Olam Group Limited

Group CFO N. Mutukumar as well as the CEO of OFI, OLAM Food Ingredients A Shaker. We would like to extend a very warm welcome to all of you for joining us in announcing our half-year results. We are pleased that at this time we are able to meet more of our stakeholders today, face-to-face, to not only show and tell you about our achievements, but also to share with you our reorganization story, how it is gradually reshaping OLAM to create greater value for our shareholders and stakeholders. Mutu will begin our story by taking us through the consolidated Olam Group financial results. We will also discuss the operating and financial results for each of the three new operating groups, beginning with OFI, which will be told by the CEO, Shekhar. Sunny, as CEO of Olam Agri, will take over and share the performance of Olam Agri as well as of the remaining Olam Group businesses. He will also share his views on the business outlook and prospects, as well as the progress we have made so far on the reorganization before wrapping up today's presentation with key takeaways. Please stay on for questions and answers. You may now actually post your questions on the webcast, which we will address during the Q&A session. For those who are here with us in the room, you may wish to scan the QR code to access the presentation if you wish to look at your own portable devices. I will pause here and request Mutu to begin his presentation. Thank you very much.

Thank you, Hangong. Good morning, ladies and gentlemen. A warm welcome once again to Olam Group's first half 22 financial results presentation. Delighted to see you all in person after more than two years of meeting most of you virtually. It is indeed a We all have to be grateful that we have successfully navigated the pandemic and coming back to normalcy. And we hope to emerge stronger as a community. And a clear representation and testimony of the same is OLAM Group's first half 22 results. So at a glance, we have delivered 22.5 million tons, a marginal increase of 0.5%, but more importantly, our revenues grew 25% to $28.4 billion. Operation Patvi up 8% at $472 million. and EBIT, which is a key operational metric that we track and report, stood at 802 million, a 25% increase against H1 of 2021. We have generated a very healthy free cash flow of 466 million, a positive change of more than $800 million on a year-on-year basis. Our reported PADB stood at 429 million, more or less consistent with what we had reported in the first half of 2021. And in spite of a secular increase in commodity prices, which started in the second half of 2021 and continued till the June 2022, we have been able to manage to keep the gearing at check through very disciplined working capital management and very well-paced CapEx investments. EBIT grew 25% to 802 million with very strong performance from Ola Magri, which grew its EBIT by roughly 50%. OFI delivered an EBIT of $265 million, despite significant challenges due to cost price inflation. And Shekhar, when he's presenting the segmental performance, will be taking us through that how OFI has very well navigated these significant headwinds, especially in the first half of 2022. Our operational PACME is up 8.2%. to $472 million despite significant increase in interest costs as well as higher provision for taxation. Very strong free cash flow to equity and free cash flow to firm and as I had discussed about it, this is through very disciplined working capital management, strong operating performance leading to cash generation as well as very well-paced CapEx investments. robust cash position of $6.4 billion and ample liquidity in terms of $24.3 billion of overall working cap lending facilities and having significant headroom of roughly $5.2 billion as at the end of June 2022. Working capital cycle time has been kept on check, as I had talked about clearly with very well-disciplined working capital management across our portfolio, in spite of significant increase in commodity prices that we had witnessed in the first half of 2022. Stable gearing at 1.73 times compared to 1.6 times this time last year. And I'm pleased to announce that our Board of Directors have declared an interim dividend of 4 cents for the first half. In terms of consolidated results by operating group, first in volume, an overall 22.5 million tons, out of which roughly Olam Agri contributed 90% of the volumes, OFI contributing 8%, and the remaining group contributing 2.2%. Revenues of $25 billion, and here again, Olam Agri contributed roughly 69%, with OFI contributing 28.5%, and the rest by the remaining Olam Group. In terms of EBIT, 76% contributed by Olam Agri, 33% by OFI, and the remaining marginal negative loss from the remaining operating group. Overall invested capital stood at roughly $20 billion. Here, OFI constitutes roughly 59%, and Olam Agri constitutes 26%, with 16% from the remaining operating groups. Sales volume, more or less flat on a year-on-year basis at 22.5 million tons. There were marginal increases in OFI of roughly 55,000 tons and 100,000 tons increase in Olam Agri. And as expected, as we have been divesting our identified deprioritized assets, volumes in the remaining group have come down. EBIT increased by 25% to $802 million at the group level, with OFI marginally lower on a year-on-year basis, primarily due to higher depreciation and amortization after the significant acquisition of Old Thompson that we did in the second half of last year. However, OLAM Agri has performed very well and has contributed a year-on-year increase of $201 million, with the remaining OLAM Group more or less stable in terms of EBIT contribution on a year-on-year, overall contributing to $800 million of EBIT. Operation Patme grew 8.2% to $473 million. This in spite of strong contribution of EBIT at $160 million increase on a year-on-year basis, significant increase in net finance cost of $73 million, higher taxation provision because of the reorganization. We have had continuing cost tax disenergies that we will have in both the operating groups OFI and Olam Agri, and that has led to higher provision of taxes. And there were some exceptional items that we had booked in terms of our accelerated PSA for our employees on account of the top hacking that we did in changing the OLAM International Limited as a listed entity to OLAM Group Limited, which has now become the listed