OLAM INTERNATIONAL LIMITED

Financial Statements for the Second Quarter and Half Year ended 31st December 2004
PART I:
1(a)

Information required for announcements of quarterly (Q1, Q2 & Q3), half-year

and full year results.

An income statement [ for the (Group) - Olam International Limited (Company) and its
subsidiaries ] together with a comparative statement for the corresponding period of the
immediately preceding financial year.

Profit & Loss Statement : Group

(in S$000)

Group
Group
Half Year ended
Three Months ended
31 Dec 2004 31 Dec 2003 % change 31 Dec 2004 31 Dec 2003 % change

Revenue
Sales of goods
Other revenue
Total Revenue

1,456,594
3,709
1,460,303

Costs and expenses

Costs of goods sold
Shipping and Logistics
Commissions and Claims
Staff costs
Depreciation
Gain on foreign exchange
Other operating expenses

1,111,690
228,260
15,347
17,878
3,166
(1,738)
37,599

795,461
166,911
13,408
13,800
1,896
(2,779)
28,478

Total Costs & Expenses

1,412,202

1,017,175

48,101

35,831

(22,354)

(18,652)

25,747

Profit from operating

activities
Finance Costs

Share of loss of jointly

controlled entity
Profit before taxation
Taxation
Profit for the financial
period

1,048,809
4,197
1,053,006

959,362
3,315
962,677

643,112
1,377
644,489

774,438
111,916
7,524
8,765
1,985
(852)
22,832

507,739
83,088
6,675
6,870
950
(1,384)
14,924

926,608

618,862

34%

36,069

25,627

41%

20%

(14,591)

(12,196)

20%

17,179

21,478

13,431

(62)

(22)

(26)

(12)

25,685
(3,082)

17,157
(2,574)

50%

21,452
(2,574)

13,419
(2,013)

60%

22,603

14,583

55%

18,878

11,406

66%

39%

50%

Notes:
(in S$000)
Other operating expenses
include bank charges of:
Other Income include
Interest Income of:

Group
Group
Half Year ended
Three Months ended
31 Dec 2004 31 Dec 2003 % change 31 Dec 2004 31 Dec 2003 % change
10,541

4,053

8,506

2,106

293

3,645

57

1,377

Page 1

1(b)(i) A balance sheet (for the Issuer and Group), together with a comparative statement as at
the end of the immediately preceding financial year.
Balance Sheets : Group & Company

(in S$000)

Group
31 Dec 2004

Fixed assets
Subsidiary companies
Deferred tax assets
Investments
Current assets
Amounts due from subsidiary companies
Amounts due from a related party
Trade debtors
Margin accounts with brokers
Stocks
Advance payment to supplier
Advance payment to subsidiaries
Other debtors
Fixed deposits
Cash and bank balances

Current liabilities
Amount due to a corporate shareholder
Trade creditors and accruals
Other creditors
Amounts due to bankers
Medium term notes
Provision for taxation

Net Current Assets

Long term loan from a corporate shareholder
Long term loans from Banks
Convertible redeemable shares

Share capital
Reserves

Company

30 Jun 2004

31 Dec 2004

30 Jun 2004

26,626
786
-

21,195
829
74

669
40,933
1,159
196

672
40,418
1,196
196

443,077
12,128
613,890
184,405
73,209
5,277
73,254
1,405,240

3,000
464,944
5,317
473,063
90,090
82,835
11,922
88,450
1,219,621

142,781
329,306
12,128
50,419
95,405
571,159
55,440
3,024
10,660
1,270,322

83,746
3,000
387,771
5,317
136,098
63,257
293,260
46,146
9,674
41,671
1,069,940

90,359
5,985
858,475
249,642
7,535
1,211,996

1,403
154,976
5,388
672,706
177,000
5,915
1,017,388

21,259
4,249
825,335
249,642
4,566
1,105,051

1,403
112,718
2,582
600,676
177,000
3,616
897,995

193,244

202,233

165,271

171,945

(187)
-

(8,600)
(266)
(25,602)

220,469

189,863

208,228

180,225

118,615
101,854

100,791
89,072

118,615
89,613

100,791
79,434

220,469

189,863

208,228

180,225

(8,600)
(25,602)

Page 2

1(b)(ii) Aggregate amount of Groups borrowings and debt securities.

