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Q1 2016 Results Briefing
May 13, 2016
Olam International Limited
Olam International Limited
H1 2017 Results BriefingAugust 14, 2017
N. Muthukumar
President and Group CFO
2
Presenters
Sunny Verghese
Co-Founder and Group CEO
A. Shekhar
Executive Director and Group COO
This presentation should be read in conjunction with Olam International Limited’s
Financial Statements for the Second Quarter (“Q2 2017”) and First Half ended
June 30, 2017 (“H1 2017”) and Management Discussion and Analysis lodged on
SGXNET on August 14, 2017.
Notice
3
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 news
release and in the Management Discussion and Analysis section of the Company’s Second
Quarter and First Half ended June 30, 2017 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 forward-looking statements.
Cautionary note on
forward-looking statements
4
• Welcome address by Olam Co-Founder & Group CEO
• H1 2017 highlights
• Financial and operating performance
• Segmental analysis
• Balance sheet and cash flow
• Key takeaways
Agenda
5
Welcome
address
H1 2017
highlights
• PATMI grew 27.5% to S$291.5 million
• Strong underlying growth with Operational PATMI up
23.6% despite higher depreciation and amortisation,
and finance costs
• EBITDA up 19.1% to S$772.3 million
• Higher positive Free Cash Flow to Firm (FCFF) at
S$239.4 million (H1 2016: S$191.2 million)
• Board declares interim dividend of 3.5 cents per share
H1 2017 highlights
8
Financial and
operating
performance
• Volume growth from all segments, led by trading volumes in Grains and Edible Oils
• EBITDA growth from Edible Nuts, Spices & Vegetable Ingredients, Food Staples & Packaged Foods,
CFS and Industrial Raw Materials, Ag Logistics & Infrastructure segments, offsetting lower contribution
from Confectionery & Beverage Ingredients
• Higher depreciation and amortisation charges due to enlarged fixed asset base
• Increased net finance costs due to 1) larger invested capital base; 2) increase in benchmark interest
rates; 3) increase in higher-cost local borrowing in select geographies
P&L Analysis
10
SGD Mn
H1 2017 H1 2016 % Change
Volume ('000 MT) 8,939.8 6,447.5 38.7
Revenue 12,324.7 9,742.8 26.5
Net gain/(loss) in fair value
of biological assets(1.6) (6.5) (75.2)
EBITDA 772.3 648.4 19.1
Depreciation &
Amortisation(183.7) (164.3) 11.8
Net Finance costs (258.0) (191.1) 35.0
Taxation (54.1) (59.8) (9.4)
Exceptional items (6.3) (12.4) n.m.
PAT 270.1 220.9 22.3
PATMI 291.5 228.6 27.5
Operational PATMI 297.8 241.0 23.6
• Compared to end-Jun 2016:
• Increase in Fixed Capital from acquisition of peanut shelling assets, as well as continued committed
investments in upstream and midstream assets
• Increase in Working Capital from higher volumes and prices, including cashew, peanuts, coffee and
cotton
EBITDA and Invested Capital
11
Invested Capital excludes :
(a) Gabon Fertiliser Project (30-Jun-17: S$237.1 million, 31-Dec-16: S$ 224.8 million, 30-Jun-16: S$ 212.1 million), and
(b) Long Term Investment (30-Jun-17: S$ 220.4 million, 31-Dec-16: S$ 148.4 million, 30-Jun-16: S$ 172.5 million)
1,129.0 1,085.2
1,202.8
648.4
772.3
0
200
400
600
800
1,000
1,200
1,400
2014restated
2015restated
2016 YTD Jun2016
YTD Jun2017
EBITDASGD Mn
5,543.5 6,721.8 7,796.2 6,427.8
7,823.1
6,017.2
7,652.8
8,852.8
7,119.8
9,096.7
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Dec'14restated
Dec'15restated
Dec'16 Jun'16 Jun'17
Invested Capital
Fixed Capital Working Capital
14,374.7
11,560.7
SGD Mn
13,547.6
16,919.8 16,649.0
Segmental
analysis
