Olam International Limited

9M 2016 Results Briefing

November
14, 2016Briefing
Q1
2016 Results
May 13, 2016

Olam International Limited

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Presenters

Sunny Verghese
Co-Founder and Group CEO

A. Shekhar
Executive Director and Group COO

N. Muthukumar
President and Group CFO
2

Notice
This presentation should be read in conjunction with Olam International Limiteds
Financial Results statement for the Third Quarter and Nine Months ended
September 30, 2016, and Management Discussion and Analysis lodged on
SGXNET on November 14, 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 Third
Quarter and Nine Months ended September 30, 2016 results report and filings on SGXNET.
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 forwardlooking statements.
4

Agenda

9M 2016 highlights

Financial performance

Key takeaways

9M 2016
highlights

9M 2016 highlights
PATMI grew 61.2% on lower exceptional losses

S$249.1 million vs S$154.6 million in 9M 2015

S$12.3 million exceptional charge in 9M 2016 vs S$101.0 million charge in 9M 2015,

incurred on buyback of high priced bonds to reduce interest costs

Operational PATMI increased 2.3%

S$261.4 million vs S$255.6 million in 9M 2015
Strong growth from Confectionery & Beverage Ingredients and Food Staples &
Packaged Foods segments

Continued to optimise tenure, mix and cost of debt

Reduced net finance costs from S$327.6 million in 9M 2015 to S$291.6 million in
9M 2016, despite higher invested capital

Issued US$500.0 million Perpetual Capital Securities

Completed US$2.0 billion debt refinancing programme post Q3 2016

7

9M 2016 highlights (contd)

Balance sheet and cash flow

Net gearing of 1.87 times as at Sep 30, 2016 (Sep 30, 2015: 1.43x); in line with
target of around 2.0 times

Positive net operating cash flow of S$812.6 million in 9M 2016; however

increased net Capex of S$901.3 million resulted in negative FCFF of S$150.5
million in 9M 2016 (9M 2015: S$5.7 million)

Continued to invest in prioritised platforms

US$150.0 million investment in animal feed, poultry breeding farms and hatchery
in Nigeria

Acquisition of Brooks Peanut Company for US$100.0 million (post working

capital adjustments on closing)

Acquisition of East African coffee specialist Schluter for US$7.5 million

JV with Mitsubishi Corporation in Japan commenced operations on

October 1, 2016
8

Financial
performance

P&L Analysis
SGD Mn

9M 2016

9M 2015
Restated

% Change

Volume ('000 MT)

10,205.5

8,814.3

15.8

Revenue
Net loss in fair value
of biological assets

14,480.7

13,604.2

6.4

EBITDA
Depreciation &
Amortisation

(3.7)

(15.6)

(76.4)

853.9

825.8

(246.8)

(182.3)

35.4

(291.6)

(327.6)

(11.0)

Taxation

(67.2)

(74.4)

(9.6)

Exceptional items

(12.3)

(101.0)

n.m.

PAT

236.0

140.5

68.1

PATMI

249.1

154.6

61.2

Operational PATMI

261.4

255.6

2.3

Net Finance costs

3.4

Volume up 15.8% with growth from all segments

EBITDA grew 3.4% with strong growth from Confectionery & Beverage Ingredients and Food Staples &
Packaged Foods segments partly offset by lower contribution from the other three segments

Lower net finance costs and tax, higher depreciation and amortisation

PATMI up 61.2% on lower exceptional losses; Operational PATMI up 2.3%

10

EBITDA and Invested Capital

EBITDA

SGD Mn

Invested Capital

SGD Mn

16,000

1,400

1,199.9
1,200

1,129.0

14,000

1,085.2

1,000

12,000

825.8

853.9

800
600

12,826.0
11,412.2

11,560.7
7,966.6

7,652.8

10,000
8,000

14,839.1

14,374.6

7,033.6

5,840.2

6,017.2

5,572.0

5,543.5

6,721.7

5,792.4

6,872.5

Dec'13

Dec'14
restated

Dec'15
restated

Sep'15
restated

Sep'16

6,000

400

4,000

200

2,000

2013

2014
restated

2015
restated

YTD Sep YTD Sep

2015
2016
restated

Fixed Capital

Working Capital

Compared to end-Sep 2015:

Increase in Fixed Capital from acquisition of Cocoa Processing, wheat milling assets and Brooks,
as well as continued investments in upstream and midstream assets
Increase in Working Capital from higher volumes post these acquisitions, higher Cocoa inventory
levels as well as higher cocoa and coffee prices
Invested Capital excludes
(a) Gabon Fertiliser Project (30 Sep 2016: S$221.1 million; 31 Dec 2015: S$209.8 million, 30 Sep 2015: S$195.1 million); and
(b) Long-term Investments (30 Sep 2016: S$161.3 million; 31 Dec 2015: S$269.2 million, 30 Sep 2015: S$291.0 million)
11

