Olam International Limited

Q1 2016 Results Briefing

Q1 2016 Results Briefing
May 13, 2016
May 13, 2016

Olam International Limited

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Presenters

Sunny Verghese, Co-founder & Group CEO

A. Shekhar, Executive Director & Group COO

N. Muthukumar, President & Group CFO

2

Notice

This presentation should be read in conjunction with Olam

International Limiteds Quarter ended March 31, 2016 Financial

Results statement and Managements Discussion and Analysis
lodged on SGXNET on May 13, 2016.

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 managements 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 Olams future financial results are
detailed in our listing prospectus, listed in this presentation, or discussed in todays press
release and in the management discussion and analysis section of the Companys quarter
ended March 31, 2016 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.

Agenda

Highlights Q1 2016
Financial Performance

Key Takeaways

Highlights Q1 2016

PATMI grew 212.8% to S$113.6 million

-

S$12.5 million exceptional charge in Q1 2016 vs S$97.2 million charge

in Q1 2015, incurred on buyback of high priced bonds to reduce
interest costs

Operational PATMI marginally lower at S$126.1 million vs

S$133.5 million in Q1 2015

Prioritising growth in select platforms

-

Full consolidation of the results of ADM Cocoa (Cocoa Processing

assets) and MMI in Q1 2016

Completed the acquisition of BUA Groups wheat milling and pasta

manufacturing assets in Nigeria in Jan 2016

Announced US$150.0 million investment in animal feed, poultry

breeding farms and hatchery in Nigeria in Apr 2016
6

Highlights Q1 2016 (contd)

Continued to optimise tenure, mix and cost of debt

-

Reduced net finance costs from S$123.2 million in Q1 2015 to

S$99.4 million in Q1 2016, despite higher invested capital

Completed repurchase and cancellation of entire US$500.0 million

of outstanding 6.0% Convertible Bonds due in late 2016

Announced the issuance of 5-year US$300.0 million notes at 4.5%

coupon, US$650.0 million Revolving Credit Facility and 5-year
US$175.0 million loan from IFC

Balance sheet and cash flow

-

Net gearing of 1.97 times as at March 31, 2016; in line with 2016
objective of at or below 2.0x

Generated positive net operating cash flow of S$309.9 million,

whilst FCFF was negative at S$156.0 million, as a result of the
acquisition of wheat milling assets in Nigeria for S$311.7 million
7

Highlights Q1 2016 (contd)

Progressing on strategic partnership with Mitsubishi

Corporation
-

Formed a 30:70 JV, MC Agri Alliance Ltd (MCAA), with Mitsubishi

Corporation (MC) in Japan

JV will import and distribute coffee, cocoa, sesame, edible nuts,

spices, vegetable ingredients and tomato products in the Japanese
market

MCAA to commence operations by Oct 1, 2016

Changes to accounting standards

-

Amendments to SFRS 16 (Property, Plant and Equipment)

and SFRS 41 (Agriculture)

Early adoption of SFRS 109 (Financial Instruments)

Agenda

Highlights 12M 2015

Financial Performance

Key Takeaways

P&L Analysis
SGD Mn

Q1 2016

Q1 2015
Restated

% Change

Volume ('000 MT)

2,965.5

2,682.8

10.5

Revenue
Net loss in fair value
of biological assets

4,761.4

4,321.1

10.2

EBITDA
Depreciation &
Amortisation

(5.3)
332.8

(1.9)
342.9

180.6
(2.9)

(80.5)

(58.3)

38.1

Net Finance costs

(99.4)

(123.2)

(19.3)

Taxation

(31.0)

(31.5)

(1.5)

Exceptional items

(12.5)

(97.2)

n.m.

PAT

109.4

32.7

235.0

PATMI

113.6

36.3

212.8

Operational PATMI

126.1

133.5

(5.5)

Volume up 10.5% with growth from all segments

EBITDA declined 2.9% with growth from Confectionery & Beverage Ingredients, Food Staples &
Packaged Foods and Industrial Raw Materials segments offset by lower contribution from Edible Nuts,
Spices Vegetable Ingredients and Commodity Financial Services

Lower net finance costs and higher depreciation and amortisation

PATMI up 212.8% on lower exceptional losses; Operational PATMI down 5.5%

10

EBITDA and Invested Capital

Invested Capital

SGD Mn

EBITDA

SGD Mn

16,000

14,374.5

14,241.6

14,000

1,400

1,199.9
1,200

1,129.0

12,000

1,085.2

1,000

10,000

800

8,000

600

6,000
342.9

400

332.8

11,814.4

11,560.7
7,652.8

7,439.6
6,357.7

5,840.2

6,017.2

5,572.0

5,543.5

6,721.7

Dec'13

Dec'14
restated

Dec'15
restated

4,000
2,000

200

11,412.2

5,456.7

6,802.0

2013

2014
restated

2015
restated

Q1 2015
restated

Q1 2016

Fixed Capital

Mar'15
restated

Mar'16

Working Capital

Fixed capital in Q1 2016 increased due to acquisition of the Cocoa Processing and wheat
milling assets
Working capital increased in Q1 2016 primarily due to higher inventory levels post
acquisition of above assets as well as higher prices in some platforms
IC excludes
(a) Gabon Fertiliser Project (31-Mar-16: S$211.6 million; 31-Dec-15: S$209.8 million, 31-Mar-15: S$173.7 million); and
(b) Long Term Investments (31-Mar-16: S$236.4 million; 31-Dec-15: S$269.2 million, 31-Mar-15: S$333.9 million)
11

