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Investor Relations

Differentiating through process and engineering excellence

By Richard Hedges, Senior Vice President, Olam Grains

Our entry into grains manufacturing was marked with the acquisition of Crown Flour Mill (CFM) in January 2010. With five mills at two sites in Lagos and Warri Nigeria, we had acquired a theoretical daily grind of 1,590 MT of wheat. However, at the point of handover, the mills had sub-optimal performances with up to 22% downtime. They were also running under capacity and produced a low flour yield.

Today, not only have we significantly upped capacity in Nigeria, we have also successfully expanded across Sub-Saharan Africa with mills in Ghana, Senegal and Cameroon, all of which have achieved world-class productivity and product output. With our recent purchase of BUA Group’s milling and pasta assets, our daily wheat grind now stands at 6,140 MT per day with a further 1,200 MT due to come on stream in Q4 2016. In less than six years, we have increased our milling capacity by five times, with significant productivity and cost efficiencies across the board.

Our operational success has been in large part due to a relentless focus on technical discipline and engineering efficiency.  This applies to every aspect of our operations, be it in mill construction, raw material sourcing, milling or product innovation.

Extracting efficiencies from the ground up

Over the last six years we have completed five major projects in four different countries. Each project has been on-time and on-budget.  We did this by using the “bottom-up” approach for all projects, with team members on the ground planning and following through with entire projects, from costing to design to construction.

The key advantage of this approach is accuracy and ownership. The same team members who have the requisite experience from past projects are the ones who plan and commit to a fixed timeline and budget.

Our project teams have also been able to make significant improvements with each additional project we have taken on. For instance, in our ‘sister’ mills in Senegal and Cameroon, the team leveraged its experience from designing the Ghana mill and was able to reduce the building and machinery capital cost by 10%. Additionally, we were able to make more meticulous adjustments to layout, processes and systems in the planning stage to ensure the mills are hygienic (as infestation of finished products can be a challenge in Sub-Saharan Africa due to its tropical climate and lack of cold storage and logistics facilities) and are easier to run, thereby reducing potential labour costs.

Even when it comes to mill design and machinery, the strength of our technical expertise has made a defining difference. The technical team’s ability to compensate for process design capability shortfall from non-mainstream suppliers enabled us to source at a significant discount compared to their closest competitors.

Saving on operational expenditure

In milling, wheat procurement makes up 75% of the entire production cost. With a capacity to mill 2 million MT of wheat every year, our ability to extract cost savings in wheat sourcing has a big financial impact.

To tackle this, we first have to understand the kind of flour consumers want, which in turn determines the wheat and production processes needed.

As such, we regularly undertake market mapping to identify trends and corresponding variables between consumers and products so we are able to translate regional preferences into specific flour types. These can be varied – for example in Nigeria we sell up to 10 different flour types.

With market insight and the sourcing advantage from our global network, we are able to use wheats from mixed and varied origins, allowing us to maintain healthy gross margins in thinly priced competitive markets.

Additionally, we have developed strong internal expertise that has allowed us to move away from buying enzyme cocktails from additive suppliers that are used to improve flour quality, and we now use our own customised enzyme mixes. Our spread across four countries also means that our teams are able to share knowledge and best practice in enzyme use to produce and improve on the flour desired by our customers.

Improving productivity

The backbone of our operational success is our strong milling and engineering team. Through their continual improvements, yields have increased by up to 5% at all mills. The uptimes at all our mills, including mills up to 30 years’ old, are world-class and consistently achieve more than 99% uptime.

We have also optimised power consumption – a significant direct cost – by reducing power use in existing plants and designing for higher power efficiency in new plants. For instance, our Senegal and Cameroon plants run with 25% lower power consumption than some of our older mills. Our initiatives to enable this include using renewables for lighting, section wise power monitoring, use of variable speed drives and single drives for multiple applications.

Product innovation

Product innovation is another important component in improving operations. The milling industry in Sub-Saharan Africa is characterised by significant overcapacity, so before expanding our capacity, we needed to have a clear strategy for growth.

Coming up with new higher-value products has been part of this process. For instance, we launched a new premium brand using a unique technology which involved de-branning wheat prior to milling. We were able to come up with an extremely white and speck-free flour and semolina by passing the wheat over carborundum stones (a type of industrial abrasive material) to remove up to 3% of the bran, before subjecting it to traditional milling. We then leveraged the existing brand equity of the Mama Gold brand, a well-known Olam rice brand, to launch this new flour product.

Our different actions to improve technical efficiencies collectively have enabled us to grow from strength to strength. As we continue to extract operating leverage from our network of mills, we envision further improvement in productivity, cost and product quality.

Mill under construction in Port Harcourt
Above: Mill under construction in Port Harcourt, Nigeria.