Segmental
analysis

Edible Nuts, Spices & Vegetable Ingredients

EBITDA

SGD Mn

4,000

450
400

346.7

360.5

393.6

300

3,363.6

3,463.0

3,624.7

1,415.0

1,804.5

1,299.0

3,240.7

3,000

244.1

250

3,610.0

3,500

327.5

350

Invested Capital

SGD Mn

2,500

1,850.4

1,587.1

1,759.6

1,776.5

2,048.0

1,820.2

1,941.7

Dec'13

Dec'14
restated

Dec'15
restated

Sep'15
restated

Sep'16

2,000

200

1,500

150
100

1,000

50

500

2013

2014
restated

2015
restated

YTD Sep YTD Sep

2015
2016
restated

Fixed Capital

Working Capital

EBITDA declined 25.5% mainly due to lower contribution from the almond and tomato
processing businesses; other businesses performed better than 9M 2015
Compared to end-Sep 2015, Invested Capital declined by S$384.0 million due to lower
working capital as a result of lower almond and tomato paste prices, offsetting increase in
Fixed Capital from acquisition of Brooks
13

Confectionery & Beverage Ingredients

EBITDA

SGD Mn

300

268.5

275.6

SGD Mn

Invested Capital

7,000

284.0

266.1

250

185.4

200

5,000
4,000

3,246.9

150

3,000
100
50

1,000

2014
restated

2015
YTD Sep YTD Sep
restated
2015
2016
restated

3,670.3
4,329.7

4,667.8

2,346.6

2,000

2013

6,056.8

5,680.9

6,000

1,855.4

3,149.6

2,745.4

491.2

501.5

Dec'13

Dec'14
restated
Fixed Capital

1,351.2

520.7

Dec'15
restated

Sep'15
restated

1,389.0

Sep'16

Working Capital

EBITDA rose 43.5% with stronger contribution from both Cocoa and Coffee
Cocoas results were due to contribution from the acquired Cocoa Processing assets, which performed
better than expected, although some of it was offset by lower contribution from supply chain business;
Coffee performed well due to better results from both the green and soluble coffee businesses
Invested Capital increased by S$2,386.5 million as compared to end-Sep 2015 primarily due to
acquisition of Cocoa Processing assets, continued investments in coffee plantations and expansion of
soluble coffee in Vietnam, higher Cocoa inventory and higher prices of cocoa and coffee
14

Food Staples & Packaged Foods

EBITDA

SGD Mn

4,000
400

378.2

350

3,612.8

3,000

250

225.6

212.1

200

3,344.8

708.7

915.0

897.9

2,524.6

2,366.4

2,315.6

2,446.9

2,621.0

Dec'13

Dec'14
restated

Dec'15
restated

Sep'15
restated

Sep'16

3,075.1
1,088.2

2,500

1,500

150
100

1,000

50

500

2014
restated

2015
restated

YTD Sep
2015
restated

857.4

2,000

163.9

2013

3,478.4

3,230.6

3,500

295.2

300

Invested Capital

SGD Mn

YTD Sep
2016

Fixed Capital

Working Capital

EBITDA grew 37.6% with most platforms improving over 9M 2015; Packaged Foods
underperformed due to continued currency volatility and disruption of its dairy and juices factory
after a plant fire in Nigeria
Invested Capital increased by S$133.6 million as compared to end-Sep 2015. Fixed Capital was
up due to acquisition of wheat milling assets in Nigeria, continued investments in Palm
plantations in Gabon and expansion of wheat milling in Ghana; Working Capital increased with
higher Grains volumes post the acquisition in Nigeria
15

Industrial Raw Materials

EBITDA

SGD Mn

Invested Capital

SGD Mn

2,500
250

218.6

2,121.6

215.6
2,000

185.1

200

129.6

150

1,917.5

1,043.6

974.2

911.9

795.8

897.8

1,005.6

1,003.3

919.4

Dec'13

Dec'14
restated

Dec'15
restated

Sep'15
restated

Sep'16

1,500

117.0

1,957.9

1,872.0

1,839.4

1,118.3

1,038.5

1,000

100
50

500

2013

2014
2015
YTD Sep YTD Sep
restated restated
2015
2016
restated

Fixed Capital

Working Capital

EBITDA declined 9.7% as a result of lower margins from Cotton offsetting better
performance from SEZ in Gabon
Invested Capital was down by S$163.7 million as compared to end-Sep 2015 due to
reduction in Working Capital in Cotton and Fixed Capital in Gabon SEZ, which offset
increase in Fixed Capital for Rubber plantations in Gabon
16