Segmental Analysis

Edible Nuts, Spices & Vegetable Ingredients

4,000
450
400
350

360.5

2,500

250

2,000

200

1,500

150

109.9

80.2

100

1,000

50

500

2014
restated

3,363.6

3,463.0

3,441.5

3,237.3

3,000

300

2013

3,610.0

3,500

393.6
346.7

Invested Capital

SGD Mn

EBITDA

SGD Mn

2015
restated

Q1 2015
restated

Q1 2016

1,850.4

1,587.1

1,759.6

1,776.5

Dec'13

Dec'14
restated
Fixed Capital

1,415.0

1,687.1

1,201.0

2,048.0

1,754.4

2,036.3

Dec'15
restated

Mar'15
restated

Mar'16

Working Capital

While the cashew, sesame, spices and vegetable ingredients businesses performed well, the almond
business was affected by lower almond prices and the tomato processing business experienced a
decline in market prices and margins, causing the overall segment EBITDA to decline by 27.0%
Invested capital declined by S$204.3 million as compared to end-Mar 2015 as increased fixed capital
investments in almond, pistachio and walnut plantations in the US was offset by a reduction in working
capital due to lower almond and hazelnut prices
13

Confectionery & Beverage Ingredients

Invested Capital

SGD Mn

EBITDA

SGD Mn

300

268.5

275.6

7,000

284.0

250

5,000

200

4,000

150

3,000
105.2
83.4

100

2013

2014
2015
Q1 2015 Q1 2016
restated restated restated

3,246.9

3,220.4

4,329.7

4,478.0

2,346.6

2,000
1,000

50

5,785.4

5,717.9

6,000

1,855.4

2,745.4

491.2

501.5

Dec'13

Dec'14
restated
Fixed Capital

2,737.6
1,351.2

482.8

Dec'15
restated

Mar'15
restated

1,307.4

Mar'16

Working Capital

EBITDA grew 26.2% driven by contribution from the acquisition of Cocoa Processing assets and
improved performance from Coffee, although some of the gains was offset by a lower contribution from
the Cocoa supply chain business which was impacted by volatile prices/margins during the quarter
Invested capital in the segment increased by S$2,565.0 million as compared to end-Mar 2015 mainly due
to the acquisition of Cocoa Processing assets, higher inventory levels and prices of Cocoa
14

Food Staples & Packaged Foods

Invested Capital

SGD Mn

EBITDA

SGD Mn

400

4,000
3,500

378.2

3,000

350

295.2

300
250

3,612.8

3,313.9

3,230.6

3,136.4

708.7

915.0

830.7

2,524.6

2,366.4

2,315.6

2,305.7

2,496.9

Dec'13

Dec'14
restated

Dec'15
restated

Mar'15
restated

Mar'16

3,075.1
1,088.2

2,500

817.0

2,000

212.1

200

1,500

150

80.0

100

85.7

1,000
500

50

2013

2014
2015
Q1 2015 Q1 2016
restated restated restated

Fixed Capital

Working Capital

EBITDA grew 7.1% with growth from most platforms. Dairy, Rice and Palm supply chain and wheat milling
businesses grew their EBITDA, while Packaged Foods and Sugar were flat. Rusmolco in Russia did well,
while dairy farming in Uruguay saw improved operational performance and lower costs, partly offset by lower milk
prices
Invested capital increased by S$177.5 million as compared to end-Mar 2015 largely due to the acquisition of
wheat milling assets in Nigeria
15

Industrial Raw Materials

EBITDA

SGD Mn

250

218.6

Invested Capital

SGD Mn

2,500

215.6

2,000

1,998.7

1,872.0

1,917.5

1,043.6

974.2

911.9

1,086.3

884.5

795.8

897.8

1,005.6

912.4

960.4

Dec'13

Dec'14
restated

Dec'15
restated

Mar'15
restated

Mar'16

1,839.4

1,844.9

185.1

200

1,500
150

1,000

100

58.5

65.2

50

500

2013

2014
2015
Q1 2015 Q1 2016
restated restated restated

Fixed Capital

Working Capital

EBITDA grew 11.5% with Cotton and Wood Products businesses recording growth

Invested capital came down by S$153.8 million compared to end-Mar 2015 due to reduced prices
in cotton, which was partly offset by continued investments in upstream Rubber plantations in Gabon
16