entity. The second is continuing separation costs that we are incurring on account of the reorganization that has significantly completed now. That has contributed an overall reported PATMI of $429 million and an operational PATMI of $473 million for the group. The 11% increase in the invested capital, primarily due to increase in working capital, as we have seen a secular increase in commodity prices in most of the products in our portfolio. Otherwise, we have been able to manage and with a very disciplined approach on working capital to keep the net debt to equity at check at 1.73 times, marginally higher than the December 2021 position. Positive free cash flow of $466 million on the FCFE basis and $720 million at the free cash flow to firm basis. And primarily, you have seen strong operating cash flow earnings in the first half contributing to $224 million. Changes in working capital contributing to a negative $600 million and a marginal increase in tax trade. But significant increase in CapEx investments, primarily as I talked about, OFI had made $3. acquisitions between the second half of 2021 and the first half of 2022, the major investment being the acquisition of Old Thompson, the Spice's private-level business in the U.S. And that had led to a positive free cash flow equity of $466 million and a positive free cash flow to firm of $720 million at the group level. We have very strong liquidity position, and we thank all our banking partners who are present here and present reportedly for their continued support through the reorganization and also now supporting us in reorganizing the debt and putting it in the respective operating groups for our continued growth prospects. With that, I will hand over to Shekhar, the CEO of OFI, to present the OFI operating performance and financial performance for the first half of 2022. Over to you, Shekhar.

Thank you, Mutu, and a good day to all of you. Great to see you all in person, and to all those joining us online, a good day to you too. So I'm pleased to take you through the OFI operating results. Just as a recap, which we have been sharing since we reorganized in 2020, OFI is comprised of five integrated product platforms in cocoa, coffee, nuts, dairy, and spices. and across these platforms we are delivering to very large, attractive, growing, end-use markets, the bakery, confectionery, beverage, snacking, and culinary, which, as you can just imagine, these products are a significant part of. And we are delivering across to a large set of large CPGs, multinational CPGs, the regional brands which are growing, The large format and small format retailers as well as the food service companies. So it's a business which is a fairly substantive business with roughly $15, $14 billion in sales, about $1.15 billion in EBITDA and $800 in EBIT. These were the results as per FY21, which was also a very strong year for OFI based on the recovery from COVID. So for the business of today, we are really going to focus on H1 and the outlook for the year. And H1, in H1, O5 overall grew about 3% in volume and about 22% in revenue, as Mutu was highlighting earlier. And obviously that shows the impact of higher input prices, both the raw material as well as the costs that have been hitting everybody in the industry. But at an operating level in terms of contracts, manufacturing, shipments, we performed to plan in terms of the volume growth that we were anticipating. The impact has been on EBIT in the first half, which is down by about 12%. But this has to be seen in the context of a very strong first half in 2021. So coming out of COVID, it was a very strong performance then. And so even as we started the year, we were expecting a more benign growth for the first half. But notwithstanding that, there was another aspect, which was the for the war, which was unanticipated and unexpected and it had its tragic consequences for everybody in the industry. And so the inflationary pressures because of the war, and especially I like to call out the energy impact on sold contracts, and in Europe it had a different impact, in Asia it's been different. So this has impacted manufacturing units and the costs of which we have taken in H1, whereas the pricing impacts of that are beginning to start flowing through in the latter part of Q2 as well as will flow through in H2 and beyond. So that has been the big tailwind. Some part of this drop compared to last year, as Muktu was talking about earlier, is also on account of higher depreciation and amortization. Roughly half of this drop that you see is on higher depreciation and amortization on investments that we did in last year, both acquired as well as the organic investments, the full impact of which will obviously flow through the coming periods. So that is something that we are not really worried about. That's just a matter of timing, and that will get set itself. But against all these headwinds, what we are very pleased with is the resilience of the integrated platforms and how many of these businesses have really performed even better than expectations during this period. More reassuring, and that's what we carry as the optimism of this business, the resilience of this business, is the broad-based support we have been getting from our customers as we engage with the repricing of these costs, which are real for everybody, and therefore That is something that we have been engaging with from April onwards. And we see that in terms of being able to get back to our margins in the revised contracts that we have done already and are doing. And as these pace of repricing as well as margin recovery improves in the second half, we believe that the impact of the cost that we had to take in H1 on the sold contracts will correct itself. So we feel quite confident as we are in second half and now well into second half that the EBIT impact that we have taken both on account of higher depreciation and amortization as well as the surge in energy costs will correct itself, is already correcting itself and we see that coming up in H2. So that's the big picture. Against this, I'll talk about when I talk to the segments about very strong performances by many of the platforms and in many parts of the businesses. But this was the big picture. A word on the invested capital. I talked about a 22% increase in revenues. So against that, we have been very, very disciplined in managing our