Strategy Report Olam International Annual Report 2018 Re-imagining Olam Offering tomorrow’s products and services Strategy Report Olam International Limited Annual Report 2018 olamgroup.com About this report Contents Strategy Report Strategy report This chapter offers narrative about our strategy, our 2 Our financial and performance and key market factors and trends. It can be performance highlights read independently as an 8 Chairman’s letter Executive Summary or as part of the full report. 10 Group CEO review 26 Our business model Governance Report This section gives detailed 28 Our strategy in action information about our rigorous governance framework and those 40 Group COO review responsible for ensuring it is 76 Manufactured Capital followed. Shareholder information is also held within this chapter. 80 Human Capital 85 Social Capital Financial Report 92 Natural Capital Our figures and respective notes are enclosed within this chapter. 101 Intellectual Capital It should be read in conjunction 104 Intangible Capital with the Strategy Report to give a balanced account of internal and Integrated Impact external factors. 108 Statement 111 Engaging stakeholders 114 Risk Management 118 General information Navigating the Strategy Report Our Value Chain Edible Nuts Confectionery Food Industrial Raw Commodity and Spices and Beverage Staples and Materials, Financial Ingredients Packaged Infrastructure Services Foods and Logistics Our Capitals Front cover image: At Olam Spices’ Innovation and Quality Centre in Fresno, California, USA, Hein Tran creates Financial Manufactured Human Social Natural Intellectual Intangible innovative recipes for customers using our high quality spice ingredients. About this report Contents Our Vision Strategy Report Strategy report To be the most differentiated This chapter offers narrative about our strategy, our 2 Our financial and and valuable global food and performance and key market performance highlights factors and trends. It can be agri-business (by 2040) read independently as an 8 Chairman’s letter Executive Summary or as part of the full report. 10 Group CEO review 26 Our business model Governance Report This section gives detailed 28 Our strategy in action information about our rigorous 40 Group COO review governance framework and those Our Governing responsible for ensuring it is 76 Manufactured Capital followed. Shareholder information is also held within this chapter. 80 Human Capital 85 Social Capital Objective Financial Report 92 Natural Capital Our figures and respective notes To maximise long-term intrinsic are enclosed within this chapter. 101 Intellectual Capital It should be read in conjunction 104 Intangible Capital value for our continuing shareholders with the Strategy Report to give a balanced account of internal and Integrated Impact external factors. 108 Statement 111 Engaging stakeholders 114 Risk Management 118 General information Our Purpose Re-imagining Global Navigating the Strategy Report Agriculture and Food Systems Our Value Chain Edible Nuts Confectionery Food Industrial Raw Commodity and Spices and Beverage Staples and Materials, Financial Ingredients Packaged Infrastructure Services Foods and Logistics Our Capitals Front cover image: At Olam Spices’ Innovation and Quality Centre in Fresno, California, USA, Hein Tran creates Financial Manufactured Human Social Natural Intellectual Intangible innovative recipes for customers using our high quality spice ingredients. How we win 1 2 Our success has and always A focus on niche Defensible niche strategies commodities and businesses in mainstream commodity will come from innovating with leadership positions categories our business model ‘The Olam Way’. 3 4 A unique African footprint A model to out-origin We have built deep industry and operating capability our competition expertise, distinctive 5 6 capabilities and differentiated Differentiated value-added A uniquely shaped our business sufficiently to solutions and services to portfolio ensure profitable growth. customers Where we operate Farming and Supply Processing and plantations chain ingredients Selective upstream Selective mid/downstream • Perennial tree crops • Global origination • Value-added • Broad acre row crops and sourcing manufacturing • Forest concessions • Primary processing • Branding and • Dairy farming • Inland and marine distribution (Africa) logistics • Merchandising • Trading • Value-added solutions and services • Risk management How we win 1 2 Our success has and always A focus on niche Defensible niche strategies As set out in our refreshed commodities and businesses in mainstream commodity will come from innovating with leadership positions categories our business model Strategic Plan, by 2024 we ‘The Olam Way’. 