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Annual Report 2020 at a Glance

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Annual Report 2020 at a Glance ANNUAL REPORT 2020 AT A GLANCE Indofood Agri Resources Ltd. (IndoAgri) is a vertically integrated agribusiness group with activities spanning the entire supply chain from research and development (R&D), seed breeding, oil palm cultivation and milling; as well as the production and marketing of cooking oil, shortening and margarine. Headquartered in Singapore, we are among the largest palm oil producers in Indonesia. Our branded cooking oil, shortening and margarine products together garner a leading share in the domestic market. As a diversified agribusiness group, IndoAgri also engages in the cultivation of sugar cane, rubber and other crops. OUR VISION To become a leading integrated agribusiness, and one of the world-class agricultural research and seed breeding companies. OUR VALUES With discipline as the basis of our way of life; we conduct our business with integrity; we treat our stakeholders with respect; and together we unite to strive for excellence and continuous innovation. OUR MISSION To be a low-cost producer, through high yields and cost- effective and efficient operations. To continuously improve our people, processes and technology. To exceed our customers’ expectations, whilst ensuring the highest standards of quality. To recognise our role as responsible and engaged corporate citizens in all our business operations, including sustainable environmental and social practices. To continuously increase stakeholders’ value. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 1 CONTENTS GROUP OVERVIEW Our Milestones 2 Geographical Presence 4 Corporate Structure 6 Chairman’s Statement 7 CEO’s Statement 8 OPERATION AND FINANCIAL REVIEW Group Performance Review 12 Plantation Review 16 Edible Oils & Fats Review 22 SUSTAINABILITY AND GOVERNANCE Sustainability at IndoAgri 26 Board of Directors 29 Corporate Information 32 Corporate Governance 33 FINANCIALS Directors’ Statement 50 Independent Auditor’s Report 52 Consolidated Statement of Comprehensive Income 56 Balance Sheets 57 Consolidated Statement of Changes in Equity 59 Consolidated Cash Flow Statement 61 Notes to the Financial Statements 63 OTHER INFORMATION Interested Person Transactions 149 Estate Locations 150 Statistics of Shareholdings 152 Notice of Annual General Meeting 154 Proxy Form 2. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION OUR MILESTONES • Reverse takeover and listing on SGX • Acquisition of plantation land in South Sumatra and Kalimantan • Acquisition of 58.8% stake in PT PP London Sumatra • Listing of PT SIMP on IDX Indonesia Tbk (Lonsum) • Diversification into sugar business with 60% stake in PT Laju Perdana Indah • Acquisition of plantation land in South Sumatra and Central Kalimantan • Acquisition of 26.4% stake in Heliae, a development- stage algae technology solutions company • Acquisition of plantation land in South Sumatra • Acquisition of 79.7% interest in PT Mentari Pertiwi Makmur, an industrial timber plantation company • Acquisition of 50.0% stake in Companhia Mineira de Açúcar e Álcool Participações (CMAA), a sugar and ethanol company in Brazil • Divestment of 8% stake • Formation of FP Natural in Lonsum, of which Resources Limited, a 30:70 3.1% was sold to PT JV to invest 34% in Roxas Salim Ivomas Pratama Holdings Inc. (Roxas), an Tbk (PT SIMP) integrated sugar business in the Philippines • 7% of nucleus Crude Palm Oil (CPO) produced was Indonesian Sustainable Palm Oil (ISPO)-certified INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 3 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION • Formation of PT Prima • Restructuring of sugar Sarana Mustika, a 40:60 operations in Brazil, with JV for road construction IndoAgri owning 36.21% and leasing of heavy of CMAA and Bússola equipment • 78% of nucleus CPO • Expanded sugar business produced was ISPO- via the acquisition of PT certified Madusari Lampung Indah 20 • 24% of nucleus CPO • Commencement of produced was ISPO- operations at the newly certified completed chocolate factory • 71% of nucleus CPO produced was ISPO- certified • Acquisition of PT Pasir Luhur, a tea plantation company • Formation of Canápolis • 39% of nucleus CPO Holding S.A. (Canápolis), produced was ISPO- a 50:50 JV to acquire certified a second sugar and ethanol mill in Brazil • Acquired Vale do Pontal Açucar e Alcool Ltda (UVP), a sugar and ethanol mill operator in Brazil, and turning CMAA into a 35:35:30 JV • Formation of PT Indoagri • 62% of nucleus CPO Daitocacao, a 49:51 produced was ISPO- JV to manufacture certified and market chocolate products • 57% of nucleus CPO produced was ISPO- certified 4. