts, Spices & Beans FY2006 FY2005 Description % Change Amount S$/Ton Amount S$/Ton Volume 481,978 395,601 21.8% (metric tons) Revenue 588,253 1,220 566,795 1,433 3.8% (S$’000) Net Contribution 52,917 110 45,237 114 17.0% (S$’000) 27
Slide 29: Growth in Volumes: Edible Nuts, Spices & Beans
Growth in Volumes: Edible Nuts, Spices & Beans Volume increased by 22% over FY2005 (86,000 mt) Growth contributed by Cashew Ivory Coast, India, Nigeria, Vietnam and Brazil Sesame* Sudan, Ethopia and Tanzania Spices India and Indonesia Pulses/Other Argentina, India and South Africa Edible Nut
Slide 30: Key Growth Initiatives: Edible Nuts, Spices & Beans
Key Growth Initiatives : Edible Nuts, Spices & Beans FY2006 FY2005 Description Increase % Change Amount S$/Ton Amount S$/Ton Net Contribution 52,917 110 45,237 114 7,680 21.8% Margin Improvement 25,000 tons capacity for origin processing, increased by 5-fold over last year (Tanzania, Mozambique, N
Slide 31: Segmental Analysis: Confectionary & Beverage Ingredients
Segmental Analysis: Confectionary & Beverage Ingredients FY2006 FY2005 Description % Change Amount S$/Ton Amount S$/Ton Volume 734,226 588,280 24.8% (metric tons) Revenue 1,711,255 2,331 1,345,915 2,288 27.1% (S$’000) Net Contribution 95,683 130 72,906 124 31.2% (S$’000) 30
Slide 32: Growth in Volumes: Confectionary & Beverage Ingredients
Growth in Volumes: Confectionary & Beverage Ingredients Volume increased by 25% over FY2005 (146,000 mt) Growth contributed by Coffee** Brazil, Vietnam, Ivory Coast, Uganda and Indonesia Cocoa Ghana, Ivory Coast and Indonesia ** new sourcing operations for Arabica set up in Peru and Honduras Mar
Slide 33: Key Growth Initiatives: Confectionary & Beverage Ingredients
Key Growth Initiatives : Confectionary & Beverage Ingredients FY2006 FY2005 Description Increase % Change Amount S$/Ton Amount S$/Ton Net Contribution 95,683 130 72,905 124 22,778 31.0% Margin Improvement Expanded VMI services in both Cocoa and Coffee covering key customers Nestle, Petra, Blommer
Slide 34: Segmental Analysis: Food Staples & Packaged Foods
Segmental Analysis: Food Staples & Packaged Foods FY2006 FY2005 Description % Change Amount S$/Ton Amount S$/Ton Volume 1,335,691 1,101,701 21.2% (metric tons) Revenue 1,058,441 792 782,692 710 35.2% (S$’000) Net Contribution 42,137 32 28,804 26 46.3% (S$’000) 33
Slide 35: Growth in Volumes: Food Staples & Packaged Foods
Growth in Volumes: Food Staples & Packaged Foods Volume increased by 21% over FY2005 (234,000 mt) Growth contributed by Rice Burkina, Algeria, Poland, Liberia, Mali, Ghana, Madagascar and Ivory Coast Sugar Poland, India, Brazil, Swaziland and Malawi Dairy Products Ukraine, Russia, Poland, Arge
Slide 36: Key Growth Initiatives: Food Staples & Packaged Foods
Key Growth Initiatives : Food Staples & Packaged Foods FY2006 FY2005 Description Increase % Change Amount S$/Ton Amount S$/Ton Net Contribution 42,136 32 28,804 26 13,333 46.0% Margin Improvement Rice milling operations in Nigeria Premium segment rice in West Africa Supply halal certified suga
