FY2010

Olam International Limited
FY 2010 Full
F ll Yea
Y r Results
R
lt Briefing
B i fi
26th August 2010 | Singapore
1
Notice
This presentation should
d be read in conjunction
with
Olam
International
Limited’s
Fourth
Quarter,, FY2010 (Q
Q
(Q4 FY2010)
F
) and Full Year
FY2010 Financial Resultts for the period ended
30th June
J
2010 stateme
t t
entt lodged
l d d on SGXNET
on 26th August 2010.
2
Cautionary note on forw
ward-looking statements
This presentation may contain statements re
egarding the business of Olam International
Li i d and
Limited
d its
i subsidiaries
b idi i (‘Group’)
(‘G
’) that
h arre off a forward
f
d looking
l ki
nature and
d are
therefore based on management’s assumptio
ons about future developments.
Such forward looking statements are intende
ed to be identified by words such as
‘believe’, ‘estimate’, ‘intend’, ‘may’, ‘will’, ‘exp
pect’, and ‘project’ and similar expressions
as they relate to the Group. Forward-looking
g statements involve certain risks and
uncertainties because they relate to future events.
e
Actual results may vary materially
f
from
those
h
targeted,
d expected
d or projected
d due
d
to severall ffactors.
Potential risks and uncertainties includes suc
ch factors as general economic conditions,
foreign exchange fluctuations,
fluctuations interest rate changes,
changes
c
commodity price fluctuations and
regulatory developments. Such factors that may affect Olam’s future financial results
are detailed in our listing prospectus, listed in
i this presentation, or discussed in today’s
press release and in the management discus
ssion and analysis section of the company’s
Fourth Quarter and Full Year FY2010 results report and filings with SGX. The reader
and/or listener is cautioned to not unduly rely on these forward-looking statements.
We do not undertake any duty to publish any
y update or revision of any forward looking
statements
statements.
3
FY2010 Full Year Results Briefing: Agenda
FY2010 Full Year Res
sults:
Consolidated P&L Analysis
A
Segmental Analysis
s
Balance Sheet Anallysis
y
Delivering our Strate
egy
4
FY2010 Full Year Results
s:
Consolidated P&L Ana
alysis
5
FY2010 Full Year Results
s: Summary
Y2010
FY
FY2009
% Increase
Sales Volume (MT)
7,006,478
5,720,640
22.5
Sales Value
10,455.0
8,587.9
21.7
9
901.0
607.2
48.4
129
106
21.1
Profit Before Tax (PBT)
4
420.2
258.0
62.9
Profit After Tax (PAT)
3 7
359
359.7
252 0
252.0
42 7
42.7
Exceptional Gains
8
87.6
69.8
25.6
Profit After Tax (PAT)
(
(excluding
l di exceptional
ti
l gains)
i )
2
272.1
182.2
49.3
PAT margin (%)
(excluding exceptional gains)
2
2.6%
2.1%
-
PAT margin (%)
3
3.4%
2.9%
-
(in S$ million)
Net Contribution (NC)
NC/ton
6
FY2010 Full Year Results
s: Sales Volume
Sales Volume: 7.006 million metric tons
Volume g
grew by
86 million metric tons
y 1.28
22.5%
5% growth
g o
over
o e FY2009
F 009
Volume growth acros
ss all 4 segments
7
FY2010 Full Year Results
s: Sales Volume
FY2010
FY2009
%
(MT/’000) (MT/’000) Change
Edible Nuts, Spices & Beans
1,108
976
13.5
Confectionery & Beverages Ingredients
1 288
1,288
1 170
1,170
10 1
10.1
Food Staples & Packaged Foods
3,207
2,451
30.8
Total Food Category
5,603
4,597
21.9
Industrial Raw Materials
1,403
1,124
24.9
Consolidated Total
7 006
7,006
5 721
5,721
22 5
22.5
8
Sales Volume Growth: Segmental Contribution
Sales Volume
(1 000 Mts)
(1,000
Sales Volume growth 22.5%, 7.006 mts
8000
279
7000
132
118
756
9%
59%
22%
6000
10%
5000
4000
7006
5721
3000
2000
1000
0
FY2009
Growth Over FY2009:
Edible Nuts,
Spices & Beans
14%
Confectionerry & Food Staples &
Beverage
Packaged Foods
Ingredients
10%
31%
9
Industrial Raw
Materials
25%
FY2010
FY2010 Full Year Results
s: Net Contribution
Net Contribution (N
NC): S$901.0 million
48.4% growth over FY
Y2009
NC growth across all se
egments
NC per ton increased ffrom $106/ton in FY2009 to
S$129/ton in FY2010
10
Net Contribution Growtth: Segmental Share
Net Contribution
(S$ M)
NC growth 48.4%, S$901 million
1000
67
900
800
23%
56
700
600
19%
500
400
92
54
25
8%
901
31%
19%
607
300
200
100
0
FY2009
Growth
G
o t O
Over
e FY2009:
009
Edible Nuts, Confectionery & Fo
ood Staples & Industrial Raw
Spices & Beans
Beverage
Packaged Foods Materials
Ingredients
36%
32%
3
%
65%
11
48%
8%
Commodity
FY2010
Financial
Services Group
4264%
Net Contribution Grow
wth: Segmental Share
Net Contrribution
Net Contribution / MT
FY2010
FY2
2009
%
FY2010
S$million S$m
million change
S$
FY2009
S$
%
change
Edible Nuts, Spices & Beans
210.9
15
55.1
35.9
190
159
19.5
Confectionery & Beverages
I
Ingredients
di t
222.8
16
68.5
32.3
173
144
20.1
Food Staples & Packaged Foods
233.9
14
41.9
64.8
73
58
25.9
Food Category Total
667.6
46
65.5
43.4
119
101
17.6
Industrial Raw Materials
208.3
14
41.1
47.6
148
126
17.5
25.1
0
0.6
4264.0
-
-
-
901.0
60
07.2
48.4
129
106
21.7
Commodity Financial Services
Group
Consolidated Total
12
Net Contribution Growtth: Sources
Net Contribution
(S$ M)
1000
900
800
700
600
500
400
300
200
100
0
NC growth 48.4%, S$901 million
177
117
901
60%
607
FY2009
40%
Volume Growth Margin
M
Growth
13
FY2010
Impact of FRS 102
The following two emp
ployee Share Schemes
come under the ambit of FRS 102:
• Employee Share Subscrription Scheme (ESSS)
• Employee Share Options Scheme (ESOS)
The impact of FRS 102
2 on the Financial
Statements is as follow
ws:
14
FY2010 Full Year Results
s: Overhead Expenses
Overheads Expens
ses increased by
37.4% to S$522.0
$
m
million in FY2010
15
FY2010 Full Year Results
s: Key Metrics
Net Profit After Tax including exceptionals:
p
S$359.7
$
m
• 42.7% growth over FY2009
9
Net Profit After Tax excludin
ng exceptionals: S$272.1 m
• 49.3% growth over FY2009
9
Earnings per Share (EPS)
• 17.92 cents/share FY2010
0 vs 14.71 cents/share FY2009
((based on weighted
g
average
g no. of shares))
• 21.8% growth over FY2009
9
Net Asset Value (NAV before
e fair value adjustment)
• 99.92 cents/share FY2010
0 vs 71.44 cents/share FY2009
• 39.9% growth over FY2009
9
16
FY2010 Full Year Results
s: Key Return Metrics
ROE (BOPE)
• 29.3% in FY2010 vs
s 26.1% in FY2009
• Equity Spread (ROE
E-KE) 19.3%
ROE (Average)
• 22.2% in FY2010 vs
s 23.0% in FY2009
ROIC (Average)
• 14.0%
14 0% in FY2010 vs
s 14.7%
14 7% in FY2009
• Total Capital Sprea
ad (ROIC-WACC) 6.8%
17
FY2010 Full Year Results
s: Segmental Analysis
18
Segmental Analysis FY2010: Summary
19
Well Diversified Sourcing
g: Origins
America
