olam international limited · - post 2015, announced the acquisition of the wheat milling and pasta...

Olam International Ltd

Olam International Limited12M 2015 Results Briefing

February 29, 2016

Sunny Verghese, Co-founder & Group CEO

A. Shekhar, Executive Director & Group COO

N. Muthukumar, President & Group CFO

2

Presenters

This presentation should be read in conjunction with Olam

International Limited’s Quarter and 18 Months ended December 31,

2015 (Q4 2015 & 18M FY2015 respectively) Financial Results

statement and Management’s Discussion and Analysis lodged on

SGXNET on February 29, 2016

Notice

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 looking statements are intended to be identified by words such as ‘believe’,

‘estimate’, ‘intend’, ‘may’, ‘will’, ‘expect’, and ‘project’ and similar expressions as they relate to

the Group. Forward-looking statements involve certain risks and uncertainties because they

relate to future events. Actual results may vary materially from those targeted, expected or

projected due to several factors.

Potential risks and uncertainties includes such factors as general economic conditions,

foreign exchange fluctuations, interest rate changes, commodity price fluctuations and

regulatory developments. Such factors that may affect Olam’s future financial results are

detailed in our listing prospectus, listed in this presentation, or discussed in today’s press

release and in the management discussion and analysis section of the company’s Quarter

and 18 Months Ended December 31, 2015 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 update or revision of any forward looking statements.

Cautionary note on forward looking statements

The Company had announced a fiscal year-end change from June 30 to December

31

With this change, the Company’s fiscal year, which began on July 1, 2014 ended

on December 31, 2015. Hereafter, the Company will follow a January to December

fiscal year

The numbers presented and analysed in this presentation are for the 12 months

ended December 31, 2015 on the new fiscal year basis (January 1, 2015 to

December 31, 2015) referred to as “12M 2015” and are compared to the prior

corresponding 12 months ended December 31, 2014 (“12M 2014”)

Change in Fiscal Year

• Highlights – 12M 2015

• Financial Performance

• Key Takeaways

Agenda

• Strong Operational Performance

- Operational PATMI up 20.1% to S$346.2 million

- Growth driven by prioritised platforms

- Restructured underperforming profit centres

• Backing growth in prioritised platforms

- Completed and integrated the acquisition of McCleskey Mills in 2015

- Completed the acquisition of ADM Cocoa in Q4 2015

- Post 2015, announced the acquisition of the wheat milling and pasta manufacturing

assets of the BUA Group in Nigeria

• Strengthened the balance sheet & shareholder base

- Raised S$915.0 million of equity capital from Mitsubishi Corporation

- Continued to optimise the tenor and cost of debt

• Strategic initiatives to unlock value and release cash

- Sold a 25.0% stake in the Packaged Foods business to Sanyo Foods Co. Ltd and

released cash of US$167.5 million

- Announced the sale-and-leaseback of Palm plantations in Gabon for US$130.0

million

Highlights – 12M 2015

• P&L

- Strong growth in Operational PATMI; up 20.1% to S$346.2 million (12M 2014:

S$288.1 million)

- Reported PATMI recorded a loss of S$64.3 million on account of exceptional items

(S$397.0 million net loss in 12M 2015 vs S$302.9 million net gain in 12M 2014)


SGD Mn

Details of exceptional items 12M 2015 Q4 2015

Sale and Leaseback of Palm Plantations, Gabon 33.6 33.6

Fair Valuation of investment in PureCircle Limited (192.6) (192.6)

NZFSU Dairy restructuring & herd revaluation gain/loss,

Uruguay(76.9) (76.9)

ADM Cocoa acquisition expenses (34.1) (34.1)

Buyback of high cost debt (126.5) (24.6)

Others (0.44) (1.50)

Exceptional items (397.0) (296.1)

• PCL was classified as an “available-for-sale” asset in Q1 2014

• This resulted in a non-cash fair value exceptional gain of S$270.3 million

(difference between the PCL carrying cost of GBP 2.01/share and closing market

price of GBP 6.40/share on March 18, 2014)

• All fair value changes on the PCL investment between March 18, 2014 and

September 30, 2015 were recorded under Other Comprehensive Income (“OCI”)

at each reporting period based on the prevailing share price of PCL

• In view of the significant and prolonged decline in the share price of PCL over this

period and in accordance with SFRS 39, the Company decided to report the non-

cash fair value change of S$192.6 million previously recorded in OCI to the profit

and loss statement in Q4 2015

• However, there is no impact on the Company’s total equity (including reserves)

or cash flow position as a result of this change

• The Company continues to believe in the long term strategy, competitive

position and growth prospects of PCL, notwithstanding the current market price of

PCL shares

• Please refer to page 2 of the SGXNET and pages 5-6 of the MD&A statements for

further details

Change in basis of presentation

of our equity investment in PureCircle Limited (PCL)

• Balance sheet and cash flow

- Net gearing of 1.94 times at December 31, 2015; in line with 2016 objective

of at or below 2.0x

- Generated positive net operating cash flow of S$154.9 million for 12M 2015.