• EBITDA up 42.4% largely from cashew, peanuts, almonds and sesame; tomato processing
underperformed as guided earlier in Q1 2017
• Compared to end-Jun 2016, Invested Capital increased by S$403.2 million; higher Working
Capital from higher cashew volumes and prices; Fixed Capital up mainly due to acquisition
of peanut shelling assets
Edible Nuts, Spices & Vegetable Ingredients
13
360.5 393.5
331.8
179.2
255.1
0
50
100
150
200
250
300
350
400
450
2014restated
2015restated
2016 YTD Jun2016
YTD Jun2017
EBITDASGD Mn
1,776.5 2,048.0 2,221.7 1,825.9 1,969.9
1,587.1 1,415.0
1,421.0
1,195.9 1,455.1
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Dec'14restated
Dec'15restated
Dec'16 Jun'16 Jun'17
Invested Capital
Fixed Capital Working Capital
3,642.7
SGD Mn
3,463.0 3,425.0 3,021.8
3,363.6
• EBITDA down 5.5% on lower contribution from Cocoa due to margin pressures from
sharply lower prices; Coffee delivered higher EBITDA
• Invested Capital increased by S$870.1 million as compared with end-Jun 2016, driven by
higher Working Capital from higher Coffee volume and prices; Fixed Capital increased with
expansion of soluble coffee capacity in Vietnam and Spain, and continued investments in
coffee plantations
Confectionery & Beverage Ingredients
14
275.6 284.0
407.2
197.5 186.7
0
50
100
150
200
250
300
350
400
450
2014restated
2015restated
2016 YTD Jun2016
YTD Jun2017
EBITDASGD Mn
501.5 1,351.2 1,540.8 1,364.3 1,514.7
2,745.4
4,329.7 4,568.7
4,200.3 4,920.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Dec'14restated
Dec'15restated
Dec'16 Jun'16 Jun'17
Invested Capital
Fixed Capital Working Capital
3,246.9
SGD Mn
5,680.9
6,434.7
5,564.6 6,109.5
• EBITDA up 31.5% with most platforms performing better than H1 2016
• Grains platform led the growth in both origination, trading and milling, followed by Dairy and
Rice. Edible Oils also performed better than H1 2016
• Invested Capital increased by S$1.7 billion as compared with end-Jun 2016; higher sales
volumes drove up Working Capital; Fixed Capital up mainly due to construction of animal feed
mills in Nigeria, wheat milling capacity expansion in Ghana and Nigeria, and continued
investments in upstream palm in Gabon
Food Staples & Packaged Foods
15
295.2
212.1
330.2
165.6
217.7
0
50
100
150
200
250
300
350
2014restated
2015restated
2016 YTD Jun2016
YTD Jun2017
EBITDASGD Mn
2,366.4 2,315.6 3,023.8
2,354.0 3,304.3
708.7 915.0
1,498.3
830.4
1,535.0
0
1,000
2,000
3,000
4,000
5,000
6,000
Dec'14restated
Dec'15restated
Dec'16 Jun'16 Jun'17
Invested Capital
Fixed Capital Working Capital
3,075.1
SGD Mn
3,230.6
4,839.3
3,184.4
4,522.1
• EBITDA increased 1.2% on the back of higher contribution from GSEZ; Cotton was steady
while Wood Products continued to face demand headwinds in India
• Invested Capital up by S$417.0 million as compared with end-Jun 2016; Working Capital
rose with higher volumes and prices of Cotton; Fixed Capital up with continued
investments in upstream Rubber plantations in Gabon
Industrial Raw Materials
Ag Logistics & Infrastructure
16
215.6
185.1
135.2
105.2 106.5
0
50
100
150
200
250
2014restated
2015restated
2016 YTD Jun2016
YTD Jun2017
EBITDASGD Mn
897.8 1,005.6 1,008.2 882.2 1,033.0
974.2 911.9 1,212.7
830.5
1,096.7
0
500
1,000
1,500
2,000
2,500
Dec'14restated
Dec'15restated
Dec'16 Jun'16 Jun'17
Invested Capital
Fixed Capital Working Capital
1,917.5 1,872.0
SGD Mn
1,712.7
2,129.7 2,220.9
Balance sheet
and cash flow
SGD Mn
30-Jun-17 30-Jun-16Change
vs Jun 16
30-Jun-2016
(assuming
PPA
exercise
completed)
Change
vs Jun 16
(assuming
PPA
exercise
completed)
Uses of Capital
Fixed Capital 8,280.6 6,245.4 2,035.2 6,911.2 1,369.4