Africa
America
Africa
Europe
Europe
p
Asia & Middle East
Asia & Middle East
Sourcing Volume
FY2010
Sourcing Volume
FY2009
20
Well Diversified Sales: Markets
M
America
Africa
America
Africa
Europe
Europe
Asia & Middle East
Sales Turnover
0 0
FY2010
Sales Turnover
FY2009
21
Asia &
Middle
East
FY2010 Full Year Results: Balance Sheet Analysis
22
Balance Sheet Analysis: Summary
Prudent capital management
Cash
Core
working
g
capital
Others
Fixed term
assets
In S$M, as of June 2010
6,275
6,275
672
2 282
2,282
Short-term
debt
2,221
Long-term
debt
(247)
247
Fair value reserve
2,019
2,083
Equity & reserves
68%
3,607
4
1,976
1,992
32%
Use of capital
Source of capital
• Investment in fixed term assets funded through
gh p
permanent capital
p
• Investment in working capital funded through a combination of long term and short-term debt
23
Sound working capital metrics
Stock (days) and
advance to suppliers (days)
FY09
Debtor (days) and trade creditor (days)
FY10
FY09
31
101
92
FY10
31
26
10
13
Stocks (days)
34
Advance to suppliers
D bt (d
Debtor
(days))
Cash-to-cash cycle (days)
T d creditor
Trade
dit (d
(days))
Successful working capital management
• Stock days increase due to higher value of
inventories (on account of substantial increase in
price of cocoa and cotton during the period)
118
105
• Careful monitoring of debtors, as well as trade
creditors and stock days to manage our cash
cycle time
FY09
• Operated with large margin of safety on
working capital to keep utilization rate at around
60 65% off available
60–65%
il bl credit
dit lines
li
through
th
h the
th course
of FY09
FY10
24
Balance Sheet Analysis: Inventories
86.4% of inventories sold forward
f
or hedged
25
Increase in working capiital due to strong
business
bus
ess g
growth
o t a
and
d co
com
mmodity
od ty price
p ce increases
c eases
• Primary driver is continued growtth in volume of business
• Commodity price increases drive inventory levels which in turn
drives receivables and overall work
king capital requirements
Inventory
Inventory (S$mm)
Receivables
Inventory as % of Sales
Receivables (S$mm)
Receivables as % of Sales
2,538
83.8%
hedged
86.4%
86
4%
hedged
1 966
1,966
977
733
24.3%
22.9%
FY09
8.5%
FY10
FY09
• Most of Olam
Olam’s
s inventories
are liquid and readily
marketable:
70.0%
secured
9.3%
FY10
• Most of Olam
Olam’s
s receivables
are secured:
- Backed by lines of credit or
document of title
- Diversified
Di
ifi d li
listt off customers
t
- Ability to hedge price risk
- Physically
h
ll d
deliverable
l
bl to clients
l
26
76.1%
secured
Conservative financial pro
ofile with strong liquidity
and credit availability
In S$M, as of Jun 2010
7,496
2,993
6,636
Short
Term
3,920
743
3
Medium
Term
1,194
2,228
1
412
Cash &
equivalents
Long
Term
260
Fixed
deposits
2,382
RMI*
Secure
ed
receivab
bles
Bank lines
Availability
y
liquidity
Total
Facilities
*RMI: inventories that are liquid, hedged
d, or sold forward
Olam has practiced prudent capital man
nagement to achieve sustainable growth
27
Balance sheet Analysis: Gearing
28
Conservative capital structure & financial policies
Net debt/Equity as of June 30,
2009 (x)
-S$1,647
mm
Net debt/Equity as of June 30,
2010 (x)
S$513mm
S$2,228m
-S$743mm
m
Note: Equity is before fair value adjustment reserves
ward
*RMI: inventories that are liquid, hedged, or sold forw
Olam’s capital managemen
nt objectives are to achieve
s stainable growth
sustainable
g o th and max
ma imize
imi e return
et n to shareholders
sha eholde s
29
Conservative financial pro
ofile with strong liquidity
Interest coverage
g ratio1 (
(x)
)
Net debt2/
/Equity
q
y3 (
(x)
)
11.8x
88
8.8x
0.43x
0.39x
FY09
FY10
FY09
FY10
1. Interest coverage ratio: (EBITDA – Interest exp
pense passed on to customers)/(Total interest
expense - interest expense passed on to custom
mers)
2. Adjusted net debt: Total debt – liquid assets
3. Before fair value adjustment reserves
30
Operating cash flows adjusted for liquid
inventories and secured receivables
Cash flow summary (S$mm)
As reported
FY10
FY09
531
331
(Increase)/decrease in inventories
(637)
(176)
Decrease/(increase) in receivables
(811)
237
Decrease/(increase) in advance payments to suppliers
19
94
Increase/(decrease) in payables
91
142
(807)
628
Operating cash flow before working capital changes
Changes in working capital
Operating cash flow after working capital changes
Cash flow summary (S$mm)
A adjusted
As
dj t d
FY10
FY09
Operating cash flow after working capital changes
(807)
628
Adjustment for (decrease)/increase in RMI1
581
(104)
Adjustment for decrease in secured receivables2
231
(25)
5
500
Adjusted Operating cash flow after working capital changes
1. RMI: inventories that are liquid, hedged, or sold fo
orward
2. Secured receivables: receivables secured by letterrs of credit or documents of title
31
FY2010 Full Yearr Results Briefing
Delivering our
o
Strategy
32
Agenda
• Olam 2009 Corporate Strategy: Recap
• Executing our strategy: Status
S
update
• Executing
g our strategy:
gy Outcomes
O
& Results - Yr 1
• M&A: Accelerating profita
able growth
33
In 2009, we announced our 6-ye
ear corporate strategy
((FY2010-15)) to increase our margins
g
&g
grow intrinsic value
Our governing objective is to maximise long term intrinsic value for our continuing shareholders
Enablers
Strategic
c thrusts
Goals
Vision
Pursue 3 key drivers: 1) Open up Capital Spreads (ROE-KE, ROI
IC-WACC); 2) Increase the Rate of Profitable Growth;
and 3) Sustain duration of growth
To be the leading global supply chain manage
er and processor of agri-commodities by:
• Serving growers and customers globally
• Pursuing select scalable & attractive niches in upstream (pla
antations/farming) and mid-stream (value added processing)
• Capitalising on our emerging markets expertise
•
•
•
•
Increase Intrinsic Value by 3-4x over the next two 3-year cycles
Pursue profitable growth & improve margin structure by selective parrticipation in attractive value chain adjacencies (upstream & mid-stream)
Maintain financial and strategic flexibility for a wide range of economic scenarios (developing minimalist, balanced & unconstrained plans)
Be widely recognised as a responsible and sustainable value creator
Invest to
I
achieve
integrated value
chain
leadership
Selectively
S
l
i l
expand into
attractive value
chain
adjacencies
Optim
mise and
ex
xtract
fulll value
from
m core
Coffee, Edible Nuts, W.
