Olam Group Limited · SGX:VC2
Olam — Olam International — H1 FY2012 Earnings Presentation
58 slides from Olam's earnings presentation, Feb 14, 2012
Slide 1: Building Relevant Scale: Delivering the Olam Strategy
Building Relevant Scale Delivering the Olam Strategy FY2012 Second Quarter and First Half Results Briefing 14th February 2012 Singapore 1
Slide 2: Notice
Notice This presentation should be read in conjunction with Olam International Limited’s Second Quarter and First Half (H1 FY2012) Financial Results for the period ended 31 December 2011 statement lodged on SGXNET on 14 February 2012. Building Relevant Scale : Delivering the Olam Strategy 2
Slide 3: 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 4: H1 FY2012 Results Briefing: Agenda
H1 FY 2012 Results Briefing: Agenda H1 FY2012 Results Consolidated P&L Analysis Segmental Analysis Balance Sheet Analysis Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 44
Slide 5: Consolidated P&L Analysis
Consolidated P&L Analysis 5
Slide 6: PAT growth of 14.9% despite tough trading conditions
PAT growth of 14.9% despite tough trading conditions Building Relevant Scale : Delivering the Olam Strategy 66
Slide 7: Sales Volume
Sales Volume Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 77
Slide 8: Sales Volume - Segmental
Sales Volume - Segmental Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 88
Slide 9: Net Contribution
Net Contribution Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 99
Slide 10: Net Contribution Growth: Segmental Share
Net Contribution Growth: Segmental Share Net Contribution (S$ M) Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1010
Slide 11: Net Contribution & NC/MT Growth: Segmental
Net Contribution & NC/ MT Growth: Segmental Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1111
Slide 12: Net Contribution Growth: Sources
Net Contribution Growth: Sources Net Contribution (S$ M) Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1212
Slide 13: Overhead Expenses
Overhead Expenses Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1313
Slide 14: Key Earnings Metrics
Key Earnings Metrics Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1414
Slide 15: Segmental Analysis
¥ouam Segmental Analysis
Slide 16: Segmental Analysis: Summary
Segmental Analysis: Summary Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1616
Slide 17: Balance Sheet Analysis
V ¥ OLAM Balance Sheet Analysis
Slide 18: Balance Sheet Summary: Strong and resilient Balance Sheet
Balance Sheet Summary: Strong and resilient Balance Sheet • Investment in fixed term assets funded through permanent capital • Investment in working capital funded through a combination of long term and short-term debt Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the m
Slide 19: Working capital Analysis
Working capital Analysis Stock (days) and Debtor (days) and Trade Creditor (days) Advance to Suppliers (days) Cash‐to‐cash cycle (days) Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 1919
Slide 20: Inventory Analysis
Inventory Analysis Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 2020
Slide 21: Strong liquidity profile
Strong liquidity profile *RMI: inventories that are liquid, hedged, or sold forward Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 2121
Slide 22: Balance sheet Analysis: Gearing
Balance sheet Analysis: Gearing Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 2222
Slide 23: Adjusted Net Gearing
Adjusted Net Gearing Net debt/Equity as of Net debt/Equity as of June 30, 2011 (x) December 31, 2011 (x) *RMI: inventories that are liquid, hedged, or sold forward Navigating Building Relevant cycles :Scale Delivering : Delivering the Olam the model Olam Strategy 23 23
Slide 24: M&A Update Q1 FY2012
M&A Update Q1 FY2012 Expansion of our Sugar footprint in India by the acquisition of Hemarus Industries Limited for US$ 73.8 m (3500 TCD capacity and co-generation facilities). Acquisition of select spices assets and business of Vallabhdas Kanji Limited in India, one of Asia’s leading processor & ex
Slide 25: M&A Update Q2 FY2012
M&A Update Q2 FY2012 Expansion of our Package Foods Business’ portfolio by the acquisition of assets of Trusty Foods Limited, a Tomato Paste processing and canning business and United Biscuits Limited, a high-quality biscuit manufacturing facility in Ghana. Acquisition of 75.2% interest in Macao Com
Slide 26: M&A Update
M&A Update Partnership with the Russian Dairy Company, LCC (“RUSMOLCO”), a growing player in the Russian dairy industry, for the large scale development of dairy and grains farming in the Penza region of Russia. The first step under this partnership is the investment of up to US$75 million by Olam i
Slide 27: Financial Summary: H1 FY2012
Financial Summary: H1 FY2012 Volume grew by 15.8% to 4.5 million MT Net Contribution grew by 18.5% to S$ 607.1 million with NC per ton growing 2.4% to S$ 134 Profit for the period grew by 6.4% to S$ 186.8 million Operational Profit for the period grew by 14.9% to S$ 162.7 million Strong liquidity pr