However FCFF was negative S$2.06 billion primarily on account of the

acquisitions of MMI and ADM Cocoa for S$1.86 billion

• Dividend

- The Board has recommended a final ordinary dividend of 3.5 cents per share,

bringing total dividends for the 18-month financial year ended December 31,

2015 to 6.0 cents per share




• Key Takeaways

Agenda

• Decline in overall sales volume mainly due to discontinued / restructured lower margin businesses

• EBITDA growth of 1.5% to S$1,122.8 million driven by strong results from Edible Nuts & SVI, Confectionery

& Beverage Ingredients and CFS, partly offset by underperformance in Food Staples & Packaged Foods and

Industrial Raw Materials segments

• Lower net finance costs, offset by higher depreciation, amortisation and tax as compared to 12M 2014

• Operational PATMI up 20.1% while Reported PATMI registered a loss of S$64.3 million due to exceptional

items

P&L AnalysisSGD Mn

12M 2015 12M 2014 % Change Q4 2015 Q4 2014 % Change

Volume ('000 MT) 12,506.7 14,021.9 (10.8) 3,692.4 3,371.4 9.5

Revenue 19,052.6 19,772.0 (3.6) 5,448.4 4,879.4 11.7

Net loss in fair value

of biological assets(14.4) (19.5) (26.3) 17.1 (12.0) n.m.

EBITDA 1,122.8 1,106.6 1.5 313.1 283.2 10.5

Depreciation &

Amortisation(237.1) (209.8) 13.0 (76.6) (45.2) 69.4

Net Finance costs (448.9) (474.5) (5.4) (121.3) (104.8) 15.7

Taxation (105.9) (94.9) 11.6 (28.0) (26.2) 6.9

Exceptional items (397.0) 302.9 n.m. (296.1) 13.6 n.m.

PAT (66.0) 630.3 n.m. (208.9) 120.6 n.m.

PATMI (64.3) 591.0 n.m. (221.3) 118.7 n.m.

Operational PATMI 346.2 288.1 20.1 88.2 105.1 (16.2)

• Increase in invested capital from the acquisition of MMI & ADM Cocoa which are

expected to deliver strong EBITDA growth going forward

IC excludes

(a) Gabon Fertiliser Project (31-Dec-15: S$209.8 million, 31-Dec-14: S$182.4 million), and

(b) Long Term Investments (31-Dec-15: S$269.2 million, 31-Dec-14: S$334.4 million)

1,062.9

1,199.9

1,106.6 1,122.8

950

1,000

1,050

1,100

1,150

1,200

1,250

2012 2013 2014 2015

EBITDASGD Mn

4,663.4 5,572.0 5,539.5 6,777.5

6,202.2 5,840.2 6,017.2

7,652.8

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Dec'12 Dec'13 Dec'14 Dec'15

Invested Capital

Fixed Capital Working Capital

10,865.6 11,412.2

SGD Mn

11,556.8

14,430.3

EBITDA and Invested Capital

EBITDA 10.7% 10.8% 9.6% 8.6%

/Avg IC

Segmental Analysis

• The almonds business continued its strong performance, aided by favourable market conditions & A$

depreciation. MMI contributed to growth in EBITDA, partially offset by underperformance in the

Argentinean Peanut business. Hazelnuts, cashews and the SVI business in the US performed well.

• Invested capital increased by S$124.3 mn as compared to end-Dec 2014 due to the acquisition of

MMI, investment in increased acreage of almond and pistachio plantations in the US and higher

inventories of almonds & cashews due to increased prices

308.5

346.7 335.5

390.2

0

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015

EBITDASGD Mn

1,657.4 1,759.6 1,769.5 2,065.9

1,391.8 1,850.4 1,587.1

1,415.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


Invested Capital


3,049.2

3,610.0

SGD Mn

3,356.6 3,480.9

Edible Nuts, Spices & Vegetable Ingredients

EBITDA 11.0% 10.4% 9.6% 11.4%

/Avg IC

• EBITDA growth driven by increased contribution from the Coffee platform and the ADM Cocoa

acquisition, partly offset by a lower contribution from the Cocoa supply chain business