Africa Palm
Cocoa, Sugar, Rice,
Dairy, Spices &
Dehydrates, Grains &
Rubber
Cotton, Se
esame, Pulses,
T
Timber
Excellence in execution
M&A effectiveness
• Institutionalise Program Management
•
capabilities
• Acquire capabilities in upstream plantation/
•
farm management & midstream VA processing •
• Complexity management
• Scalable IT, Risk, Control & Compliance systems
Build on
latent assets
Packaged Foods Business
(PFB) in W. Africa,
Commodity Financial
Services (CFS), AgriInputs (fertiliser)
Capital efficacy
Actively build M&A pipeline and
• Strengthen capital structure and
develop prioritisation
build financial flexibility
Deepen due diligence capabilities • Continuously improve overhead
Institutionalise best-in-cla
best in cla
ass
and capital productivity
integration practices
34
Downsize/exit/
prune
unattractive
activities
Select product origins
and profit centres
People & Values
• Continue to grow global talent pool
• Deepen entrepreneurial culture
• Continue to embed stretch and
ambition
• Create ownership culture
• Build empowered teams
We decided to enhance our portfolio
p
by selectively
integrating
g
g into higher
g
marrgin
g value chain segments
g
U t
Upstream
S
Supply
l Ch
h i
hain
• Plantations (perennial tree crops)
• Sourcing/origination
• Farming (annual crops)
• Primary proc
cessing
• Forestry concessions
Mid t
Midstream
D
Downstream
t
• Secondary
• Contract mfg/
Private Label
processing
• Logistics
• Distribution
• Trading/mar
g/
rketing
g
• Dairy farming
• Agri-inputs: Fertiliser
Selective Value C
Chain Integration
What is the distribution of the profit pool within the various segments of the value
chain? What is the size of the prize?
What is our winnability? Can we acquire or
o build competencies required to win in
the more attractive parts of the value ch
hain?
35
We decided to enhance our portfolio
p
by selectively
integrating
g
g into higher
g
marrgin
g value chain segments
g
Upstream + Mid/Downstream targeted to grow
from 26% to 50% of EBT contribution …
Olam Capital Employed
Olam EBT
100%
80
60
40
CFS 0.3%
Midstream/
Downstream
20%
Supply
Chain/VAS*
Origination/
logistics/
processing
74%
20
0
… with increased share of total capital
employed from ~19% to 41%
Upstream 6%
2009
100%
CFS 10%
CFS 0%
Midstream/
D
Downstream
t
14%
80
Midstream/
Downstream
35%
60
Supply
Chain/VAS*
40
Origination/
logistics/
g
/
processing
81%
Supply
Supply
Supp
y
Chain/VAS*
Chain/VAS
Chain/VAS*
Origination/
logistics/
processing
40%
CFS 2%
Midstream/
Downstream
32%
Supply
Chain/VAS*
Origination/
logistics/
processing
56%
20
Upstream
15%
0
2015E
* VAS= Value Added Services
36
Upstream 5%
Upstream 9%
2009
2015E
Our goal was to double Net Profit Margins & increase
intrinsic value by
y 3-4x overr the next two 3-year
y
cycles
y
NP
PAT
margin
FY20
015F
≥4%
4
Equity
Spread
FY2015F
≥10%
Intrinsic
Value
FY20
015F
Earnings
per Share
p
CAGR
FY2015F
≥ 20%
3-4x
Return
on Equity
(BoPe)
ROIC
FY2015F
≥12%
FY2015F
≥ 20%
37
Olam is developing a well diversified, uniquely shaped portfolio
focused on a single
g commodity
y as
sset class ((agri
g complex)
p
)
FY2000
Upstream
(farming, plantations)
Supply Chain/
VA Services
Downstream
L
Cashew
Integrated
value chain
global
leadership
p
Midstream
(VA processing)
Peanuts
Almonds
Coffee
Palm¹
Rubber
Dairy
Selective Spices & Dehydrates
value chain
Grains2
expansion
Sugar
Cocoa
Rice
Cotton/Wool
L
Sesame
Core
ptimisation
Pulses
Ti b
Timber
Latent
assets
CFS3
Packaged Foods
Agri inputs/Fertiliser
L
Leader
(Top 3)
Follower
(#4,5)
Minor
Inorganic
Below #5
1 In West Africa
2 Africa
3 Commodity Financial Services
VAS = Value Added Services
38
~7
products
across 20
countries
in 2000
Olam is developing a well diversified, uniquely shaped portfolio
focused on a single
g commodity
y as
sset class ((agri
g complex)
p
)
FY2005
Upstream
(farming, plantations)
Supply Chain/
VA Services
Downstream
L
Cashew
Integrated
value chain
global
leadership
p
Midstream
(VA processing)
Peanuts
Almonds
L
Coffee
Palm¹
Rubber
Dairy
Selective Spices & Dehydrates
value chain
Grains2
expansion
Sugar
Cocoa
L
Rice
Cotton/Wool
L
Sesame
Core
ptimisation
Pulses
Ti b
Timber
Latent
assets
CFS3
Packaged Foods
Agri inputs/Fertiliser
L
Leader
(Top 3)
Follower
(#4,5)
Minor
Inorganic
Below #5
1 In West Africa
2 Africa
3 Commodity Financial Services
VAS = Value Added Services
39
~13
products
across 40
countries
by 2005
Olam is developing a well diversified, uniquely shaped portfolio
focused on a single
g commodity
y as
sset class ((agri
g complex)
p
)
FY2010
Upstream
(farming, plantations)
Supply Chain/
VA Services
Midstream
(VA processing)
L
L
Cashew
Integrated
value chain
global
leadership
p
L
Peanuts
Downstream
L
L
Almonds
L
Coffee
Palm¹
L
L
Rubber¹
L
L
L
L
L
Dairy
L
Selective Spices & Dehydrates
value chain
Grains2
expansion
Sugar
Cocoa
L
Rice
L
~20
products
across 60
countries
today
L
Cotton/Wool
Core
ptimisation
L
Sesame
L
Pulses
Exited
Exited
Ti b
Timber
Latent
assets
CFS3
Packaged Foods
Agri inputs/Fertiliser
L
Leader
(Top 3)
Follower
(#4,5)
Minor
Inorganic
Below #5
9 BU
BU’s
s
Upstream
1 In West Africa
2 Africa
3 Commodity Financial Services
VAS = Value Added Services
Lea
adership
in 10 BU’s
40
14 BU
BU’s
s
Midstream
3 BU
BU’s
s
Downstream
Olam is developing a well diversified, uniquely shaped portfolio
focused on a single
g commodity
y as
sset class ((agri
g complex)
p
)
FY2015
Integrated
value chain
global
leadership
p
Upstream
(farming, plantations)
Supply Chain/
VA Services
Midstream
(VA processing)
Cashew
L
L
Peanuts
L
L
L
L
L
Almonds
Downstream
L
Coffee
Palm¹
L
L
L
Rubber¹
L
L
L
L
Dairy
L
Selective Spices & Dehydrates
value chain
Grains2
expansion
Sugar
Core
ptimisation
L
L
Cocoa
L
Rice
L
Cotton/Wool
L
Sesame
L
Pulses
Ti b
Timber
Latent
assets
CFS3
Packaged Foods
Agri inputs/Fertiliser
L
Leader
(Top 3)
Follower
(#4,5)
Minor
Inorganic
Below #5
12 BU’s
Upstream
1 In West Africa
2 Africa
3 Commodity Financial Services
VAS = Value Added Services
Leadership
in 11 BU’s
41
16 BU’s
Midstream
6 BU’s
Downstream
Agenda
• Olam 2009 Corporate Strrategy: Recap
• Executing our strategy: Status
S
update
• Executing
g our strategy:
gy Outcomes
O
& Results - Yr 1
• M&A: Accelerating profita
able growth
42
Five strategic thrusts ide
entified to drive Olam’s
growth
g
o t choices
c o ces a
and
d po
portf
tfolio
o o shape
s ape go
going
g forward
o a d
1
Invest to achieve
integrated value
chain leadership
Coffee, Edible Nuts,
W Africa Palm
W.