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION GEOGRAPHICAL PRESENCE INDONESIA Palm Oil Mills CPO Refineries Sugar Mills/Refineries Capacity Capacity Capacity 27 7.0M 5 1.7M 2 2.2M Mills Tonnes FFB Refineries Tonnes CPO Mills & Tonnes Cane Per Year Per Year Refineries Crushing Per Year Indonesia IndoAgri owns strategically located estates and production facilities across Indonesia. The Group’s planted area occupies 303,149 hectares. Oil palm is the dominant crop, followed by sugar cane, rubber and other crops. Our plantations are largely located in Sumatra and Kalimantan, while our refineries are mainly sited at major cities including Jakarta, Medan, Surabaya and Bitung. Planted Area (Ha) Oil Palm Sugar Cane Rubber Other crops 253,061 14,153 15,976 19,959 SOUTH NORTH SUMATRA EAST ASIA MALAYSIA CENTRAL KALIMANTAN WEST KALIMANTAN EAST SINGAPORE KALIMANTAN NORTH SULAWESI RIAU INDONESIA SOUTH SUMATRA SOUTH SULAWESI JAKARTA WEST JAVA CENTRAL JAVA EAST JAVA INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 5 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION BRAZIL Sugar and Ethanol Mills Capacity 3 8.8M Mills Tonnes Cane Crushing Per Year Brazil LEGEND IndoAgri has 36.21% in CMAA, which R&D Centre Oil Palm Estate operates three sugar and ethanol mills. Sugar Cane Estate Rubber Cocoa CPO Refinery Palm Oil Mill Sugar Mill & Refinery Tea Timber Sugar and Ethanol Mill SOUTH AMERICA BRAZIL MINAS GERAIS 6. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION CORPORATE STRUCTURE (AS AT 31 DECEMBER 2020) 73.5% 36.2% Bússola 59.5% Notes: • IndoAgri is 71.7% effectively owned by PT Indofood Sukses Makmur Tbk (PT ISM) • Shareholding percentage is calculated based on total number of issued shares (excluding treasury shares of the Company) INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2020 7 GROUP OVERVIEW OPERATION AND FINANCIAL REVIEW SUSTAINABILITY & GOVERNANCE FINANCIALS OTHER INFORMATION CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, Your company turned in a credible performance in 2020. IndoAgri is in the forefront to contribute to efforts in In the face of mounting challenges posed by the pandemic, combating climate change by maintaining the highest we focussed on the fundamentals. Our top priority was the standards in social and environmental practices. Our health and safety of our workers. We also paid close attention programmes are aimed at improving the welfare of all to ensuring uninterrupted supply lines. Emphasising the stakeholders, especially those of the local communities. optimal use of our resources, we took steps to mitigate Our target is for all IndoAgri’s plantations and mills to be the risks of lower demand and higher cost. Our cyclical certified under the mandatory ISPO programme. In 2020, planting and replanting for long-term growth continued. we achieved 486,000 tonnes of ISPO-certified CPO, These measures had a salutary effect on the profitability representing 78% of total nucleus CPO production. We of IndoAgri. expect to reach our ISPO target by 2023. Similarly, our sugar operations in Brazil participated in Bonsucro, a scheme for At the outset, therefore, I would like to pay the highest sustainable sugar cane. In 2020, we produced 1.9 million tribute to all our employees from the senior executives to tonnes of Bonsucro-certified cane, a 90% improvement over the humble plantation workers. Throughout 2020, they our sustainable cane production in 2019. We take pride in pressed on undaunted with grit and determination in these presenting our Annual Sustainability Report which is freely testing times. accessible from our website. Fortuitously, both CPO and sugar prices recovered South East Asia, particularly Indonesia, with its robust significantly in 2020. Edible oils and fats (EOF) continued demographics and strong consumer demand is poised for its growth momentum. The lockdowns and movement remarkable economic growth in the next decade. A recent restrictions and a surge in home-cooking led to an OECD projection puts the region’s GDP growth at 5.2% increased demand for our edible oils and margarine. Cash between 2019 and 2023, and Indonesia’s at 5.3%. Our flow, revenue and profits improved compared with 2019. focus in the near- and medium-term will be to prioritise The CEO’s Message has more details about this. capital investment in growth areas such as EOF and sugar. Managing costs is a perennial challenge. We pursued I am grateful to all of you, our shareholders, for your innovations, such as the use of drones and mechanisation unwavering support. My profound thanks to my fellow for cost efficiency, as well as improved seed
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