Amount repayable in one year or less, or on demand:
(in S$000)

As at 31 Dec 2004
Structured

Overdrafts
Loans

As at 30 Jun 2004

Unstructured

Structured

Unstructured

17,477

13,659

32,261

35,455

489,774

587,207

306,001

475,989

Amount repayable after one year:

(in S$000)

As at 31 Dec 2004
Structured

Loans

As at 30 Jun 2004

Unstructured

187

Nil

Structured

Unstructured

266

Nil

Details of any collateral

Structured bank loans are secured by the underlying stocks and receivables of specific
transactions for which funding was obtained from the lending banks.
1(c)

A Cash Flow Statement (for the Group), together with a comparative statement for the
corresponding period of the immediately preceding financial year.

(in S$'000)

Group

Group

Half Year Ended

Quarter Ended

31-Dec-04

31-Dec-03

31-Dec-04

31-Dec-03

25,685

17,157

21,452

13,419

62

22

26

12

3,166

1,896

1,985

950

Cash flow from operating

activities
Operating profit before
taxation
Adjustments for:

Share of loss in jointly controlled

entity
Depreciation of fixed assets
Interest income

(293)

(3,645)

(57)

(1,377)

Interest expense

22,354

18,652

14,591

12,196

Operating profit before

reinvestment in working
capital

50,974

34,082

37,997

25,200

Page 3

Contd/-

Decrease in amount due from a

related party
Increase in stocks
Decrease /(increase) in debtors
Increase in advance payment to
suppliers
(Decrease)/increase in creditors
Cash used in operations
Interest expense paid
Interest income received
Income tax (paid) / refund
Net Cash used in operating
activities
Cash flow from investing
activities
Purchase of fixed assets
Net cash used in investing
activities
Cash flow from financing
activities
Dividends paid on ordinary shares
by the company
(Decrease)/increase in amount
due to a corporate shareholder
Proceeds from issue of ordinary
shares at premium
Proceeds from issue of
convertible redeemable shares at
premium
Repayment from term loan from
banks
Proceeds from issue of medium
term notes
Repayment of long term loan from
a corporate shareholder
Increase in loans from banks
Net cash provided by financing
activities
Net effect of exchange rate
changes in consolidating
subsidiary companies
Net decrease(increase) in cash &
cash equivalent
Cash & cash equivalents at
beginning of the period
Cash & cash equivalents at end of
the period

Group
Half Year Ended
31-Dec-04
31-Dec-03

Group
Quarter Ended
31-Dec-04
31-Dec-03

3,000
(140,827)
24,682

1,232
(119,287)
62,017

3,000
(117,232)
(128,986)

68
(97,314)
10,507

(94,315)
(64,020)
(220,506)
(22,354)
293
(1,419)

(129,854)
(19,105)
(170,915)
(18,652)
3,645
180

(36,563)
22,018
(219,766)
(14,591)
57
(1,419)

(109,315)
(11,598)
(182,452)
(12,196)
1,377
741

(243,986)

(185,742)

(235,719)

(192,530)

(8,597)

(2,947)

(6,416)

(2,450)

(8,597)

(2,947)

(6,416)

(2,450)

(24,272)

(22,730)

(24,272)

(4,730)

(1,403)

(1,403)
17,000

(79)
72,642

122
35,241

25,602
(68)
-

17,000

(79)
49,762

17,241

25,602
-

(8,600)
222,349

(180)
200,310

(8,551)
235,069

(140)
156,738

277,637

238,297

267,526

194,711

(10,315)

(2,039)

(9,194)

(1,567)

14,739

47,569

16,197

(1,836)

32,656

(33,516)

31,198

15,889

47,395

14,053

47,395

14,053

Page 4

1(d)(i) A statement (for the Issuer and Group) showing either (i) all changes in equity, or (ii)
changes in equity other than those arising from capitalisation issues and distributions to
shareholders, together with a comparative statement for the corresponding period of the
immediately preceding financial year.