Working Capital 8,851.8 7,693.6 1,158.2 7,672.1 1,179.7
Cash 2,038.0 2,152.0 (114.0) 2,152.0 (114.0)
Others 226.9 738.4 (511.5) 94.1 132.8
Total 19,397.3 16,829.4 2,567.9 16,829.4 2,567.9
Sources of Capital
Equity & Reserves 5,856.5 4,941.0 915.5 4,941.0 915.5
Non-controlling interests 211.2 224.7 (13.5) 224.7 (13.5)
Short term debt 5,686.5 4,542.6 1,143.9 4,542.6 1,143.9
Long term debt 7,883.3 7,399.6 483.7 7,399.6 483.7
Fair value reserve (240.2) (278.5) 38.3 (278.5) 38.3
Total 19,397.3 16,829.4 2,567.9 16,829.4 2,567.9
Balance sheet
18
• Compared with end-Jun 2016 on a Purchase Price Allocation (PPA) adjusted basis for
acquisitions made during 2015 and 2016, the net increase in Fixed Capital would be S$1.4 billion
Balance sheetOptimising tenure and borrowing mix
19
Completed several debt refinancing programmes in H1 2017:
• First revolving revolving credit facility in Europe aggregating US$1.0
billion which comprises of three tranches – a 1-year (US$400.0 million),
a 2-year (US$300.0 million) and a 3-year (US$300.0 million) facility
• S$300.0 million Perpetual Securities bearing 5.5% for first 5 years and
tapped additional S$50.0 million at 100.25% of principal at the same
rate
• 3-year term loan facility of ¥25.0 billion (approximately US$222.0
million) in the Japanese loan market
• ¥6.0 billion (approx. US$50.0 million) 5-year senior unsecured notes
due 2022 at a fixed coupon of 0.9725%
• ¥5.7 billion (approx. US$50.0 million) senior notes due 2022 at 98.0%
of principal and fixed yen coupon of 0.47%
Cash flow analysis
20
• Reduced net Capex and investments by S$118.7 million in H1 2017; Capex
were mainly due to committed and ongoing investments
• Higher positive Free Cash Flow to Firm in H1 2017 by S$48.2 million
SGD Mn
Cash Flow Summary H1 2017 H1 2016 YoY
Operating Cash flow (before Interest & Tax) 756.3 661.3 95.0
Changes in Working Capital (35.1) 130.0 (165.1)
Net Operating Cash Flow 721.2 791.3 (70.1)
Tax paid (45.1) (44.7) (0.4)
Capex/ Investments (436.7) (555.4) 118.7
Free cash flow to firm (FCFF) 239.4 191.2 48.2
Net interest paid (252.2) (196.2) (56.0)
Free cash flow to equity (FCFE) (12.8) (5.0) (7.8)
Gearing
21
• Net debt flat compared with end-Dec 2016
• Net gearing at 1.97 times, similar to gearing levels as at end-Dec 2016 and
end-Jun 2016
SGD Mn
30-Jun-17 31-Dec-16Changevs Dec 16
30-Jun-16Changevs Jun 16
Gross debt 13,569.8 13,670.5 (100.7) 11,942.2 1,627.6
Less: Cash 2,038.0 2,144.0 (106.0) 2,152.0 (114.0)
Net debt 11,531.8 11,526.5 5.3 9,790.2 1,741.6
Less: Readily marketable
inventory5,451.7 5,909.2 (457.5) 4,815.5 636.2
Less: Secured receivables 1,309.7 1,381.4 (71.7) 1,134.7 175.0
Adjusted net debt 4,770.4 4,235.9 534.5 3,840.0 930.4
Equity (before FV adj reserves) 5,856.5 5,797.1 59.4 4,941.0 915.5
Net debt / Equity (Basic) 1.97 1.99 (0.02) 1.98 (0.01)
Net debt / Equity (Adjusted) 0.81 0.73 0.08 0.78 0.04
*RMI: inventories that are liquid, hedged and/or sold forward
• Available liquidity sufficient to cover all repayment and Capex obligations
S$ million as at Jun 30, 2017
Liquidity position
22
2,038
16,194
5,452
1,310
7,394
Long Term7,883
Short Term5,687
Cash and short-termfixed deposits
RMI* Secured Receivables Unutilised bank lines Available Liquidity Total Borrowings
13,570
Key
takeaways
• Strong EBITDA and Operational PATMI growth in H1 2017
across most segments
• Continue to focus on turning around underperforming
businesses, ensuring gestating businesses reach full
potential and delivering positive free cash flow
• Execute on our strategic plan and pursue growth in
prioritised platforms
Key takeaways
24