Slide 37: Segmental Analysis: Fibre & Wood products
Segmental Analysis: Fibre & Wood products FY2006 FY2005 Description % Change Amount S$/Ton Amount S$/Ton Volume 620,289 467,743 32.6% Turnover 1,003,153 1,617 673,835 1,441 48.9% Net Contribution 68,704 111 46,024 98 49.3% 36
Slide 38: Growth in Volumes: Fibre & Wood products
Growth in Volumes: Fibre & Wood products Volume increased by 33% over FY2005 (153,000 mt) Growth contributed by Cotton India, Sudan, Tanzania, West Africa and U.S.A. Timber Guinea, Gabon, Brazil and Ghana Market Share FY2006 FY2005 Cotton 4.2% 2.7% Timber 2.2% 2.0% 37
Slide 39: Key Growth Initiatives: Fibre & Wood products
Key Growth Initiatives: Fibre & Wood products FY2006 FY2005 Description Increase % Change Amount S$/Ton Amount S$/Ton Net Contribution 68,704 111 46,024 98 22,680 49.0% Margin Improvement Cotton ginning in Tanzania and Nigeria Timber processing operations in Gabon and Brazil Achieved economies
Slide 40: Results: FY2006 Balance Sheet Analysis
Results: FY2006 Balance Sheet Analysis 39
Slide 41: Balance Sheet Analysis: Summary
Balance Sheet Analysis: Summary (Figures in S$’000) 30 Jun 2006 30 Jun 2005 % Change Fixed Assets & Investments 74,712 40,649 83.8% Current Assets Debtors 426,778 649,179 (34.3%) Stocks 1,013,905 1,019,025 (0.5%) Cash & Cash Equivalents 296,241 165,367 79.1% Other Current Assets 527,018 268,220 96.5
Slide 42: Balance Sheet Analysis: Ratios
Balance Sheet Analysis: Ratios 30 Jun 2006 30 Jun 2005 Change Current Asset Ratios Debtors (days) 36 70 34 Stock (days) 92 119 27 Advance to Suppliers (days) 15 11 (4) Trade Creditors (days) 12 20 (8) Current Ratio (x) 1.50 1.28 41
Slide 43: Balance Sheet Analysis: Debtors
Balance Sheet Analysis: Debtors 67% of Debtors secured by Letter of Credit / Docs of Title. Debtor quality good – Additional provision made for $ 1.5 m Percentage of Debtors* Period < 30 days 30 to 90 days > 90 days FY 2006 83.4% 7.4% 9.1%** FY 2005 89.7% 6.0% 4.3% * Company ** Most of the > 90
Slide 44: Balance Sheet Analysis: Stock
Balance Sheet Analysis: Stock (in S$ Millions) Jun 2006 Jun 2005 Increase Edible Nuts, Spices & Beans 151.6 148.7 1.9% Confectionery & Beverage Ingredients 510.0 510.6 (0.1%) Food Staples & Packaged Foods 274.4 304.2 (9.8%) Fibre & Wood Products 77.9 55.5 40.4% Total 1,013.9 1,019.0 (0.5%) 81.8% o
Slide 45: Balance Sheet Analysis: Fixed Assets
Balance Sheet Analysis: Fixed Assets Fixed assets Investment in fixed assets amounted to S$48.4 million in FY2006 as compared to S$25.9 million in FY2005. Investments in fixed assets grew 83.8% to S$74.7 million as at end Q4 FY2006 compared to S$40.6 million as at the end of 30th June 2005. 44
Slide 46: Balance Sheet Analysis: Cash & Borrowings
Balance Sheet Analysis: Cash & Borrowings Cash and Fixed Deposits increased by 79.1% to S$296.2 million Borrowings: Only 48.0% of our total credit facilities were used as of 30 June. (in S$ million) 30 Jun 2006 % Share Short Term Banking Facilities 1,532.2 49.8% Committed Banking Facilities 237.9 7.