(in S$'000)

From

GROUP

Company

GROUP

Company

For the period

For the period

For the period

For the period

1-Jul-04

1-Jul-03

To 31-Dec-04 31-Dec-03

1-Jul-04

1-Jul-03

1-Oct-04

1-Oct-03

1-Oct-04

1-Oct-03

31-Dec-04

31-Dec-03

31-Dec-04

31-Dec-03

31-Dec-04

31-Dec-03

Issued Capital
Balance at beginning

100,791

81,496

100,791

81,496

100,791

89,383

100,791

89,383

17,824

15,441

17,824

15,441

17,824

7,554

17,824

7,554

118,615

96,937

118,615

96,937

118,615

96,937

118,615

96,937

Balance at beginning

36,035

11,531

36,035

11,531

36,035

21,644

36,035

21,644

Increased during the period

24,778

19,800

24,778

19,800

24,778

9,687

24,778

9,687

Balance at end

60,813

31,331

60,813

31,331

60,813

31,331

60,813

31,331

Increased during the period

Balance at end

Share Premium

Foreign currency translation

reserve

Balance at beginning
Foreign currency translation
adjustment

(4,005)

(1,744)

3,079

5,459

(5,125)

(2,216)

1,959

4,987

(10,327)

(2,039)

(9,965)

(2,039)

(9,207)

(1,567)

(8,845)

(1,567)

Balance at end

(14,332)

(3,783)

(6,886)

3,420

(14,332)

(3,783)

(6,886)

3,420

Balance at beginning

57,042

26,947

40,320

17,866

60,767

12,124

44,045

3,043

Profit for the period

22,603

14,583

19,638

12,396

18,878

11,406

15,913

9,219

Dividends paid

(24,272)

(18,000)

(24,272)

(18,000)

(24,272)

(24,272)

Balance at end

55,373

23,530

35,686

12,262

55,373

23,530

35,686

12,262

Total Reserves

101,854

51,078

89,613

47,013

101,854

51,078

89,613

47,013

Total Equity

220,469

148,015

208,228

143,950

220,469

148,015

208,228

143,950

Revenue Reserves

Page 5

1(d)(ii)

Details of any changes in the company's share capital arising from rights issue, bonus
issue, share buy-backs, exercise of share options or warrants, conversion of other issues
of equity securities, issue of shares for cash or as consideration for acquisition or for any
other purpose since the end of the previous period reported on. State also the number of
shares that may be issued on conversion of all the outstanding convertibles as at the end
of the current financial period reported on and as at the end of the corresponding period
of the immediately preceding financial year.
Dec 2004

Dec 2003

Issued, fully paid share capital

Balance as at 1st July

503,954,686

407,480,803

Issue of ordinary shares

36,956,522

77,205,013

Conversion of redeemable convertible shares

52,161,689

st

Balance as at 31 December

593,072,897

484,685,816

Note:
The number of ordinary shares shown above is before sub division with a par value of
S$0.20 per each ordinary share. The shares of the company were later sub-divided into 2
ordinary shares with par value of S$0.10 per each ordinary share on 4th January 2005.
2.

Whether the figures have been audited or reviewed and in accordance with which
auditing standard or practice.
The financial statements presented above have not been audited or reviewed.

3.

Where the figures have been audited or reviewed, the auditors report (including any
qualifications or emphasis of a matter).
N/A

4.