Slide 28: Thank you
Thank you 28
Slide 29: Strategy Update
Strategy Update H1 FY2012 Results Announcement 14th February 2012 I Singapore DRAFT
Slide 30: Enablers Strategic thrusts
In 2009, we announced a 6-yr corporate strategy (FY10-15) to increase margins & quadruple intrinsic value Our governing objective is to maximise long term intrinsic value for our continuing shareholders Pursue 3 key drivers: 1) Open up Capital Spreads (ROE-KE, ROIC-WACC); 2) Increase the Rate of Pro
Slide 31: Until 2009, portfolio largely focused on the asset light supply chain core
Until 2009, portfolio largely focused on the asset light supply chain core FY2009 Upstream Supply chain Mid/down stream Edible nuts, Edible nuts Spices Spices Confection & Coffee Bev. Ingredients Cocoa Dairy Food Grains/Rice Staples and Packaged Sugar/Swtnr Foods Palm Packaged Foods Natural Fibres I
Slide 32: Plan envisaged taking the supply chain core business to full potential by 2015
Plan envisaged taking the supply chain core business to full potential by 2015 2015 Upstream Supply chain Mid/downstream Cashew Peanuts Edible nuts, Almonds Spices & Beans Sesame Spices Confec. & Bev. Coffee Ingredients Cocoa Dairy Food Grains Staples & Sugar Packaged Rice Foods Palm PFB Strengthen
Slide 33: Key thrust was selective integration into excess return upstream & midstream segments
Key thrust was selective integration into excess return upstream & midstream value chain segments 2015 Upstream Supply chain Mid/downstream Cashew Peanuts Edible nuts, Almonds Spices & Beans Sesame Spices Confec. & Bev. Coffee Ingredients Cocoa Dairy Food Grains Staples & Sugar Packaged Rice Foods P
Slide 34: Building unique competitive advantages in each value chain step
Building unique competitive advantages in each value chain step Mid/down Upstream Supply chain stream • Cost leadership (below the • Global footprint • High asset utilisation marginal cost producer’s • Global scale • Control of choke points cost of production) • Out origination • Customer loyalty •
Slide 35: Plan envisaged significant change in portfolio shape by 2015
Plan envisaged significant change in portfolio shape by 2015 2015 Upstream Supply chain Mid/downstream Cashew Peanuts Edible nuts, Almonds Spices & Beans Hazelnuts Sesame Spices Confec. & Bev. Coffee Ingredients Cocoa Dairy Enter new products Food Grains (Almonds, Hazelnuts, Staples & Sugar/Sweetnrs
Slide 36: Portfolio focused on a single commodity asset class: agri-complex
Portfolio focused on a single commodity asset class: agri-complex Single Commodity class Agri-Complex 5 Segments Edible Nuts, Confection & Food Staples Commodity Industrial Spices & Beverage & Packaged Financial Raw Materials Beans Ingredients Foods Services 4 Cores Agri PFB Fertiliser CFS Commoditi
Slide 37: Building a well diversified & balanced portfolio
Building a well diversified & balanced portfolio Size of prize (intrinsic value creation potential) Return profile Winnability Future platform(s) for growth Working capital intensity Fixed capital intensity Risk intensity Degree of correlation Recession sensitivity 37
Slide 38: A highly defensible & differentiated portfolio
A highly defensible & differentiated portfolio Major Olam ADM Bunge Cargill Dreyfus Glencore Noble Wilmar Competitors Edible nuts Olam SVI 1 Coffee 2 Cocoa 3 Dairy Olam Grains/Rice 7 Sugar/Sweeteners 6 Palm 4 PFB 1 Natural Fibres 4 Wood Products Olam Rubber 1 Fertilisers Olam CFS 3 Presence in produ
Slide 39: We committed to the strategy by investing US$1.94 billion in the first 2 years
We committed to the strategy by investing US$1.94 billion in the first 2 years of the plan 2010 2011 Total US$M Cashflow Committed Cashflow Committed Cashflow Committed Cashew 18 41 24 24 41 65 Peanuts - - - - - - Almonds 277 277 25 100 302 377 Spices & Vegetable Ingredients 100 100 11 11 111 111 Co
Slide 40: Strong momentum in successfully executing this plan
Strong momentum in successfully executing this plan No. of initiatives based on 2009 plan • Gilroy Foods (US) SELECT EXAMPLES • Britannia Foods (UK) • Almonds processing (AUS) • Soluble coffee manufacturing (Vietnam) • Cocoa grinding (IVC) • Wheat milling (Nigeria/Ghana) • Sugar refining (Indonesia/
Slide 41: Diversification across the value chain has already seen good momentum
Diversification across the value chain has already seen good momentum PAT (S$ M) FY11 PAT Margin 2.4% 27.2% 5.4% 1.3% 41
Slide 42: Successful execution led to a strong trajectory towards FY2015 targets
Successful execution led to a strong trajectory towards achieving our FY2015 targets PAT (S$M) Exceeded budget by 103% (63%*) over last 2 yrs Exceeded by 94% (62%*) (US$454M) Exceeded by 118% (65%*) 373 272 Target based on 2009 plan Actual Operational PAT * Based on operational PAT 42
Slide 43: Revised aspiration to US$1B PAT by FY2016