• Reinforce
leadership position
• Achieve superior
returns through
scale and
integration
Select initiatives
Edible Nuts: Almond
Plantations, Australia
Coffee: Laos
Plantations
2
Selectively
expand into
attractive value
chain
adjacencies
Cocoa, Sugar, Rice,
Dairy, Spices &
Dehydrates Grains
Dehydrates,
Grains,
Rubber
• Strengthen core
and improve
g p
position
strategic
• Tap into ‘attractive’
and ‘accessible’
adjacencies
Select Initiatives
Cocoa: West Africa
processing
Spices & Dehydrates:
OTP (SK Foods)
3
4
Optimis
se and
extract
full va
alue
from core
Cotton, Sesame,
S
Pulses Timber
Pulses,
T
• Capture full
f value
of existing
investment
through focus,
f
efficiencyy and
effectiven
ness
Select Initiatives
Cotton: Signifiicant volume
and margins g
growth
43
Build on latent
assets
Packaged Food in W.
Africa, Commodity
Financial Services
Services,
Agri-inputs
• Extract full value
from trading
p
&
capabilities
market access
Select Initiatives
CFS & Packaged
Food Business
5
Downsize/
exit/ prune
unattractive
businesses,
origins and
activities
Select Profit
Centers/
BU’s/Origins
• Free-up capital
and management
resources where
industry structure
and our position is
unfavourable
Select Initiatives
Select Profit centres/
BU’s/Origins removed
& exited pulses
business
1
Achieving integrated value
v
chain leadership:
Edible nuts
SELECT INI
ITIATIVES
TimberCorp’s
Almond
d Orchards acquisition
• Platform to achieve integrated vallue chain leadership in almonds,
the largest edible nut category
• Profit pool analysis revealed that up
pstream is the most profitable
part in the value chain
• Identified Australia as entry into upstream (Almond Orchards)
-Acquired ~30K Acres from TimberCorp for ~S$374M; ~40K MT peak
volume
• Embedding almond orchard mana
agement expertise
• Accelerate downstream entry in key consumer markets for almonds
-e.g. China,
Chi
India,
I di EU and
dR
Russia
i
44
1
Achieving integrated value
v
chain leadership:
Coffee
SELECT INI
ITIATIVES
Laos plantations
investments
Vietnam soluble
coffee plant
• Investment of ~S$70M
$
with a
total capacity of about 7,000 MT
(including Phase II)
• Identified Laos as the lowest cost
Arabica coffee producer globally
• Acquired land on long lease and
planted 970 Ha in 2009
• Phase I of plant commissioned in
March 2010
• 1.2K Ha under planting this year to
grow to ~3-5K Ha in two years
• Plant capable of producing spray
dried coffee powder and
agglomerated granules, freeze
dried granules and frozen
extracts
• Installed
ll d a 5 member
b
management team with a 70
man years experience in coffee
• Potential to develop the estate as a
value added certified specialty
coffee supplier
• Initial shipments have evoked
positive feedback from
customers
• Clearly excess return opportunity
45
Selectively expand into
o value chain adjacencies:
2
Cocoa
SELECT INI
ITIATIVES
Cote d’Ivoire
d
processing
• Integral part of Cocoa Global Strategy
y to supply quality Cocoa Products to
Chocolate Manufacturers
• Investment of S$60.9M in a 60K MT Cocoa
C
Processing and Usinage Plant
to produce Cocoa Liquor, Butter & Cake
C
• Attractive asset with significant sy
ynergy potential
-
Better quality beans and future crop flows
f
Synergy with existing Beans business
Traceability of product
Logistics advantage
Corporate tax and other fiscal incentives
• Strengthens
St
th
Ol
Olam’s
’ competitive
titi
position
iti
i W
in
Westt Africa
Af i
46
Build on latent assets: Commodity Financial
4
Services
Se
ces (C
(CFS)
S) & Packa
ac aged Foods
oods Business
us ess ((PFB))
CFS
•
The CFS business is being organically
d
developed
l
d
•
Currently participates in Market Making and
volatility arbitrage trading in softs
•
g risk management
g
solutions to
Now offering
our customer base
•
launched its first Relative Value commodity
fund (Ektimo RV Fund)
•
Leadership in LIFFE and growing market
share in ICE/CBOT
•
Developing other commodities fund ideas for
the future
•
Packaged Foods
Promising start to the new business
47
•
Started Packaged
g
Foods Business through
g launch
of Coffee Mix products in select markets in
2004
•
Expanded by launching other packaged food
categories (eg. tomato paste, edible oil) in
South Africa, Nigeria, Ghana, Congo and
other W. Africa leveraging on common
distribution for the other products in Olam’s
portfolio
•
Expanded
E
d d th
the portfolio,
tf li which
hi h now includes
i l d
Noodles, Pastas, Mayonnaise, Beverages,
Snack Nuts and Seeds, & Culinary products
•
Investing to build brand franchise in select
markets
5
Downsize/Exit unde
erperforming
businesses, origins and profit centres
Downsized/Pruned 23% of
original profit centres
Exited unattractive businesses
Number of Profit Centres (PCs)
• Exited Pulses business,,
improving overall segment
profitability
300
230
200
-2%
2% off overall
ll PBT in 2009
-Released capital and
management
g
bandwidth to
grow more promising
businesses
-11
-23
177
-19
100
• Exited Angola and
Madagascar as origins
0
48
Existing Deprioritised Value
PCs of
& New
initiatives Destroying "Exit"
Profit
(Do not
PCs
BUs
Centres
meet
(eg.