Whether the same accounting policies and methods of computation as in the issuers
most recently audited annual financial statements have been applied.
The same accounting policies and methods of computation have been followed as in our
last audited financial statements dated 30th June 2004.

5.

If there are any changes in the accounting policies and methods of computation,
including any required by an accounting standard, what has changed, as well as the
reasons for, and the effect of, the change.
N/A

Page 6

6.

Earnings per ordinary share of the Group for the current financial period reported and for
the corresponding period of the immediately preceding financial year, after deducting any
provision for preference dividends.
Earnings Per Share based on Group's net profit after tax
Group
(unaudited)
Six Months ended
1 Jul to
1 Jul to
31 Dec 2004
31 Dec 2003

(unaudited)
Three Months ended
1 Oct to
1 Oct to
31 Dec 2004
31 Dec 2003

(a) Based on weighted average

number of shares on issue

4.22 cents

3.27 cents

3.32 cents

2.35 cents

(b) Based on fully diluted basis

4.22 cents

3.27 cents

3.32 cents

2.35 cents

Weighted average number of shares in

issue applicable to basic earnings per
share

536,194,951

446,083,310

568,435,216

484,685,816

Weighted average No. of shares based

on fully diluted basis

536,194,951

446,083,310

568,435,216

484,685,816

Note:
The amounts shown above are prior to sub-division of the shares and is based on each
ordinary share having a par value of S$0.20 per share. Subsequent to 31st December 2004
(on 4th January 2005), there was a sub-division of each ordinary share of S$0.20 in the
existing, authorized, and issued and paid-up share capital of our Company into two
ordinary shares of S$0.10 each.
7.

Net asset value (for the Issuer and Group) per ordinary share based on issued share
capital of the issuer at the end of the:
(a)
(b)

current financial period reported on; and

immediately preceding financial year.
Group

Company

(unaudited)
(Audited) (unaudited)
(Audited)
As at
As at
As at
As at
31-Dec-2004 30-Jun-2004 31-Dec-2004 30-Jun-2004
Net Asset Value per ordinary share
based on issued share capital at end
of the period

37.17 Cents

37.67 Cents

35.11 Cents

35.76 Cents

Note:
The calculation shown above is based on number of ordinary shares before sub division
with a par value of S$0.20 per each ordinary share. The shares of the company were later
sub-divided into 2 ordinary shares with par value of S$0.10 per each ordinary share on 4th
January 2005.

Page 7

8.

A review of the performance of the Group, to the extent necessary for a reasonable
understanding of the Groups business. It must include a discussion of the following:
(a)

any significant factors that affected the turnover, costs, and earnings of the Group
for the current financial period reported on, including (where applicable) seasonal or
cyclical factors; and

(b)

any material factors that affected the cash flow, working capital, assets or liabilities
of the Group during the current financial period reported on.

This is the first results announcement after the companys listing on the 11th February
2005. The ensuing management discussion and analysis, highlights and compares, the
financial performance for the Half Year ended December 2004 (1H FY2005) with the
corresponding period, namely Half Year ended December 2003 (1H FY2004)
(corresponding period of the immediately preceding financial year).

Introduction
Olam is a leading, global, integrated supply chain manager of agricultural products and
food ingredients with operations in 38 countries. Since the establishment of our business in
1989, we have evolved from a single country, single, product trader to a multi country, multi
product supply chain manager. Today, we manage an integrated supply chain for over 14
agricultural products. As supply chain managers, we are engaged in the sourcing,
processing, warehousing, transportation, shipping, distribution and marketing of these
products from the farm gate in the producing countries to the factory gate of our customers
in the destination markets while managing the risks at each stage of the supply chain. We
organize the 14 products that we supply into 4 business segments as given below:

Business Segment

Products

Edible Nuts, Spices & Beans

Cashews, Other Edible Nuts (Peanuts, Almonds, Hazelnuts)

Spices (Pepper, Cloves, and other spices)
Sesame
Beans (Pulses, Lentils & Peas)

