Value Chain Review and Analysis
The Upstream segment registered a year-on-year volume growth of 5.2%, mainly coming from almonds and Coffee. Revenue and EBITDA declined by 31.6% and 48.9% respectively in 2016.
The revenue decline was primarily on account of lower almond prices. EBITDA was dragged down by reduced contribution from almond plantations in Australia and the USA as well as Wood Products, although this was partly offset by improved performance in NZFSU.
Invested capital in the segment increased by S$689.6 million from 2015, mainly on account of higher fixed capital invested in almond, Coffee, Palm and Rubber plantations. EBITDA/IC declined from 5.2% in 2015 to 2.3% in 2016 on higher average invested capital but lower EBITDA.
Of the S$3.8 billion invested capital in 2016, about S$1.7 billion was in gestating or partly contributing assets. These are primarily the Palm and Rubber plantations in Gabon, Rice farming business in Nigeria, as well as Coffee plantations in Brazil, Zambia, Tanzania and Laos which were both gestating and partly yielding investments.
The S$2.1 billion fully contributing assets delivered a lower EBITDA/IC of 5.1% on a higher asset base in 2016 compared with 2015. These assets now include NZFSU and Rusmolco which were treated as partly contributing assets in 2015 and had not yet reached their full potential in 2016.
The Supply Chain segment recorded a 5.3% increase in volume due to growth from Grains, Rice, Dairy and Sugar trading, offsetting the reduction in Cocoa as much of its volumes were channelled for cocoa processing. As a result of lower Cocoa volumes, revenue declined by 19.8%.
EBITDA declined by 16.1% arising from lower contribution from the Cotton, CFS and Cocoa supply chain due to the shift in bean volumes to captive processing. However, invested capital in the segment rose by S$1.7 billion owing to larger working capital in Coffee, Cotton and Cocoa beans carried as feedstock for processing. As a result, EBITDA/IC dropped from 12.3% in 2015 to 8.8% in 2016.
The Mid/Downstream segment recorded a strong growth of 51.6% and 93.4% in volumes and revenues respectively. The growth in volumes was driven by larger volumes of processed Cocoa products and flour from wheat milling. Revenues were up as a result of these higher volumes.
EBITDA surged by 87.7% due to strong contribution from Cocoa processing, wheat milling in West Africa, soluble coffee processing, peanut shelling as well as sugar and palm refining. This was partly offset by the drop in contribution from tomato processing.
Invested capital was lower by S$101.1 million for the year on account of higher fixed capital investments being offset by lower working capital. The increase in EBITDA lifted EBITDA/IC from 6.5% in 2015 to 9.7% in 2016.
About S$3.4 billion of invested capital was partly contributing, generating a significantly higher EBITDA/IC of 9.9% compared with the previous year. This was due to the addition of the Cocoa processing assets and the acquired wheat milling and pasta manufacturing assets well as Brooks, all of which had performed very well during the year. The fully contributing assets achieved an EBITDA/IC ratio of 9.5%, slightly below that for 2015 due to the underperforming tomato processing business.