(PCs)
threshold)
pulses)
PCs
currently
operating
We have also acquired an
nd established strong
capabilities to execute on our strategic thrusts
M&A Effectiveness
Capital Efficacy
• B
Built
ilt Balance
B l
Sheet
Sh t flexibility
fl ibilit through
th
h innovative
i
ti
sources of funding including raising:
• Well defined M&A discipline, aligned with
corporate strategy and goals
- S$ 420M equity investment from Temasek
• Dedicated core M&A team with extensive
y experience
p
industry
- S$ 700M 7-year CB issuance
- S$ 1,190M syndicated term loan facility
• Robust pipeline and rigorous deal
prioritisation process
- S$ 140M Islamic loan facility
- S$250M MTN issuance
• Strengthened due diligence and post merger
integration capabilities
- S$ 350M 10-year unrated bond issuance (1st in SG)
• Gearing lowered since FY08 (2.4 to 1.7)
Excellence in Execution
People & Values
• Program office established to oversee and
monitor
it execution
ti
off strategic
t t i initiatives
i iti ti
• Fortune/Hewitt/RBL named Olam as one of
the
h top 25 companies
i globally
l b ll ffor building
b ildi
leaders
• Expanded operational capabilities: Grew
Global Assignee Talent Pool, (GATP), from 340
(FY07) to
t 558 (FY10)
• Low attrition rate including high retention
from all acquisitions
• Continued fostering of entrepreneurial
lt
culture
• Specialised milestone training programs
• Strengthened system capabilities
- Eg. SAP, MUREX (CFS), strengthened audit &
compliance systems
• Good progress in building upstream and
midstream capabilities
- Product development, technical expertise and
quality specifications
- Management expertise: hired Upstream experts
(14), Midstream technical experts (105)
49
We have expanded our operational
o
capabilities
through acquiring new ttalent
Supply Chain/VAS
Richard Haire
Managing Director
Regional Head
Aus & NZ
Damien Houlahan
Sr. Vice President
Almonds, Australia
Midstream
Robert Hunink
Bob Dall’Alba
Mukul Mathur
President
Sr. Vice President Sr. Vice President
Global Head of
Cotton
Country Head
Timber, Singapore
Australia
Nigeria
Simon Bentley
Jose Antonio
General Manager, CFS, General Manager, CFS,
Singapore
Geneva
Stephen Driver
President
Global Head
Mfg Innovation & Tech
Services,
Singapore
Someswara Rao
Vice President
Soluble Coffee
Vietnam
34
40
(FY0
07)
55
58
(FY1
10)
Jim Fenn III
Business Head
Universal Blanchers,
Blanchers
USA
Richard Hedges
Chief Miller
Grains
Nigeria
Upstrream
Piero Carello
General Manager,
Sugar Division,
Division
Singapore
John Beverly
Manager
David DeFrank
Sr. Vice President Rice Plantations
Mozambique
AG Operations,
USA
Greg Estep
President
Spices &
Dehydrates,
USA
Andreas Fanjul
Manager
Manager,
Peanuts
Argentina
Bob Gulack
Operations
Manager,
Almonds,
Australia
Toby Smith
Commercial
Manager,
Almonds,
Australia
50
Sanjeet Khurana Oliver Megard
Associate GM
Forestry Operations Regi George
Rice Outgrowers
Coffee Plantation,
Gabon
Program,
Laos
Nigeria
Agenda
• Olam 2009 Corporate Strrategy: Recap
• Executing our strategy: Status
S
update
• Executing
g our strategy:
gy Outcomes
O
& Results - Yr 1
• M&A: Accelerating profita
able growth
51
We have invested significan
ntly across prioritised value
chain segments
g
in line with our Corporate
p
Strategy
gy
FY10 Total Investments (organic
c and inorganic)*
100%
80
S$ 1,462M
1 462M
Selected Investment Initiatives*
Midstream 44%
60
40
20
0
Supply Chain 16%
& VAS
Upstream
p
40%
•
Spices (Grinding in Vietnam)
•
Cashew (Mech Processing in IVC &
Nigeria)
•
Grains (Milling in Ghana)
•
Timbers (Logs in Gabon)
•
Sugar (Refinery in Indonesia)
•
(
)
Rice (India)
•
Wheat (Crown Flour Mills)
•
Dehydrates (SK Foods)
•
Coffee (Brazil)
•
Rice (Distribution in Nigeria)
•
Cashew (Brazil)
•
Cotton (USA & Australia)
•
Peanuts (Argentina)
•
Coffee (Laos Plantation)
•
Almonds (TimberCorp)
•
Dairy (NZFSU)
2010
Inorganic initiatives
Note: *Excludes Gilroy Acquisition (S$ 350M) which was complete
ed in July 2010
52
All initiatives are on strategy;; ~80% of initiatives identified
in the 2009 Corporate
p
Plan are either executed or on track
Invest to achieve
integrated value
chain leadership
p
On plan” “New initiatives”
“On
strategy”
“Off
strategy”
Executed &
Contributing
Selective
ely expand
into attra
active value
chain ad
djacencies
j
• Almonds: Orchards &
processing, Australia
• Spices & Dehydrates:
• Ingredients Mfg (roast
ready and ingredients
quality) in Vietnam
and US
• Grains: Wheat
W
milling
(CFM), Niigeria
• Sugar:
g
Re
efining,
g,
Indonesia
a
• Rice:
- Tomato
o Paste Mfg, US
- Rice Lo
ogistics,
Thailan
nd
- Rice Bu
ulk Shipment
• Cashew: Mechanical
Processing, IVC &
Nigeria
Executed &
Gestating
• Coffee:
- Plantations, Laos
- Soluble Coffee Mfg,
Mfg
Vietnam
•
Under
Evaluation
•
•
Adjacent edible nuts
growth opportunities
(P
(Pecans,
W
Walnuts,
l t Hazels
H
l
& Pistachios)
Almonds orchards&
processing, USA
Palm: Plantations,
crushing, refining, West
Africa
Optimise and extract
full value from core
• Cotton
• Sesame
• Timber
- Milling,
g,, India & Brazil
- Refinin
ng, Africa
- Milling,, Indonesia
• Wheat Miilling, Africa
• Rubber Pllantations
• Scaling up market
making and volatility
arbitrage trading
• PFB: Tomato Paste
sachet mfg, Nigeria
• Cotton: Warehouse, US
• Timber:
- Timber Logs, Africa
- Timber concession,
Africa
- Teak Plantation
concessions, South/
Central America
No “Off Strategy”
S
initiatives
53
• CFS: Relative Value
Fund launched
Exited Pulses
and select
profit centers
• Dairy: SCM
M/Mfg, IVC
• Grains: Grreenfield
wheat millling, Ghana
• Spices & Dehydrates:
D
Gilroy Foo
ods, US
• Dairy: Farrming,
Uruguay
• Cocoa: Pro
ocessing, IVC
& Nigeria
• Sugar:
Build on latent assets
• PFB growth
opportunities
• CFS: Fund
Management Options
• Fertiliser
Manufacturing Africa
This year, we have regis
stered a strong
increase in operating and after tax margins
Olam Margin Performance (FY10)
10.1
9.0
150
bps
8.6
80
0
bp
ps
7.1
8
5
5.8
5.0
5
100
bps
3.2
Gross
Contribution
%
Net
Contribution
%
EBITD
DA
%
54
2.1
2010
2010
2009
2010
2009
2010
2009
0
2009
2.2
3
50
bps
PBT
%
26
2.6
2010
10
100
bps
2009
13%
PAT
%
Early results have exceeded expectations with
strong trajectory towards achieving 2015 targets
NPA
AT
mar
argin
g
Target
2.6
6%
Actual
FY20
010A
NPAT margin
m
FY201
15F
FY2015F
12-15%
≥ 4%
%
Equity
S
Spread
d
Equity
E
it
Spread
FY2015F
FY2010A
19%
≥ 10%
Intrin
nsic
Valu
ue
FY201
15F
EPS
change
E
Earnings
i
per Share
CAGR
FY2015F
FY2010A
22%
≥ 20%
3-4
4x
ROE
FY2010A
Return
on Equity
q
y
(BoPe)
FY2015F
ROIC
FY2015F
≥ 12%
≥ 20%
ROIC
FY2010A
29%
14%
55
Value Chain Integration: Outcome/Results
Value Chain
Initiatives
Supply Chain & VAS
Sales Revenue
(in S$’000)
Net Contribution
(NC) (in S$’000)