3 4 A unique African footprint A model to out-origin We have built deep industry and operating capability our competition will be a global food and expertise, distinctive 5 6 capabilities and differentiated agri-business that delivers Differentiated value-added A uniquely shaped our business sufficiently to solutions and services to portfolio ensure profitable growth. customers food, feed and fibre along Where we operate with innovative solutions Farming and Supply Processing and plantations chain ingredients to our customers. Selective upstream Selective mid/downstream • Perennial tree crops • Global origination • Value-added • Broad acre row crops and sourcing manufacturing • Forest concessions • Primary processing • Branding and This supports our customers’ • Dairy farming • Inland and marine distribution (Africa) logistics • Merchandising growing need for sustainable • Trading • Value-added solutions and services and transparent supply chains • Risk management with a clear focus on tomorrow’s consumer preferences. Our financial and performance highlights Our financial and performance highlights Volume Edible Nuts and Spices Food Staples and Packaged Foods 5.1% 82.5% 1,690.5 27,104.3 Sales volume by segment (’000 metric tonnes) Confectionery and Industrial Raw Materials, Beverage Ingredients 32,867.6 Infrastructure and Logistics 5.6% (2017: 22,534.6) 6.8% 1,836.3 2,236.5 Edible Nuts Confectionery and Food Staples and Industrial Raw Materials, and Spices Beverage Ingredients Packaged Foods Infrastructure and Logistics Sourcing volume by region (’000 metric tonnes) Americas Asia, Australia 37.8% and Middle East 22.0% 32,867.6 (2017: 22,534.6) Africa 10.6% Europe 29.6% 2 Olam International Limited Annual Report 2018 Our financial and performance highlights Our financial and performance highlights Volume Revenue Edible Nuts and Spices Food Staples and Edible Nuts and Spices Food Staples and Packaged Foods Packaged Foods 5.1% 82.5% 14.1% 47.6% 1,690.5 4,312.0 27,104.3 14,506.3 Sales volume by segment Revenue by segment (’000 metric tonnes) (S$ million) Confectionery and Industrial Raw Materials, Confectionery and Industrial Raw Materials, Beverage Ingredients 32,867.6 Infrastructure and Logistics Beverage Ingredients 30,479.0 Infrastructure and Logistics 5.6% (2017: 22,534.6) 6.8% 23.4% (2017: 26,272.5) 14.9% 1,836.3 2,236.5 7,129.8 4,530.9 Edible Nuts Confectionery and Food Staples and Industrial Raw Materials, Edible Nuts Confectionery and Food Staples and Industrial Raw Materials, and Spices Beverage Ingredients Packaged Foods Infrastructure and Logistics and Spices Beverage Ingredients Packaged Foods Infrastructure and Logistics Sourcing volume by region (’000 metric tonnes) Sales revenue by region (S$ million) Americas Asia, Australia Americas Asia, Australia 37.8% and Middle East 16.9% and Middle East 22.0% 43.0% 32,867.6 Europe 30,479.0 (2017: 22,534.6) Africa 24.7% (2017: 26,272.5) 10.6% Europe Africa 29.6% 15.4% 2 Olam International Limited Annual Report 2018 olamgroup.com 3 Our financial and performance highlights continued Invested Capital and EBITDA By business segment (S$ million) (%) 14,812.2 1,235.8 Edible Nuts and Spices 100 3,609.9 339.9 Confectionery and Beverage Ingredients Food Staples and Packaged Foods 80 Industrial Raw Materials, Infrastructure and 4,935.1 444.0 Logistics 60 Commodity Financial Services 40 4,577.9 288.8 20 1,571.7 176.2 117.6 (13.1) 0 Invested Capital EBITDA By value chain segment (S$ million) (%) 14,812.2 1,235.8 Upstream 100 4,061.2 148.0 Supply chain Midstream and downstream 80 5,151.3 405.2 60 40 5,599.7 682.6 20 0 Invested Capital EBITDA Edible Nuts, Spices and Food Staples and C ommodity Financial Services Upstream Vegetable Ingredients Packaged Foods Supply chain Confecti onery and Industrial Raw Materials, Midstream and downstream 4 OlamBeverage International Ingredie nLimitedts Annual ReportA 2018g Logistics and Infrastructure Our financial and performance highlights continued Invested Capital and EBITDA By business segment For the 12 Months Ended 31 December (S$ million) (S$ million) 2018 2017 % Change Profit and Loss Statement Sales Volume (‘000 Metric Tonnes) 32,867.6 22,534.6 45.9 (%) 14,812.2 1,235.8 Sales Revenue 30,479.0 26,272.5 16.0 Edible Nuts and Spices 100 3,609.9 339.9 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)* 1,235.8 1,327.9 (6.9) Confectionery and Earnings Before Interest and Tax (EBIT) * 843.0 947.2 (11.0) Beverage Ingredients Profit Before Tax * 375.4 630.8 (40.5) Food Staples and Packaged Foods 80 Profit After Tax and Minority Interest 347.8 580.7 (40.1) Industrial Raw Operational Profit After Tax and Minority Interest * 346.6 431.5 (19.7) Materials, 4,935.1 444.0 Infrastructure and Per Share Logistics 60 Earnings Per Share basic (cents)