invested capital, which grew by about 7% against a 22% increase in revenues. So again, that is a focus that has been, you have seen over the past many years, and it's a focus that should continue forever because we are really focused on the business, managing working capital and productive use of our fixed assets. And that will continue to be a focus for the entire business. Global sourcing, which had a good performance, roughly about 7% increase in volumes, 27% increase in prices, and 18% increase in EBIT. So again, the nature of the business is such that the pass-through in import raw material price increases and costs happens much faster and quicker. And so that is what has characterized this performance in first half. Again, very, very strong performances from the dairy part of the business, the green coffee part of the business, the other parts, the origination parts of other products. And despite the fact that almonds, which is the upstream operations in almonds, which is a part of global sourcing for us, faced lower prices, despite the impact of that, the overall segment has performed quite well. So we're quite pleased with the performance, and more importantly, the navigation of the volatility that every product has faced. The macroeconomic uncertainty has weighed on the supply-demand fundamentals. So within the O5 portfolio, we saw a very strong surge in coffee prices and a fall in recent times in cocoa demand. Despite the fact that the supply-demand fundamentals are very strong, but the macroeconomic uncertainty has not led to the kind of price increases that one would have otherwise anticipated. I talked about almonds, which have been facing very poor prices despite all the cost increases that have actually happened, the energy cost increases, the labor cost increases, as well as the The impact of drought in California, none of that is still showing up in those prices. So it's been a fairly volatile price across the portfolio. But again, we are quite pleased with the performance of the global sourcing teams, have managed this volatility, managed the supply chain disruptions, and executed on plan and delivered quite good results during this period. And again, even more so, despite the overall impact on prices across the portfolio, the working capital has been managed very well, which is a significant part of this business, of this segment. Moving on to ingredient solution, which is where bulk of the impact, the adverse impact that I talked about, obviously the depreciation and amortization is felt in the manufacturing part, which is part of this segment, and that's one part of it. And again, the energy impact has again been felt entirely by this segment and borne by this segment. So this segment has seen that EBIT drop in prices, but the EBIT drop because the cost increases But we see very strong recovery in margin as well as we reprice the contract with our customers, and we believe that the growth in this segment for what we have invested, not just in prior years and certainly in 2021, you will see the results of that flowing through. And we feel quite confident as we have already entered H2, and we feel very well positioned to end the year on a strong note. Again, the invested capital in this segment is more in line with the revenue growth in this segment of roughly about 12.5%, and even least split between fixed capital and working capital, which has been managed quite well. So last bit I'd like to say is that that is the first half and that has been a very volatile first half with all the macroeconomic uncertainties of the war, inflation, etc., which has flown through. But we feel very strong about the prospects of the business, what we have invested for, what we are building as we speak. And we do not feel that there is any change in the medium-term guidance in terms of volume growth as well as EBIT growth that we have indicated earlier. In terms of the growth framework, we stay absolutely focused on extracting value from all the investments we have made, ensuring that we focus with all our customers, but even more so the strategic customers where we are increasingly doing the cross-sell and up-sell, which will be reflected in the margins going forward. One important aspect is the cost competitiveness. I think the cost increase has been felt by the whole world and is being accessed by the whole world. But in the discussion that we are having with our customers, we see real support, which is a validation of the portfolio's resilience, the ability to deliver security of supply, security of traceable, sustainable supply, competitiveness, in a cost-competitive manner, providing solutions to our customers to make alternative cost, whether it's on raw material, alternative raw materials, alternative ingredients, alternative packaging, and a variety of other solutions that we are discussing to ensure that not only do we retain our cost competitiveness, but also offer those cost-competitive solutions to our customers, and providing that with increasing amount of innovation and sustainability across the chain. So we feel I'd like to convey that assurance about the business is on course, is on stream, and also reflected in the fact that we are investing behind the strategy that we have chosen. You would have seen two investments that we announced just after the close of the first half. One was private label Roaster in Canada. which also supplies to the U.S. a very strong business with a very strong sustainability-focused packaging, novel packaging, which is quite in demand with the retailers in North America and which will fit in very well with the sustainable, traceable supply chain that we have in coffee. And so that's a very neat business, and we are very pleased to have the entire team joining us from July 5th. Similarly, we have also done an acquisition in Germany of NUT, again, private label retailer, private label player supplying to retailers in Europe, and again, which fits in perfectly with the focus on private label and the sustainable, traceable supply chain that we have built in the NUT's business. So both these acquisitions are a reflection of the channel expansion, the product extension that we have been focused on, improving the margins, improving the returns, as we build O5 towards future. And with that, I'll hand over to Sunny to take us through great performance by Ulam Agri. Thank you, Mr. Shekhar.