Jun 10
Jun 09
Jun 10
Jun 09
Jun 10
Jun 09
9,162,602
7,809,296
635.114
469,226
403,768
351,932
6.9%
6.0%
4.4%
4.5%
110,354
14,747
98,824
13,138
50.4%
74.6%
45.1%
66.5%
155,617
123,278
105,541
65,234
14.5%
16.2%
9.8%
8.6%
901,085
607,251
608,133
430,304
Margin (%)
Upstream
219,084
19,758
Margin (%)
Midstream &
Downstream
1,073,346
758,878
Margin (%)
Total
EBITDA
(in S$’000)
10,455,032
8,587,932
56
NC uplift this year drive
en by improvements
across all value chain
n segments
CAGR
(09-10)
Olam Net Contribution (S$ M)
S$1,000M
S$
,000
32
140
800
600
(11%)
97
25
901
CFS
(8%)
Mid/
Downstream
(48%)
)
607
(33%)
400
Supply
Chain/
VAS
% off
incremental NC
200
0
Upstream
2009
Net Contribution %
Up/Mid/Downstream
Supply chain/VAS
Total
Upstream
Supply
y
Chain/
VAS
Midstream/
Downstream
CFS
2010
17.7%
20.6%
6.0%
6.6%
7.1%
8.6%
57
48%
EBITDA uplift this year driven
d
by improvements
across all value chain s
segments
CAGR
(09-10)
Olam EBITDA (S$ M)
S$800M
S$800
600
86
26
(15% )
434
400
40
(23%)
20
605
CFS
(12%)
Mid/
Downstream
(50%)
% of
incremental
EBITDA
200
Supply
Chain/
VAS
Upstream
0
2009
EBITDA %
Upstream
Supply
Chain//
VAS
Up/Mid/Downstream 10.1%
Supply chain/VAS
Total
Midstream/
Downstream
CFS
2010
15.8%
4.5%
4.2%
5.0%
5.8%
58
40%
Significant inroads mad
de in entering more
profitable parts of the value
v
chain
Midstream/Downstream
Olam PBT breakdown by value chain
100%
1%
6%
20%
10
0%
•
Robust FY2010 growth: NC by 26.3% to S$156M
and EBITDA by 61
61.8%
8% to S$106M
•
19 mid/downstream initiatives executed in
FY2010, of which 14 are contributing and 5 are still
in gestation
•
Strong contributors include Tomato Paste Mfg in
USA (SK Foods), Peanuts Ingredients Mfg in USA
(Universal Blanchers) and Sugar refining in
Indonesia (PT DUS)
15%
80
35
5%
60
Supply Chain/VAS
99%
60%
74%
40
40
0%
•
Revenues grew by 17.3%, NC by 29.6% and NC
per ton by 19.1% in FY2010
•
Cotton, cocoa, coffee, edible nuts, spices &
dehydrates rice,
dehydrates,
rice sugar,
sugar grains and sesame have
all contributed to strong supply chain performance
20
0
2007
Supply Chain/VAS
6%
2009
Upstream
Upstream
19%
15
5%
2010
Actual
2015E
Mid/downstream
C
CFS
59
•
Very
y strong
g FY2010 g
growth: NC & EBITDA
increased to S$110M (648%) and S$99M (652%)
respectively
•
9 upstream initiatives executed in FY2010, of
which 7 are contributing and 2 are still in gestation
•
Key contributors include Almonds Orchards in
Australia (TimberCorp) and Nauvu
Agenda
• Olam 2009 Corporate Strrategy: Recap
• Executing our strategy: Status
S
update
• Executing
g our strategy:
gy Outcomes
O
& Results - Yr 1
• M&A: Accelerating profita
able growth
60
In 2007 we embarked on our M&A growth
plan with clear objectiives & guidelines
Objectives
Freq
quency
• We will seek to build our M&A expertise
over a multi-year period through a series of
small deals (“string of pearls” approach)
• Build leadership position
in an existing business
S
Size
• Expand into related new
product adjacency
• Expand into value chain
adjacency
Framework
ming
Tim
• Overcoming entry
barriers in a new
geography
• Acquire new capabilities
and competencies
• Take advantage of
“favorably priced”
targets with high business
overlap with Olam
Guidelines
• Sweet spot deals: 5%-10% of market cap
• Max deal size: 10% of market cap
• Max deal value per annum.: 15% of our
market cap
• We will make acquisitions throughout
economic cycles and not try to time the
market
Control stake
• We will seek to do deals where it is p
possible
to acquire a controlling stake or
management control
Stra
ategic
vs. financial
• We will not enter into deals purely based on
“P/E arbitrage” opportunities as the prime
driver of the transaction
M&A was envisaged as a tool to aid
d strategy & not a strategy in itself
61
Rigorous M&A approach to ensure strategic
alignment
a
g
e ta
and
d value
a ue acc
accrretion
et o
Corporate
Strategy
Target
screening
process
M&A
Strategy
Investment
thesis
Commercial
due diligence
Post merger
integration
Olam core M&A deal team in place witth ‘end-to-end’ responsibility
•Growth vision:
-2X share- holder
value every 3 years
-To be top 2 player in
major products by
2011
•4
4 strategy pillars:
ill
-Scale up core biz
-Reduce cost in
existing supply chain
-Expand into value
chain adjacencies
-Enter attractive
related adjacent
products
•5 M&A g
guidelines:
-At least 1 deal per
year
-Spend <15% of
market cap per acq.
-Make deals
regardless of
economic cycle
-Pursue deals with
controlling stake
whenever possible
-Consider deals w/ a
strong strategic
rationale
•Deal g
generation
from list of ideas,
including
•A
A detailed
i
investment
that
c
clearly
articulates
•Analysis
y
to drive
•Integration
g
investment decision guidelines:
-Industry
-Competition
-Business fit
-Strength & stability
-Strategic importance
-Valuation (standalone -Business plan
& synergies)
i )
•4 imperatives to
-Deal complexity
follow
•Long list of targets
-Key risks & potential
-Independent thesis
to be screened for:
integration issues
-Primary research
-High level financials
•S
Synergy
valuation
-Consider down side
-Initial strategic fit
-Reality
Reality check
m
must
be realistic
-Etc.
Etc
-Competition
-Advisors
-Board
-Etc.
Et
and probability
a
a
adjusted
-Plan early
-Integrate quickly
where matters
-Prioritise culture
-Maintain firepower in
core biz
•4 major deal types:
-Consolidation
-Tuck-in
-Company
Company redefinition
-Adjacency expansion
Expected value
Frequency
Size
M&A
policy
Enhanced P/E
“Long-list”
Cost synergy
Timing
Controlling
stake
Strategic
vs. financial
Operational
Improvement
Revenue synergy
y
gy
“Short-list”
62
Standalone
value
Investment
thesis
Think the
Unthinkable
Primary
research
Reality
check
Relative size
of companies
Similar
scale
Large
vs.
small
Consolidation
Company
Redefinition
Tuck-in
Tuck
in
Adjacency
expansion
Highly related
Adjacent
Business overlap
Significant acquisitions
s and investments made
across the value chain
FY2007
FY200
08
FY2009
F
Foods
OTP (Formerly SK Foods)
De Francesco
Edible
Nuts,
Spices &
Beans
Industria
als
FY2010
*
Confectionery &
Beverage
Ingredients
PT DUS
Food
Staples &
Packaged
Foods
Industrial
Raw
Materials
GSIL
Sugar Mill
SECO
3
Supply Ch
hain/VAS
63
3
Upstream
11
Midstream
4
Equity stake
investments
Strong acquisitions & in
nvestments track record:
on strategy and delivering healthy returns
Olam acquisitions and investments
2007-2010 (S$ M)
100%
551
NZFSU (Dairy)
207
Sifca/Nauvu
Investments
(Palm/rubber)
1,012
• 17 deals completed
Gilroy Foods
(Cl
(Closed
d in
i July
J l 2010)
• ~S$1.4B* in total investments
Naarden Agro
GSIL Sugar Mill
DeFranseco
TimberCorp
(Almonds)
QCH
H (Cotton)
PT DUS
60
40
Total
(ex Gilroy) = S$ 1,422M
(ex.