Strong trajectory prompted us to revise our aspiration to achieve US$1B PAT by rolling forward our plan by 1 year to FY2016 Olam PAT (US$ M) Reported earnings Core earnings 293 194 105 124 // Goals & Boundary Conditions: • PAT margin >4%; RoE 25%; ROIC 14% • No further equity dilution 43
Slide 44: Our strategy is granular on where to compete
Our strategy is granular on where to compete Number of initiatives over next 5 years ~65 initiatives over 5 yrs 44
Slide 45: All planned initiatives of FY12 are either executed or near execution
All planned initiatives of FY12 are either already executed or are near execution No. of new initiatives 45
Slide 46: New initiatives planned & executed in FY2012
New initiatives planned & executed in FY2012 Projects approved by the board in H1 FY12 No. of new initiatives BU Description 1 Sugar Acq. of Hemarus industries- a sugar milling & cogen facility 2 Palm Investment in port based palm refinery in Mozambique 3 Grains Position in Greenfield AUS port based
Slide 47: Integrating upstream: 24 initiatives in 13 commodities across 17 countries
Integrating upstream: 24 initiatives in 13 Commodities across 17 countries. Total land bank in excess of 2.5m hectares Almond orchards: Australia & USA Cashew plantation: Mozambique Coffee plantations: Ethiopia, Laos & Tanzania Cotton farming: Brazil & Mozambique Dairy farming: Uruguay & Russia Grai
Slide 48: Expanding into midstream: 32 initiatives across 16 commodities in 19 countries
Expanding into midstream: 32 initiatives across 16 commodities in 19 countries Almond processing: Australia & USA Cocoa processing: Cote d’Ivoire & Nigeria Cocoa powder manufacturing: Spain Cocoa speciality fats manufacturing: UK Cashew mechanical processing: Cote d’Ivoire & Nigeria Cashew ingredien
Slide 49: Expanding into midstream: 32 initiatives across 16 commodities in 19 countries
Expanding into midstream: 32 initiatives across 16 commodities in 19 countries Soluble Coffee manufacturing: Vietnam Green Coffee processing: Peru Hazelnuts processing: Turkey Rice milling: Nigeria Rice aggregation, packing & sortexing: Thailand Spice grinding: India & Vietnam Spices & Vegetable Ing
Slide 50: Expanding downstream: 6 initiatives in growing the PFB franchise in Africa
Expanding downstream: 6 initiatives in growing the PFB franchise in Africa PFB - Tomato Paste canning & distribution: Ghana PFB - Tomato Paste sachet manufacturing & distribution: Nigeria PFB - Biscuit manufacturing & distribution: Ghana & Nigeria PFB - Candy manufacturing & distribution: Nigeria PF
Slide 51: Well diversified across scale platforms
Well diversified across scale platforms PAT by BU (US$ M) 338 1,014 Other Other 4 platforms: Palm Coffee <$50M PAT Dairy CFSG Coffee Dairy PFB CFSG Sugar Grains/Rice 7 platforms: Natural fibres $50-100M PAT Cocoa Grains/Rice SVI Cocoa SVI Natural fibres 3 platforms: Fertilizers >$100M PAT Edible nut
Slide 52: Leading to a well balanced portfolio with greater than 25% ROE
Leading to a well balanced portfolio with greater than 25% ROE PAT (US$ M) ROE FY16 26% 27% 31% 20% * Upstream includes Fertilizers 52
Slide 53: Revised plan is in line with our Governing Objective
Revised plan is in line with our Governing Objective Our Governing Objective is to maximise long term intrinsic value for our continuing shareholders in an ethical, socially responsible & environmentally sustainable manner 3 key drivers to achieving our governing objective Increase Open up Sustain t
Slide 54: 3 key drivers to achieving our Governing Objective
3 key drivers to achieving our Governing Objective Increase Sustain Open up the rate of capital duration of profitable spreads growth growth ROE-KE: 15% PAT growth PAT growth ROIC-WACC: 7% FY11-16: 26% Horizon2 Double net profit margin Differentiate, build Invest to secure to 4% by: sustainable comp
Slide 55: We have built true sources of competitive advantage
We have built true sources of competitive advantage: A unique portfolio & delivery model Defensible Leadership Superior and relevant Organisational origination, position Global scale advantage trading, & risk manage- ment Olam’s skills Selective Unique Competitive Delivery integra- tion portfolio Ad
Slide 56: Summary
Summary Focused business portfolio Defensible portfolio Good business mix, intelligently diversified spreading the risks Selective integration strategy upstream & midstream in excess return opportunities String-of-pearls M&A strategy reduces risk Differentiated business model (out origining, customi
Slide 57: Summary
Summary Significantly stronger balance sheet and more resilient to better manage macro economic risks (credit crisis). Strong long term shareholders. Strong momentum to achieve FY2016 ambition of US$1 billion NPAT. Strong leadership with clear vision and highly competent Executive Management Team (“
Slide 58: Thank You
ee Thank You i ~~ ‘\ o > Ma lm _~ . p ro r i a a ed 58 The Brand Behind The Brands 7 OLAM