Slide 47: Balance Sheet Analysis: Gearing
Balance Sheet Analysis: Gearing 30 Jun 2006 30 Jun 2005 Change Vis-à-vis Before Fair After Fair before Fair Leverage (x) Value Adj. Value Adj. Value Adj. Reserve Reserve Reserve Gross Debt to Equity (x) 2.79 3.03 2.91 (0.12) Net Debt to Equity (x) 2.23 2.42 2.58 (0.35) Interest Coverage (x) 2.29 2.5
Slide 48: Balance Sheet: Analysis of Gearing
Balance Sheet: Analysis of Gearing Adjusting: hedged, liquid inventory $1,500M 2.23 x 1,000 Net Debt/Equity (x) 500 -829 0.12 x -286 0 Net Debt/Equity Adj. Stock Adj. Debtors Adj. Net Debt/Equity 47
Slide 49: Impact of FRS 39
Impact of FRS 39 Impact on P&L is increase in profits of S$0.17 million. Reduction in equity as of 30 June 2006 is S$42.0 million. FRS 39 allows for hedge accounting to be applied when strict effectiveness criteria are met. We have assessed the effectiveness of our hedging instruments and have concl
Slide 50: Balance Sheet Analysis: Cash Flows
Balance Sheet Analysis: Cash Flows S$ Millions FY 2006 FY 2005 Operating profit before reinvestment in Working 193.4 131.7 Capital Net Cash used in operations 214.0 (713.6) Net Cash used in Investment Activity (48.3) (26.6) Cash from operating activities (NPAT + Depreciation 101.1 74.6 and amortizat
Slide 51: ROE
ROE : FY 2006 FY 2006 ROE FY 2005 Pre-FRS39 Post-FRS39 ROE (BOP) 17.5% 17.5% 34.7% ROE (Average) 17.0% 17.7% 19.2% ROE (EOP) 16.5% 17.9% 13.2% Ke 9% 9% 9% Equity Spread 8% 8.7% 10.2% 50
Slide 52: Other Ratios
Other Ratios : FY 2006 FY 2005 ROIC 9.41% 6.14% WACC 5.91% 5.34% Capital Spread 3.50% 0.80% 51
Slide 53: Dividend
Dividend: Name of Dividend FY2006 FY2005 Ordinary Special Ordinary Special Total Total Dividend Dividend Dividend Dividend Dividend (cents per share) 1.50 1.50 3.00 1.08 1.08 2.16 Total Dividend S$46.6 m S$33.6 m Dividend Payout 53.45% 50.00% Ratio (PAT) 52
Slide 54: Impact on Growth: ROE
Impact on Growth: ROE = PM x AT x FL 16.5% = 2.0% x 2.55 x 3.23 Sustainable growth rate (SGR) = Δ Equity SGR (growth) = ROE x DRR (16.5% x 46.6% = 7.7%) Target Growth = 20 % Target ROE = 2.25% x 2.50 x 4.5* = 25% * FL of 4.5 corresponds to 3.5x Debt / Equity 53
Slide 55: M&A Update
M&A Update The Brand Behind The Brands
Slide 56: M&A Update: Recent Acquisitions
M&A Update: Have recently announced 2 small but earnings and value accretive transactions: 1. Acquisition of Taloca’s (a subsidiary of Kraft Food International) Coffee processing facilities in Colombia. 2. Acquisition of a Peanuts shelling and processing unit from Senwes in South Africa. 55
Slide 57: M&A Update: M&A as a strategy tool
M&A Update: Olam uses M&A as a tool to support its strategy and is not a strategy in itself. Each business has developed 2 three-year strategic plans with specific/actionable growth initiatives. Based on these strategic plans, a master list of potential targets in each business that is aligned to th
Slide 58: M&A Update: Target selection and deal team
M&A Update: These targets have been chosen to complement our distinctive capabilities. We have strengthened our core Deal Team to include 2 more senior professionals with 1 based in the U.S. to take the team strength to 3. We intend to be deliberate and patient in finding value accretive targets tha
Slide 59: Shareholding Structure
Shareholding Structure The Brand Behind The Brands
Slide 60: Tracking Shareholder Changes
Tracking Shareholder Changes July 2006 shareholding Shareholder Shares (‘000) % O/S 1. Main Sponsor 513,135 33.01% (KC Group) 2. Management Team 258,042 16.60% Co-Sponsors 3. 197,455 12.70% (AIF Capital, IFC) 4. Institutional Investors 564,350 36.30% 5. Retail / Individuals 21,609 1.39% Total Shareh