SECO (Cotton)
IMC
(Peanut)
80
Total = S$ 1,771M
• ~S$280M* Net Contribution
accretion achieved in FY2010
KFI (Dehydrates )
SK Foods Tomato Processing
Universal Blanchers (Peanut)
Open Country Dairy
• 25% ROE on acquisitions
Crown Flour Mills (Wheat)
20
• 14% ROIC on acquisitions
i iti
PureCircle
(Natural Sweeterner)
0
U t
Upstream
Supply
S
l
Chain/
VAS
Mid t
Midstream
Note: Exchange rate assumed for all deals: US$1=S$1.4
Note:*Excludes Gilroy Foods
(Acquisition completed in July 2010)
64
Contribution from Acq
quisitions
(in S$ million)
FY2
2010
FY2009
Volume (Metric Tons)
7,006,478
,
,
5,720,640
Sales
10,4
455.0
8,587.9
NC
90
01.0
607.2
NC Margin %
8.6%
7.1%
EBITDA
60
07.3
430.3
EBITDA Margin %
5.8%
5.0%
FY2010
FY2009
% Increase
Existing
Businesses
Acquired
Businesses
Exis
sting
Busin
nesses
Acquired
Businesses
Existing
Businesses
Acquired
Businesses
Volume
o u e (Metric
( et c Tons)
o s)
5,676.9
5,6
69
1,329.6
,3 9 6
4 78
4,78
84 4
84.4
936.2
936
18.7%
8 %
42.0%
0%
Sales
8,820.7
1,634.3
7,52
29.4
1,058.5
17.2%
54.4%
NC
638.3
262.7
65.8
46
141.4
37.0%
85.7%
NC Share %
70 8%
70.8%
29 2%
29.2%
76.7%
76.
7%
23 3%
23.3%
NC Margin %
7.2%
16.1%
2%
6.2
13.4%
EBITDA
400.8
206.5
76.6
37
53.7
6.4%
284.8%
EBITDA Share %
66 0%
66.0%
34 0%
34.0%
87.5%
87.
5%
12 5%
12.5%
EBITDA Margin %
4.5%
12.6%
5.0
0%
5.1%
(in S$ million)
65
M&A has augmented organic growth and
improved our overall profitability
p
Olam Net Contribution (2009-2010)
(S$ M)
NET CONTRIBUTION
CAGR
(09-10)
S$1,000M
122
171
800
600
901
48%
Acquired
Acq
i ed
Business
86%
Existing
Business
36%
607
400
200
0
Net Contribution %
2009
Existing Business
6.2%
7.2%
Acquired Business
13.4%
16.1%
Total
7.1%
8.6%
Existing Business
s
66
Acquired Business
2010
14 out of 17 deals are trac
cking above investment
ttheses;
eses; steady state retu
etu
urns
u
se
expected
pected to be higher
g e
Olam Acquisitions Performance (FY10)
Return on Equity (ROE)
150%
132.2
25.4%
weighted
average
ROE in
FY2010
100
60.3
50.5
50
49.0
26.3
0
26
6.2
23.3
19.7
14.1
10.1
05
0.5
PT DUS
OTP/
De Francesco
g
Naarden Agro
QCH
Q
TimberCorp
KFI
SIF
FCA
Universal
Blanchers
SECO
03
0.3
OCDL
Crown Flour
PureCircle
Note: Excluded deals – GSIL (insignificant), IMC (tbd), NZFS (he
eld for trade) and Gilroy Foods (completed post June 2010)
67
14 out of 17 deals are trac
cking above investment
ttheses;
eses; steady state retu
etu
urns
u
se
expected
pected to be higher
g e
Olam Acquisitions Performance (FY10)
Return on Invested Capital (ROIC)
125%
100
13.9%
weighted
average
ROIC in
FY2010
101.2
75
50
32 4
32.4
25
0
28.1
23.5
22.5
3.3
13
PT DUS
13.1
12.6
10.6
8.7
4.6
06
0.6
Universal
OCDL
OTP/
Naarden Agro Crown Flour
Blanchers
De Francesco
SIFCA
QCH
Timbe
erCorp
KFI
PureCircle
SECO
Note: Excluded deals – GSIL (insignificant), IMC (tbd), NZFS (he
eld for trade) and Gilroy Foods (completed post June 2010)
68
Most of our acquisition
ns/investments are in
line with expectations
s (1/2) SELECTED DEALS
Strong
Investment
Investment
amount
(S$ M)
Stake
%
Value chain
TimberCorp
363
100
Upstream
SIFCA
(Nauvu
Investment)
171
50
Upstream
N/A
NZFSU
18
18.45
Upstream
N/A
QCH
Q
191
100
Supply
Chain/VAS
SECO
7
100
Supply
Chain/VAS
Gilroy Foods
350
100
Midstream
PureCircle
169
20
Midstream
Earnings
acc etion
accre
Management
retention
etention
Platform
fo growth
for
g o th
(Continuing mgmt
agreement w/
Select Harvest)
(accelerated
US almonds)
Value unlocked
N/A
N/A
Transaction completed post June 2010
N/A
69
Weak
N/A
Most of our acquisition
ns/investments are in
line with expectations
s (2/2) SELECTED DEALS
Strong
Investment
Investment
amount
(S$ M)
Stake
%
Value chain
Crown Flour
Mills
151
99.5
Midstream
Open Country
Dairy
108
24.99
Midstream
Universal
Blanchers
102
100
Midstream
SK Foods
55
100
Midstream
KFI
26
100
Midstream
PT DUS
20
100
Midstream
De Francesco
14
100
Midstream
Earnings
accrettion
(40% off volume
goes throu
ugh Olam)
70
Management
retention
N/A
Platform
for growth
Weak
Value unlocked
M&A has and will continu
ue to play an important
role as we pursue profita
able growth
M&A an aid
to execute
strategy
gy
Right
‘parent’
capabilities
biliti
Strong
execution
capabilities
• M&A has helped overc
come industry barriers to enable entry in
attractive markets
• It has also enabled us leapfrog competition to secure leadership
position and attain su
uperior profitability
• Selective M&A will co
ontinue to be pursued by BUs,
BUs as an aid to
execute their growth strategy
• Our track
track-record
record & exp
perience since 2007 has helped us benefit
from asset price dislo
ocations from the recent market uncertainties
• At the same time, we have achieved significant success at
unlocking
g value from
m our acquisitions
• Revived growth amb
bitions and successful expansion into ‘white
space’ opportunities
s
• Experience and enhanc
ced ability in due-diligence and integration
• Strong expertise and rigor
r
in identifying and mitigating execution
risks
71
Assessment of two M&
&A transactions
72
QCH example: A soun
nd investment thesis
underpinned the QCH ac
cquisition
QCH Profile
Q
• Australia’s largest cotton company
with volume of 250K tons per
annum
Investment facts
In
nvestment
details:
Date
June 2007
Final price
S$216M
Ownership
100% ownership
• Key activities include:
- Sourcing and origination
- Ginning of seed cotton
- Marketing and warehousing of
cotton
- Farmer input services
• Strong origin presence in new
to Olam origins: Australia, US
and Brazil
• Access to key origin counties
(Australia, US, Brazil)
Investment
R
Rationale:
• QCH’s presence in premium
cotton segment
complements Olam’s
portfolio
• Industry consolidation
likely; significant benefits
f om scale
from
• Strong market presence in
Japan Korea,
Japan,
Korea China and
Indonesia
73
QCH example: Value from QCH and Olam created
significant synergies forr the combined entity
QCH to Olam
Olam to QCH
• Access to key
y cotton origins
g
USA,
Brazil and Australia
• Embed ‘stretch
stretch growth ambitions
ambitions’
and strong performance
management systems
• Access to capital to fund aggressive
growth in US and Brazil and tap
adjacent opportunities
• Focus on cost management
• Enhanced risk management systems
and practices
• Stronger distribution network in key
markets e.g.
