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Value chain review and analysis

S$3.9 billion of total investments already made are expected to give incremental earnings over time.


In the Upstream segment, while fully contributing (mature) businesses such as almonds met targeted returns, other fully contributing businesses like Dairy and Rice farming had not yet reached full potential in terms of earnings expectations due to underperformance in previous years, although these had shown positive trajectory in 2017. This led to an EBITDA/IC return of 7.8% against our target of 15-18%. A total of S$1.8 billion of invested capital is still gestating (not yielding any EBITDA) or partly contributing (not fully mature). Gestating businesses, such as the Coffee and Rubber plantations, are expected to move into the partly contributing stage as they grow, while partly contributing ones, mainly the palm plantations in Gabon, are expected to become fully contributing as they reach full maturity.

EBITDA/IC for the Supply Chain segment was dragged down by the underperformance in Coffee and Cocoa to 7.3% in 2017 (2016: 8.8%) even as working capital optimisation initiatives helped reduce overall invested capital deployed by 11.2% from a year ago.

In the Mid/Downstream segment, a total of S$4.1 billion of invested capital were in fully contributing assets and these include the wheat milling businesses in West Africa, the Edible Oils refining and distribution business in Mozambique as well as the GSEZ investments in ports, which came onstream in 2017. These yielded an EBITDA/IC return of 12.4%, which is below target as the result was impacted by the underperformance in the tomato processing and Packaged Foods businesses. Some S$2.1 billion of invested capital was partly contributing as these businesses had not reached steady-state levels of production.

All in all, S$3.9 billion of total investments already made are either gestating or partly contributing, which means these investments are expected to give incremental earnings over time as they grow to full potential.