Confectionery & Beverage

ingredients

Cocoa
Coffee
Sheanuts

Food Staples & Packaged Foods

Rice
Sugar
Dairy Products
Packaged Foods

Fibre & Wood Products

Cotton
Timber

Page 8

Background to analyzing our Financial Statements

(i)

Seasonality: Production of agricultural products is seasonal in nature. The

seasonality of the products in our portfolio depends on the location of the producing
country. The harvesting season for most of the agricultural products for countries
situated in the northern hemisphere generally falls between October to March.
Countries in the southern hemisphere have harvesting seasons between April to
September. It is also not unusual to experience both some delay as well as early
start to the harvesting seasons in these countries based on actual weather patterns
in that particular year. In addition to an early or delayed harvesting season, the
precise timing and size of arrivals of these products can also vary based on the
farmers selling decisions, which is mainly a function of his view on prices and his
inventory holding capacity. The majority of our Origins are located in the northern
hemisphere. Consequently, our earnings tend to be relatively higher in the Second
Half of the Financial Year (January to June) compared to the First Half of the
Financial Year (July to December). In the past, our earnings in the First Half of the
Financial Year have averaged between 30% and 38% of the Full Year earnings
compared to 62% to 70% in the Second Half of the Financial Year. Given this
seasonality, we would like to reiterate that the right way to look at our results is to
focus on the Full Year earnings, as profits can move from one quarter to another on
account of the factors listed above. Therefore a full year assessment of our results
offers more clarity on our underlying performance.

(ii)

Profitability
a.

Gross and Net Contribution: We measure and track our profitability in

terms of Gross Contribution (GC) and Net Contribution (NC) per ton of
product supplied. GC is calculated as total revenue less cost of goods sold
(raw material costs plus other direct costs, including packing costs etc.),
shipping and logistics expenses, claims and commission and bank charges.
For the purposes of determining Net Contribution, we deduct the net interest
expense from the GC. We consider interest expense to be a variable cost
and is a function of our inventory holding periods. We use short term,
transactional, self liquidating, working capital funding to finance our short
term inventories and debtors. For every transaction, we target a minimum
net contribution per ton of product supplied based on the risks, complexities,
and value added services that we provide to our customers to meet their
specific requirements. We are focused on enhancing these margins through
providing value added services including vendor managed inventory
services (VMI), organic certification, fair trade produced certification (FTP),
customized grades and quality and risk management solutions to our
customers.

b.

Volumes: The second key driver to our profitability is the volume of

products supplied. Given our integration and end-to-end supply chain
capabilities, we seek to match the supply of our products with demand from
our customers. The volume of agricultural products that we supply are
largely within our control and is a function of the extent of our supply chain
infrastructure in the origins (producing countries) and the markets
(consuming countries).

Page 9

Profit and Loss Statement

We are pleased to report that for the six months ended 31st December 2004 (1H FY2005),
the Group has posted strong results with Sales Volumes growing by 21% to 1.185 million
tons, Sales Revenue growing by 39% to S$1.46 billion, and Net Profit after Tax growing by
55% to S$22.6 million over the comparable corresponding period of the preceding
Financial Year (1H FY2004). The other income component has shown a marginal reduction
to S$3.7 million in 1H FY2005 from S$4.2 million in 1H FY2004 due to lower interest
income during this period. The quality of our earnings continues to improve with broad
based contribution from each of the four product segments with all of them registering
strong growth in Sales Volume, Sales Revenue and Net Contribution for 1H FY2005
compared to 1H FY2004.
The following table provides segmental breakdown on Sales Volume, Sales Revenue,
Gross Contribution (GC) and Net Contribution (NC) for the half year ending 31st December
2004 (1H FY2005) and 31st December 2003 (1H FY2004).