Balance sheet and

cash flow

Balance sheet
Optimising tenure and borrowing mix
SGD Mn

30-Sep-16

31-Dec-15
Restated

Change
vs Dec
15

30-Sep-15
Restated

Change
vs Sep
15

Uses of Capital
Fixed Capital

6,660.8

6,674.7

(13.9)

6,276.4

384.4

Working Capital

8,334.2

8,317.2

17.0

7,240.7

1,093.5

Cash

2,223.1

2,143.2

79.9

1,276.0

947.1

805.6

478.4

327.2

18,023.7

17,613.5

410.2

14,630.2

3,393.5

5,513.8

5,187.0

326.8

5,511.2

2.6

223.9

240.6

Short term debt

6,330.3

5,512.2

818.1

2,398.0

Long term debt

6,230.5

6,781.7

(551.2)

6,777.7

Others
Total

(162.9)

968.5

Sources of Capital
Equity & Reserves
Non-controlling interests

Fair value reserve

Total

(274.8)
18,023.7

(107.9)
17,613.5

(16.7)

(166.9)
410.2

232.2

(288.9)
14,630.2

(8.3)
3,932.3
(547.2)
14.1
3,393.5

Issued US$500.0 million Perpetual Capital Securities bearing a distribution rate of 5.35%

Tap of US$150.0 million under 4.50% fixed rate notes due 2021 at 101.651% of principal

Completed US$2.0 billion debt refinancing programme in Oct 2016, consisting of 364-day RCF of
US$400.0 million, 2-year RCF of US$800.0 million and 3-year RCF of US$800.0 million
18

Cash flow analysis

SGD Mn

Cash Flow Summary

9M 2016

9M 2015
Restated

9M YOY

2015

2013

1,148.3

1,144.9

2012

Operating Cash flow (before Interest & Tax)

865.1

849.7

15.4

Changes in Working Capital

(52.5)

(527.4)

474.9

(995.9)

(766.2)

(98.2)

(55.0)

(315.7)

(362.2)

46.5

(478.4)

(411.5)

(485.0)

(434.6)

(61.8)

(53.1)

(8.7)

(127.8)

(65.6)

(64.3)

(44.1)

66.1

241.2

(175.1)

249.8

468.4

95.6

90.4

501.2

148.2

353.0

(201.5)

373.4

593.1

525.9

Capex/ Investments

(967.4)

(504.7)

(462.7)

(2,339.4)

(455.7)

(913.2) (1,553.3)

Free cash flow to equity (FCFE)

(466.2)

(356.5)

(109.7)

(2,540.9)

(82.3)

(320.1) (1,027.4)

Net interest paid

Tax paid
Cash from divestments
Free cash flow before capex/ investments

1,150.8

2014

969.3

Generated improved Free Cash Flow before Capex and investments in 9M 2016
FCFE remained negative as Capex and investments increased

19

Gearing remains in line with 2016 objective

SGD Mn

30-Sep-16
Gross debt
Less: Cash

12,560.8

31-Dec-15 Change 30-Sep-15 Change

Restated vs Dec 15 Restated vs Sep 15
12,293.9
266.9
9,175.7 3,385.1

2,223.1

2,143.2

79.9

1,276.0

947.1

10,337.7

10,150.7

187.0

7,899.7

2,438.0

4,680.7

5,232.9

(552.2)

3,854.1

826.6

1,322.4

1,155.8

166.6

1,525.3

(202.9)

Adjusted net debt

4,334.6

3,762.0

572.6

2,520.3

1,814.3

Equity (before FV adj reserves)

5,513.8

5,187.0

326.8

5,511.2

2.6

Net debt / Equity (Basic)

1.87

1.96

(0.09)

1.43

0.44

Net debt / Equity (Adjusted)

0.79

0.73

0.06

0.46

0.33

Net debt
Less: Readily marketable
inventory
Less: Secured receivables

Net debt increased by S$187.0 million compared to end-Dec 2015

Net gearing at 1.87 times, in line with our target of around 2.0 times

20

Liquidity position
S$ million as at Sep 30, 2016

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

21

Key
takeaways

Key takeaways
Cocoa Processing business on track to meet targets for 2016
Improved earnings contribution from Food Staples & Packaged
Foods compared to a year ago
Debt optimisation initiatives have resulted in lower finance
costs
Strong balance sheet and liquidity position
Executing on Strategic Plan 2016-2021 to invest in prioritised
platforms

23

Q3 2016 Results Briefing

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