Slide 61: World Class Investors: Top Institutional Shareholders
World Class Investors Top 20 Institutional Shareholders (by Parent Company) Rank Institution 1 UBS Group 2 Newton Asset Management 3 Capital Group 4 T. Rowe Price 5 Jardine Flemming Asset Management 6 Penta Investment Advisors 7 Credit Suisse Group 8 JP Morgan Asset Management 9 Barclays Global Inve
Slide 62: World Class Investors: Top Institutional Shareholders
World Class Investors Top 20 Institutional Shareholders (by Parent Company) Rank Institution 11 Arisaig Partners 12 Abu Dhabi Investment Company 13 Fidelity 14 Clay Finlay 15 DnB NOR Asset Management 16 Castalia Partners 17 HSBC Group 18 Sumitomo Trust 19 Lion Capital 20 TIAA CREF 61
Slide 63: Outlook & Prospects
The Brand Behind The Brands
Slide 64: Outlook & Prospects
Outlook & Prospects: Barring any unforeseen circumstances, we continue to be positive on the overall business outlook as we head into Q1 FY2007 and beyond. The various initiatives that we are executing on to broaden and deepen our business franchise should continue to yield results in the form of bo
Slide 65: Key Investment Merits: Strong Financial Track Record
Key Investment Merits: Strong Financial Track Record FY2002 FY2003 FY2004 FY2005 FY2006 CAGR (%) Sales Revenue 1,582 2,274 2,610 3,369 4,361 28.9% (S$’million) NPAT 25.0 28.7 48.1 65.9 87.2 36.7% (S$’million) ROE (BoPE) 49.2 39.6 40.7 34.7 17.6 64
Slide 66: Key Investment Merits: Well Diversified Across Products
Key Investment Merits: Well Diversified Across Products Olam Consolidated • Turnover S$4,361.1 million • Volume 3.172 mmts • NC S$259.4 m • NPAT S$87.2 m Edible Nuts, Spices Confectionery & Food Staples & Fibre & Wood & Beans Beverage Ingredients Packaged Foods Products • Turnover $588.3 m • Turnove
Slide 67: Key Investment Merits: Well Diversified: Customers
Key Investment Merits: Well diversified: Customers Top 5 Customer Share Segment of Total Sales Edible Nuts, Spices & Beans 2.5% Confectionery & Beverage Ingredients 13.7% Food Staples & Packaged Foods 1.8% Fibre & Wood Products 3.4% Total number of customers grew by 16% over FY2005 to 3,828 customer
Slide 68: Key Investment Merits: Risk Management as a Core Competence
Key Investment Merits: Risk Management as a Core Competence FY2005 FY2006 Change % Change (US$’m) (US$’m) US$’m) VaR 15.3 16.2 0.9 5.9% VaR/Equity (%) 5.20% 4.87% Sales volume growth of 24.2% in FY2006 vs FY2005 but VaR growth of 5.9%. 67
Slide 69: Key Investment Merits: High Governance Standards
Key Investment Merits: High Governance Standards High quality Board Balanced perspective from all shareholder groups (Main Sponsor, Co-sponsors, Management, Independents) Board committees 68
Slide 70: Key Investment Merits: Strong Management
Key Investment Merits: Strong Management Global Assignee Talent Pool (GATP) FY2005 FY2006 Change % Change 168 250 82 60% Attrition 5.6% amongst the lowest in the industry 69
Slide 71: Key Investment Merits: Strong Prospects & High Growth Potential
Key Investment Merits: Strong Prospects & High Growth Potential On track to meet long term goal of doubling intrinsic shareholder value (Proxy: doubling after tax earnings) every 3 years across the next 2 three-year strategic planning cycles i.e. the next six years (FY2007 to FY2012) 70
Slide 72: Key Investment Merits
Key Investment Merits Strong financial track record Proven growth model Unique competitive position Well-diversified across businesses, geographies & customers Risk management is a core competence High governance standards & world class investors Strong Management Strong prospects & high growth pote
Slide 73: Thank You
¥OLAM 72 The Brand Behind The Brands