g China,, Bangladesh
g
• Access to long staple, premium, high
grade cottons
• Strong ginning and farmer mgt
capability
• Access to adjacent businesses
- De Francesco, OTP, Gilroy Foods in US &
Almonds, Grains and Wool in Australia
• Experienced management team
Power of com
mbined entity
• Olam ( ranked • Cost
5) & QCH
benefits
from
(ranked 10)
increased
combined to
become No.2
scale
cotton player
• Diversified &
• Improved access to
• Ability to capture
resilient cotton
proprietary market
adjacent agriportfolio, profita
able
intelligence in cotton
business
even during the
market due to p
presence
opportunities
worst drought in
in all key Origins &
Australia history
Destinations
74
With successful integration, Olam Cotton volume
has
as achieved
ac e ed g
growth
o t sign
s g ificantly
ca t y above
abo e market
a et
Significant growth for Cotton unit
after acquisition…
… as a result of the successful
integration
• Key functions fully centralised in
Singapore
Olam Cotton production
Volume (indexed, 2007=1)
CAGR
(07-15)
3.0
2.6
2.3
- Marketing
- Risk Management
13%
- O&D analyses
• QCH well integrated with rest of
Olam business
2.0
1.0
Outperforme
ed
initial
investmentt
thesis
1.0
2007
- 95% off ttop 20 QCH managers
retained
- QCH CEO part of Olam ExCo and has
regional responsibility for ANZ
Prior merger,
merger
excludes QCH
0.0
- High employee engagement scores
2010
- QCH manager is now head of Olam’s
almond business
2015
75
KFI example: Attractiive target for Olam to
enter the Dehydrates business
b
KFI overview
• One of the largest processors of
dehydrated garlic in China with
superior processing technology
Investment breakdown
In
nvestment
details:
• Pioneer in enabling acceptance
of Chinese dehydrated garlic
ingredients in the US
• Strong origin presence in
China, the largest garlic
producing country
Date
October 2007
Final price
S$25.2M
Ownership
O
hi
100% ownership
hi
• Accelerated entry into a new
product adjacency: Dehydrates
Investment
R
Rationale:
• Strong destination presence in
US, Europe and Australia
• Provide Olam with accelerated
access into new value chain adjacency
– dehydrates ingredient
manufacturing
• Enlarged portfolio for new untapped
food service market segment
• Cross sell opportunities for Olam to
sell KFI’s products to its markets and
vice versa
76
KFI example: Strong sttrategic and business fit
with Olam’s
Olam s Spices & Deh
hydrates business
KFI to Olam
Olam to KFI
• Redefinition of BU scope with entry into
de-hydrates/ingredients (Olam
previously a whole spices supplier)
• Capital to fuel domestic and international
expansion
• Cross sell KFI products to markets and
customers in Olam’s existing portfolio
• Access to key customers & significant
market share g
gain in the US,, the largest
g
spices and dehydrate market
- (e.g. significant customer sharing for garlic,
onions and tomatoes dehydrates)
• Supply chain management capabilities in
Olam’s existing origins and destinations
• Resources sharing in port logistics &
overheads
• Took over KFI management in Qingdao
and combined with existing Peanut
structure
• Processing expertise in garlic dehydrates
that can be applied to other dehydrates
- (e.g.
(e g onion and capsicum dehydrates)
• Valuable industry experience and deep
industry relationships
• Introduced De Francesco opportunity
Power of com
mbined entity
• Expansion into a
variety of new product
categories
• (e.g.
(
d h d t d
dehydrated
onions and capsicum)
• Strengthened
•
product offering to
o
better meet custome
er
demand
77
Increased crossselling
opportunity,
further gain in share
of wallet
• Strong platform for
organic and
inorganic expansion
• ((e.g. D
De Francesco,
F
Gilroy Foods & PFB)
KFI example: Significant profit growth expected
through successful integrration with Olam
Strong growth in profitability after
acquisition…
EBT Garlic Dehydrates
(Indexed, 2007=1)
… as asset is being successfully
integrated
• Key marketing capabilities fully
integrated into Olam
• Smooth and systematic integration of
senior
i
managementt from
f
both
b th sides
id
CAGR
(07-15)
4.0
0
3.3
16%
30
3.0
2.3
Outperformed
d
initial
investment
thesis
2.0
1.0
0.0
• Successful acquisition & integration of
De Francesco to further expand Olam
Olam’s
s
portfolio
1.0
2007
- Dave Watkins, (KFI) President with strong
industry expertise now leading US onions
Spices & Dehydrates
- Anthony Cummins (KFI) focused on client
relationships and future strategies/M&A
- Vinayak (Olam) grew customer relationships
from KFI
- Nitin Bansall (Olam)
( l
) took
k over China
h
plant
l
operation
2010
- Anthony Cummins’ deep industry knowledge
and networks extremely valuable in
successful integration of the asset
2015
• KFI President part of Olam ManCom
78
Pivotal acquisitions of QCH
Q
and KFI have helped
create a substantial earn
nings platform
Processing capabilities
Gilroy Foods in US
Asset buyout from major customer
Jun 2010
Share grower relationships
De Francesco
Turnaround of a distressed plant
Dec 2008
Aug 2007
Olam Tomato Processing (SK Foods)
Strengthened US footprint
Senior Mgmt
Relationship
Jul 2009
Almond Orchards in Australia
Almond upstream entry
Sep 2009
Jul 2007
Grains and Wool in Australia
Geographical overlap
Customer sharing
Product expansion in Australia
Oct 2008
79
Executive summary (1 of 2)
Olam 2009
Corporate
Strategy:
Recap
• In 2009, we announced our 6-year Corporate Strategy (FY2010-15)
with a g
goal to double ourr net p
profit margins
g
and increase Intrinsic
Value by 3-4X
• We decided to enhance our portfolio by selectively integrating into
higher margin value cha
ain segments upstream (farming/plantations)
and midstream/downstrea
am (value added processing)
• Focused on a single com
mmodity asset class (agri complex), we are
developing a well-diversiified, uniquely shaped portfolio
• Strong progress has bee
en made along the five strategic thrusts
identified to drive our grow
wth choices and portfolio shape, e.g.
Executing
our
strategy:
gy
Status update
1
2
3
4
Plantations and value add
ded processing investments in Edible Nuts & Coffee
Cocoa processing in West Africa; acquisitions in Spices & Dehydrates
Leadership in key Cotton
n origins (AU/US/Brazil) following QCH integration
Established Commodity Financial Services business and expanding Packaged
Foods portfolio
- Exited
i d Pulses
l
b i
business,
A
Angola
l and
d Madagascar
d
origins,
i i
and
d underperforming
d
f
i
5
profit centres
• We have also established
d and acquired strong capabilities to execute
on our strategic
g thrusts in M&A Effectiveness,, Execution Excellence,,
Capital Efficacy and in People and Values
80
Executive summary (2 of 2)
Executing
our
strategy:
Outcomes &
Results – Yr 1
• All initiatives are on strategy; ~80% of initiatives identified in the
2009 Corporate Plan are either executed or on track
• Early results have exceed
ded expectations with a strong trajectory
towards achieving 2015 ta
argets
- 29% ROE achieved and 22% EPS growth in 2010
- Strong
St
i
increase
i operatting
in
t
ti
and
d after
ft tax
t
margins
i
( 50 b
(~50
bps))
• EBITDA uplift this year to
o 5.8% from 5.0% in 2009 driven by
improvements across alll value chain segments
• In 2007, we embarked on our M&A growth plan with clear objectives
and guidelines, and a rig
gorous M&A approach to ensure strategic
alignment and value acc
cretion
M&A:
Accelerating
profitable
growth
• W
We have
h
maintained
i t i d a stro
t ong acquisitions
i iti
and
d investments
i
t
t track
t
k
record with significant acttivity across the value chain:
- Deals have been on strate
egy and contributed to organic growth enhancement
and improved profitability
- Delivered healthy returns
s: 14 out of 17 deals tracking above investment
theses; steady state returrns expected to be higher
- Acquisitions have contribu
uted 29% of NC and 34% of EBITDA in 2010
• M&A has and will continue
e to play an important role in our pursuit for
long term profitable grow
wth
81
Thank You
82