• Invested capital in the segment increased by S$2,468.3 mn as compared to end-Dec 2014 primarily

on account of the acquisition of ADM Cocoa

322.6

268.5 278.3

324.9

0

50

100

150

200

250

300

350

2012 2013 2014 2015

EBITDASGD Mn

298.5 491.2 504.2 1,388.2

1,615.4 1,855.4

2,745.4

4,329.7

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Invested Capital


1,913.9 2,346.6

SGD Mn

3,249.6

5,717.9

Confectionery & Beverage Ingredients

EBITDA 18.5% 12.6% 9.9% 7.2%

/Avg IC

• EBITDA growth from the Grains and Rice businesses was offset by reduced volumes from discontinued

operations, continued underperformance of Dairy farming operations in Uruguay, adverse impact of

currency devaluation on our Palm refining operations in Mozambique and the Packaged Foods business

in Africa and a lower contribution from Sugar and Palm trading

• Invested capital increased by S$156.0 mn as compared to end-Dec 2014 due to higher working capital

deployed in this segment

296.0

378.2

295.2

212.1

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015

EBITDASGD Mn

2,020.3 2,524.6 2,366.7 2,316.4

1,670.9 1,088.2

708.7 915.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


Invested Capital


3,691.3 3,612.8

SGD Mn

3,075.4 3,231.4

Food Staples & Packaged Foods

EBITDA 9.4% 10.4% 8.8% 6.7%

/Avg IC

Restructuring of NZFSU, Uruguay

• Objectives:

- Arrest operating underperformance

- Restore profitability

• Incurred one-time costs of S$76.9 million in Q4 2015

• Restructured operations

- Closed a significant number of dairy farms

- Reduction in herd population from ~87,000 to ~56,000

• Initial results are encouraging

- Already resulted in improved milk productivity and lower operating costs from

Q4 2015

• Outlook

- The business is expected to turn profitable from 2017, subject to dairy prices

• EBITDA growth from the Cotton and Wood Products businesses was offset by a reduced contribution

from the SEZ business as compared to 12M 2014

• Invested capital increased marginally by S$45.5 mn compared to end-Dec 2014 due to investments

in upstream Rubber plantations and SEZ in Gabon

143.5

218.6 215.6

185.1

0

50

100

150

200

250

2012 2013 2014 2015

EBITDASGD Mn

686.2 795.8 897.8 1,005.6

1,507.7 1,043.6 974.2 911.9

0

500

1,000

1,500

2,000

2,500


Invested Capital


2,193.9

1,839.4

SGD Mn

1,872.0 1,917.5

Industrial Raw Materials

EBITDA 6.5% 10.8% 11.6% 9.8%

/Avg IC

Value Chain Analysis

• EBITDA growth due to increased contribution from almond and coffee plantations, partly offset by lower

contribution from the Dairy farming operations in Uruguay

• Fixed capital increased on account of higher fixed capital invested in almond, coffee, palm and rubber

plantations and rice farming

Upstream

184.4

208.8

182.5

192.5

165

170

175

180

185

190

195

200

205

210

215

2012 2013 2014 2015

EBITDASGD MnSGD Mn

2,025.8 2,384.9 2,522.5

2,771.5

340.9

322.6 304.0

358.9

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Invested Capital


2,366.7

2,707.5 2,826.5

SGD Mn

3,130.4

EBITDA 8.7% 8.2% 6.6% 6.5%

/Avg IC

• EBITDA decline due to reduced volume from lower margin or discontinued operations and lower

contribution from Sugar and Palm trading and the Cocoa supply chain business

• Invested capital in the segment reduced by S$84.5 million, despite an increase in fixed capital due to lower

average commodity prices

Supply Chain

652.0

700.2

608.8 599.9

540

560

580

600

620

640

660

680

700

720

2012 2013 2014 2015

EBITDASGD Mn

675.3 685.3 539.7 621.6

4,584.8 4,156.8 4,396.7 4,230.3

0

1,000

2,000

3,000

4,000

5,000

6,000


Invested Capital


5,260.1 4,842.1 4,936.4

SGD Mn

4,851.9

EBITDA 12.4% 13.9% 12.5% 12.3%

/Avg IC

• Strong growth in EBITDA from wheat milling (Africa), soluble coffee processing (Vietnam, Spain), sugar

refining (India), SVI and peanut businesses (US) and the cocoa processing business (IVC, ADM Cocoa)

• Invested capital increased by S$2,654.1 million during the period, mainly due to the MMI and ADM Cocoa

acquisitions

Midstream/Downstream

226.5

290.9 315.3

330.4

0

50

100

150

200

250

300

350

2012 2013 2014 2015

EBITDASGD Mn

1,962.3 2,501.8 2,477.3

3,384.4

1,276.5 1,360.8 1,316.6

3,063.6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Invested Capital


3,238.8

3,862.6 3,793.9

SGD Mn

6,448.0

EBITDA 9.0% 8.2% 8.2% 6.5%

/Avg IC

3.4

3.1

FY15Invested Capital

S$6.4B

4.9


S$4.9B

1.3

1.2

0.6


Gestating

PartlyContributing

FullyContributing

S$3.1B

Upstream Mid/DownstreamSupply Chain

Expected EBITDA/IC

at steady state: 15-18%

Expected EBITDA/IC


Expected EBITDA/IC


EBITDA/ Avg IC

7%

-1%

2%

14%

EBITDA/ Avg IC

12%

12%

EBITDA/ Avg IC

7%

1%

10%

Gestation Mix

• Generated positive net operating cash flow of S$154.9 million in 12M 2015

• FCFF for 12M 2015 was negative S$2,062.6 million primarily from the

acquisitions of MMI and ADM Cocoa for S$1,855.4 million

SGD Mn

Cash Flow Summary 12M 2015 12M 2014 Y-o-Y

Operating Cash flow (before Interest & Tax) 1,150.8 1,148.3 2.5

Changes in Working Capital (995.9) (766.2) (229.7)