(in S$'000)
Segment
Edible Nuts,
Spices & Beans
Per ton
Confectionery &
Beverage
Ingredients
Per ton
Food Staples &
Packaged Foods
Per ton
Fibre & Wood
Products*
Per ton
Total

Sales Volume
(in Metric Tons)

Sales Revenue

Gross
Contribution
(GC)

Net
Contribution (NC)

Dec 04

Dec 03

Dec 04

Dec 03

Dec 04 Dec 03

Dec 04

Dec 03

160,045

140,025

247,309

167,021

18,051

12,038

14,515

9,535

113

86

91

68

34,730

28,262

25,792

19,541

145

130

108

90

23,120

15,620

17,466

13,276

37

32

28

27

18,271

13,607

14,338

12,169

111

100

87

90

94,172
79

69,527
71

72,111
61

54,521
55

239,073

622,043

164,295

1,185,456

Per ton

218,075

489,084

135,847

514,499

452,902

241,884

411,641

251,714

218,433

983,031 1,456,594 1,048,809

* Measured in cubic metres.

Gross Contribution (GC) grew by 35% to S$94.2 million while Net Contribution (NC) grew
by 32% to S$72.1 million. GC per ton increased to S$79 per ton in 1H FY2005 from S$71
per ton in 1H FY2004. GC for all the four segments increased during this period as
compared to the corresponding period in the previous year. The total increase in gross
contribution of S$24.6 million in 1H FY2005 over 1H FY2004 was contributed by a) volume
growth accounting for 58% of this improvement and margin enhancement accounting for
the balance 42%.
Net interest expense increased to S$18 per ton during this period compared to S$16 per
ton during corresponding period in previous year due to increase in LIBOR interest rates.
These rate increases were however passed through to the customers or suppliers as
applicable. As a result, Net Contribution per ton increased to S$61 per ton in this period
from S$55 per ton during corresponding period in previous year.
Page 10

The management of Olam remains focused on securing volume growth a) by expanding

our product portfolio by moving into new and related product adjacencies, b) by expanding
into new origins and markets, and c) by securing margin enhancements through deeper
value chain integration including developing new ways of serving our customers by offering
value added services that capitalizes on our strengths across the entire agricultural
products supply chain. We have made good progress in the implementation of this strategy
in 1H FY2005. Some of this progress is highlighted below:

Edible nuts, spices and beans business recorded significant improvement in both
volumes and margins on account of deeper value chain integration in the existing
processing centres in Vietnam and Brazil. Similarly, our initiative of moving processing
operations directly to the cashew producing countries of Africa has also begun to pay
off with processing efficiency in our operations in Tanzania improving to the levels that
we attain in a matured processing centre like India. We are in the process of scaling up
these operations with the addition of one more factory in Dar-e-salaam. We are also at
an advanced stage of project implementation in Mozambique, Cote dIvoire and
Nigeria. We have also broadened the Edible Nut portfolio by adding on Almonds and
Hazelnuts and are encouraged by the early results that we have seen in this area.

The volume in the confectionery & beverage ingredients business improved

significantly during 1H FY2005. The withdrawal of some of the large European Trade
Houses from Cote dIvoire due to civil unrest prevailing in 2004,presented us with
interesting market opportunities in the 1H FY2005. The enhanced premiums seen
towards the second half of the last year for both cocoa and coffee continued in 1H
FY2005. With normalcy now being restored in Cote dIvoire, we expect cocoa and
coffee margins to revert back to the more historical levels in the Second Half FY 2005.
Cocoa has made progress in moving up the value chain by expanding its processing
initiatives in Nigeria. Coffee has made a successful start in expanding into the Arabica
business by setting up its operations in Brazil, the worlds largest producer and
exporter of Arabica coffees.

The Food Staples and Packaged Foods segment registered robust growth in volumes
of 27% over 1H FY2004. This was mainly on account of increase in sales of rice and
sugar in both existing and new markets of Asia and Africa.