Balance Sheet and Cash Flow

Balance sheet
Optimising tenure and borrowing mix
SGD Mn

31-Mar-16

31-Dec-15
Restated

Change
vs Dec 15

31-Mar-15
Restated

Change
vs Mar 15

Uses of Capital
Fixed Capital

6,680.0

6,674.7

5.3

5,825.6

854.4

Working Capital

8,397.7

8,317.2

80.5

6,321.5

2,076.2

Cash

1,600.5

2,143.2

1,272.6

327.9

580.8

478.4

256.0

324.8

17,259.0

17,613.5

13,675.7

3,583.3

5,275.5

5,187.0

4,375.1

900.4

231.2

240.6

Short term debt

5,564.6

5,512.2

Long term debt

6,412.7

6,781.7

Others
Total

(542.7)
102.4
(354.5)

Sources of Capital
Equity & Reserves
Non-controlling interests

Fair value reserve

Total

(225.0)
17,259.0

(107.9)
17,613.5

88.5
(9.4)
52.4
(369.0)

232.6
2,725.0
6,552.8

(117.1)
(354.5)

(209.8)
13,675.7

(1.4)
2,839.6
(140.1)
(15.2)
3,583.3

Reduction in cost of borrowing via buyback of higher cost bonds

Issuance of new medium term notes at lower coupon

Tapping on other sources of borrowing, eg. IFC and other DFIs, to diversify debt
portfolio
18

Free cash flow

SGD Mn

Cash Flow Summary

Q1 2016

Q1 2015

Y-o-Y

2015

2014

2013

2012

Operating Cash flow (before Interest & Tax)

345.4

372.1

(26.7)

1,150.8

1,148.3

1,144.9

969.3

Changes in Working Capital

(35.5)

(162.7)

127.2

(995.9)

(766.2)

(98.2)

(55.0)

(127.8)

(177.6)

49.8

(478.4)

(411.5)

(485.0)

(434.6)

(21.6)

(10.2)

(11.4)

(127.8)

(65.6)

(64.3)

(44.1)

6.8

222.5

(215.7)

249.8

468.4

95.6

90.4

Free cash flow before capex/ investments

167.3

244.1

(76.8)

(201.5)

373.4

593.1

525.9

Capex/ Investments

(451.1)

(301.5)

(149.6) (2,339.5)

(455.7)

(913.2) (1,553.3)

Free cash flow to equity (FCFE)

(283.8)

(57.4)

(226.4) (2,540.9)

(82.3)

(320.1) (1,027.4)

Net interest paid

Tax paid
Cash from divestments

Generated positive cash flow before investments of S$167.3 million in Q1 2016

19

Gearing remains in line with 2016 objective

SGD Mn

31-Mar-16
Gross debt
Less: Cash

11,977.4

31-Dec-15 Change
Restated vs Dec 15
12,293.9
(316.5)
(542.7)

1,272.6

327.9

226.2

8,005.2

2,371.7

5,232.9

(135.1)

3,673.1

1,424.7

1,102.4

1,155.8

(53.4)

1,062.2

40.2

Adjusted net debt

4,176.7

3,762.0

414.7

3,269.9

906.8

Equity (before FV adj reserves)

5,275.5

5,187.0

88.5

4,375.1

900.4

Net debt / Equity (Basic)

1.97

1.96

0.01

1.83

0.14

Net debt / Equity (Adjusted)

0.79

0.73

0.06

0.75

0.04

Net debt
Less: Readily marketable
inventory
Less: Secured receivables

1,600.5

2,143.2

10,376.9

10,150.7

5,097.8

31-Mar-15 Change
Restated vs Mar 15
9,277.8 2,699.6

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

Net gearing of 1.97 times at Mar 31, 2016 was higher than 1.83 times as at Mar 31,
2015 due to the acquisition of Cocoa Processing and wheat milling assets

Gearing level remains in line with our 2016 objective of at or below 2.0 times
20

Liquidity position
S$ Mn as at Mar 31, 2016

11,977
5,925
Short Term
5,565

1,102

13,726

5,098
Long Term
6,413

1,601
Cash and short-term
fixed deposits

RMI*

Secured
Receivables

Unutilised bank
lines

Available Liquidity

Total Borrowings

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

Available liquidity sufficient to cover all repayment and Capex obligations

Continue to optimise debt tenure and cost and rebalance borrowing mix of long
and short term debt to match fixed and working capital needs
21

Agenda

Highlights 12M 2015

Financial Performance

Key Takeaways

22

Key takeaways
Consistent operating performance despite challenging market
conditions on account of our diversified portfolio
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
23

Q1 2016 Results Presentation

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