Net Operating Cash Flow 154.9 382.1 (227.2)

Tax paid (127.8) (65.6) (62.2)

Capex/ Investments (2,089.7) 12.7 (2,102.4)

Free cash flow to firm (FCFF) (2,062.6) 329.2 (2,391.8)

Net interest paid (478.4) (411.5) (66.9)

Free cash flow to equity (FCFE) (2,540.9) (82.3) (2,458.6)

Free Cash Flow

• Net gearing of 1.94 times at December 31, 2015 was higher than 1.85 times

as at December 31, 2014 due to the acquisition of ADM Cocoa

• Gearing level remains in line with our 2016 objective of at or below 2.0

times

*RMI: inventories that are liquid, hedged and/or sold forward

SGD Mn

31-Dec-15 31-Dec-14 Change

Gross debt 12,293.9 9,840.7 2,453.2

Less: Cash 2,143.2 1,845.8 297.4

Net debt 10,150.7 7,994.9 2,155.8

Less: Readily marketable

inventory5,232.9 3,947.9 1,285.0

Less: Secured receivables 1,155.8 1,030.4 125.4

Adjusted net debt 3,762.0 3,016.6 745.4

Equity (before FV adj reserves) 5,226.4 4,320.1 906.3

Net debt / Equity (Basic) 1.94 1.85 0.09

Net debt / Equity (Adjusted) 0.72 0.70 0.02

Gearing remains in line with 2016 objective

2,143

15,600

5,233

1,156

7,068

Long Term6,782

Short Term5,512

Cash and short-termfixed deposits

RMI* SecuredReceivables

Unutilised banklines

Available Liquidity Total Borrowings

12,294

*RMI: inventories that are liquid, hedged and/or sold forward

• Available liquidity sufficient to cover all repayment and Capex obligations

• Borrowing mix currently weighted towards medium and long term

• Continue to optimise debt tenor and cost

S$ Mn as on 31 Dec 2015

Ample liquidity



• Key Takeaways

Agenda

• Strong operating performance despite challenging market

conditions

• Restructured underperforming operations

• Continue to selectively invest in prioritised platforms

• Strong balance sheet and liquidity position to support growth

plans

• Ongoing debt optimisation efforts have helped reduce

overall borrowing costs

• Continue to pursue strategic initiatives to unlock value and

release cash

• Remain on track to achieve our strategic plan objectives of

profitable growth and free cash flow generation

Key Takeaways

Update on strategic plan executionSGD Mn

Summary of Completed Strategic Plan InitiativesNumber of

Initiatives

P & L

impact

Addition

to capital

reserves

Cash

flow

impact

Closed in 2012 1 17.4 68.6

Closed in 2013 4 18.2 14.2 65.5

Sale and Leaseback of Almond Plantation Assets, Australia 65.4 233.2

Divestment of Olam Lansing JV, Canada 6.8

Sale of Timber Assets, Gabon (14.6) 22.8

Repurchase of Bonds and Perpetual Securities 1.0 2.3

Sale of 9.8% stake in OCDL, New Zealand (0.6) 35.1

Australian Grains JV with Mitsubishi Corporation 28.8 79.8

Sale of Timber Subsidiary in Gabon (22.6) 7.5

Sale of Collymongle Cotton Gin, Australia 6.0 9.9

Sale of 20% stake in SEZ to RoG, Gabon 74.8

Sale of Dairy Processing Plant, Cote d'Ivoire 17.7 32.7

Sale of 10%/20% stake in Palm/Rubber to RoG, Gabon 31.9 40.0

Sale and Leaseback of Dairy Farm Land, Uruguay 21.0 70.4

Sale of Australian Wool Business (2.7)

Closure of SVI dehydrates facility, US (4.9)

Closed in 2014 14 94.5 34.2 612.9

Sale of 25% stake in Packaged Foods BU to Sanyo Foods 106.2 219.1

Sale and Leaseback of Palm Plantations, Gabon 20.2 184.4

Closed in 2015 2 20.2 106.2 403.5

Total 21 150.3 154.6 1,150.5

olam international limited · - post 2015, announced the acquisition of the wheat milling and pasta...

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