1H FY2005 saw a sharp decline in the prices for cotton due to the increase in the local
production of cotton in both India and China. Interest costs increased to S$24 per ton in
1H FY2005 from S$11 per ton in 1H FY2004 due to increase in advance payments to
suppliers for forward cotton purchases mainly from the CIS countries. As a result, the
net contribution per ton decreased to S$87 per ton in 1H 2005 from S$90 in 1H FY2004
for the fibre and wood products segment. We expect that this higher interest cost
absorption in cotton in 1H FY2005 would get normalized during the 2H FY2005 as
shipments get executed. Wood Products has made significant progress in finalizing its
planned investments in saw milling facilities in Gabon and Congo and successfully
expanding into Brazil and China.

Costs and Expenses

Our Selling, General & Administrative expenses (SG&A) increased by 24.2% to S$46.4
million for 1H FY2005 from S$37.3 million for 1H FY2004. Of this, staff costs increased by
29.6% due to increase in staff strength as well as general wage increases in the origin
countries. These costs are in line with our budgets, and is part of our planned investment in
enhancing our procurement, logistics and marketing infrastructure in existing origins and
markets.

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Foreign currency gains were lower at S$1.7 million for 1H FY2005 from S$2.8 million for
1H FY2004. These are primarily due to translation gains arising from fluctuations in the
exchange rate of GBP and Euro to USD.
Other operating expenses increased by 10.8% to S$27.1 million in 1H FY2005 from S$24.4
million in 1H FY2004 due to increase in level of business activities.
Profit before tax
Based on foregoing, profit before tax increased by 49.9% to S$25.7 million for the half year
ended 31st December 2004 from S$17.2 million for the half year ended 31st December
2003.
Taxation
Taxes increased by 19.7% to S$3.1 million for the half year ended 31st December 2004 as
compared to S$2.6 million for the half year ended 31st December 2003.
Profit after tax
Profit after tax increased by 55% to S$22.6 million for period ending 31st December 2004
as against S$14.6 million for the corresponding half year ending 31st December 2003.
Balance Sheet & Cash Flow
Investment in fixed assets increased by S$8.6 million in 1H FY2005 from S$2.9 million in
1H FY2004. The increase was mainly on account of investment in infrastructure and
logistics in the existing origins and also due to fixed assets purchased in our new
operations in Brazil.
Working capital increased by 36.6% to S$1,301 million in 1H FY2005 from S$952.9 million
in 1H FY2004. The increase is in line with the increase in business during this period. The
debtors number of days decreased marginally to 55 days in 1H FY2005 from 56 days in 1H
FY2004. However the stock number of days increased to 81 days as of end December
2004 from 74 days as of end December 2003. This increase is mainly due to increased
procurement in the October to December 2004 period due to early starts to the season in
most of our producing countries resulting in higher rate of arrivals of products during this
cropping season. Advance to suppliers came down to 49 days as of end December 2004
from 65 days as of end December 2003 due to faster delivery of stocks from the suppliers.
The increased working capital was mainly funded by bank borrowings. Borrowings
increased by 40.2 % to S$1,108 million as of end December 2004 from S$789.9 million as
of end December 2003. The borrowings were mainly in the form of short term trade finance
facilities from banks. In addition, we raised S$72.6 million from non-bank sources
(institutional investors) by issue of notes during this period. The net debt to equity ratio
went up marginally to 5.0 times in December 2004 from 4.7 times in December 2003.
The company also paid off the long term loan from the corporate shareholder amounting to
S$8.6 million in December 2004. The company also received S$3 million as a final
installment from related party (the penultimate holding company of the company then)
which arose from acquisition of the subsidiary companies on 1st April 1997.

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In October 2004, the convertible redeemable preference shares issued to International

Finance Corporation (IFC) amounting to S$25.6 million were converted into common
equity. The company also issued new shares to Employees in December 2004 under the
Employee Share Subscription Scheme (ESSS). This resulted in the increase in equity and
share premium of S$17 million. The company further paid S$24.3 million of final dividends
recommended by the board and approved at the EGM of the company. Shareholder funds
increased by 16% from S$189.9 million at 30th June 2004, to S$220.5 million on 31st
December 2004.
9.

Where a forecast, or a prospect statement, has been previously disclosed to shareholders,

any variance between it and the actual results.
No forecast was previously given.

10.

A commentary at the date of the announcement of the significant trends and competitive
conditions of the industry in which the Group operates and any known factors or events
that may affect the Group in the next reporting period and the next 12 months.
Please refer to the introduction and background to analyzing our Financial Statements,
given in point 8 to understand the impact of seasonality and the profitability drivers to our
business.
We continue to be optimistic on the overall business outlook as we head into 2H FY2005
and beyond. The various initiatives that we are executing on to broaden and deepen our
business franchise should continue to yield results in the form of both increased volumes
and enhanced margins. These structural factors lead us to believe that our company will
continue to deliver reasonable earnings growth going into 2H FY2005 compared to 2H
FY2004.
The exceptionally strong growth in earnings in 1H FY2005 was underpinned by early start
to most harvesting seasons in our various origins as well as higher than normal margins in
the cocoa and coffee business resulting from supply side anxieties arising out of the Cote
dIvoire situation. With normalcy now restored in Cote dIvoire, we expect the margins for
our cocoa and coffee business to revert to historical levels going forward.
The Group had a strong 1H FY2005 performance and the outlook for 2H FY2005 remains
good. We expect earnings growth for 2H FY2005 to be satisfactory, though the rate of
growth would not be as high as the exceptional growth rate achieved in 1H FY2005.
The Board and Management of Olam is committed to creating shareholder value by
delivering sustainable earnings growth and continued improvement in the quality of
earnings. The Group has a successful track record of setting and achieving challenging
financial goals and the 1H FY2005 Financial Performance is a continuation of this track
record.

11.

Dividend
(a)

Current Financial Period Reported On

NIL. Given the strong earnings growth in 1H FY2005 and if we meet our earnings
expectations in 2H FY2005, and assuming that there are no material adverse
developments, the Board will consider a target dividend payout ratio of not less than
25% of our Net Profit After Tax.

Page 13

(b)

Corresponding Period of the Immediately Preceding Financial Year.

Any dividend declared for the corresponding period of the immediately preceding financial
year?
Name of Dividend

Dividend
Type

Interim Dividend in respect

of financial year ended
June 2004

Interim
Dividend

Dividend Amt
per Share
(in cents)
4.42 cents

Optional:
Dividend
Rate (in %)

Par value
of shares

Tax Rate

22.10%

20 cents

Exempt

Note:
The number of ordinary shares shown above is before sub division with a par value of
S$0.20 per each ordinary share. The shares of the company were later sub-divided into 2
ordinary shares with par value of S$0.10 per each ordinary share on 4th January 2005.
(c)

Date payable
N.A.

(d)

Books closure date

N.A.

12.

If no dividend has been declared/recommended, a statement to that effect.

During the current period there is no dividend declared or recommended.

PART II:

13.

Additional information required for Full Year announcement

(This part is not applicable to Q1, Q2, Q3 or Half Year Results)

Segmented revenue and results for business or geographical segments (of the Group) in
the form presented in the issuers most recently audited annual financial statements, with
comparative information for the immediately preceding year.
N/A

14.

In the review of performance, the factors leading to any material changes in contributions
to turnover and earnings by the business or geographical segments.
N/A

Page 14

15.

A breakdown of sales.
N/A

16.

A breakdown of the total annual dividend (in dollar value) for the issuers latest full year and
its previous full year.
N/A

17.

Interested Persons Transactions.

N/A

BY ORDER OF THE BOARD

Sunny George Verghese
Group Managing Director & Chief Executive Officer
8 March 2005

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