Singapore-based Olam International Limited (“Olam”), a leading global integrated supply chain manager of food and industrial raw materials, today announced that it has successfully completed a new round of capital raising, by receiving private equity funding of US$45 million (S$78 million) from three investors of global standing.
The investors are the International Finance Corporation (IFC), the private sector arm of the World Bank Group, Temasek Holdings and AIF Funds Management Limited (a Hong Kong based private equity firm).
Said Mr Sunny Verghese, Group Managing Director & CEO: “We are delighted to have successfully completed the first round of our capital raising exercise which is undoubtedly a key inflection point in the development of our company.
More importantly, we are encouraged to win the backing and confidence from such high quality investors. This strong support will further enhance our competitive position as we continue to build and consolidate a global leadership position in each of our businesses.”
Olam was promoted by the Kewalram Chanrai Group – which has a well established entrepreneurial track record, proven across various businesses and geographies, since its inception in 1860. Olam began its operations in 1989, initially exporting Raw Cashew nuts from Nigeria. Today, the Company has a portfolio spanning 12 product groups, and operates with wholly owned subsidiaries in 36 countries, servicing customers in over 50 end user markets.
Olam has built a strong global leadership position as the “preferred supplier” in most of its businesses. This distinctive position in the industry is because of its integrated presence across the entire physical supply value chain – right from the farm gate in the producing countries to the factory gate of its customers in the consuming markets. The origination is mainly from emerging markets, primarily across Asia and Africa, with recent expansion into S. America, while the consumption is mostly in the developed economies. Olam has built its competitive position by combining its origination skills (in sourcing, primary processing and logistics) with global market strengths (in terms of direct access to end users, trading and risk management, and superior market intelligence).
Added Mr Verghese: “In the space of just 14 years, we have grown into a S$2.0 billion multinational company with a portfolio of 12 products and operations in over 36 countries. We have established a reputation for ourselves as a reliable counter-party for large, blue chip customers spread across Europe, USA, and Asia. We offer a one stop supply chain solution to our customers – in products and from markets where default risks have been traditionally high.
Over the years, we have developed very close working partnerships with our customers, by tailoring our services to meet specific customer needs – whether its by way of providing them with hedging facilities, just-in-time delivery or customised product grades and qualities.”
Olam’s customer list includes a host of large multinationals such as Nestle, Sara Lee, Mars, Kraft, Cadburys and ADM, along with a mix of smaller end users in niche markets. Olam has built a strong sales and distribution network with its marketing offices in the USA, UK, Holland, France, Italy, Poland, Russia, Dubai, Singapore, China and India. The Company has also developed distribution and marketing arrangements in smaller markets with brokers/agents and logistics service providers.
The Company has been operating in Singapore since 1996, when it relocated its Head Office from London. The top management team for all its businesses as well as all the corporate functions are now located here. Said Mr. Verghese: “The move to Singapore coincided with a major growth and expansion phase for our Company. Despite the twin jolts of the Asian financial crisis in 1997 and the negative effects of the subsequent stock market collapse across the region, the last seven years have seen the Company grow its sales revenue at a CAGR of 28% with its after tax profits growing even more rapidly at a CAGR of 45% over the same period.
Such rapid growth could not have been supported without the help of our Banking partners, the logistics support service network, the strong IT infrastructure and services as well as the skilled manpower available in Singapore. The proactive actions by the government to enhance the cost competitiveness of Singapore as a business hub, have also contributed to our success.”
2003 has been a year of significant achievements for Olam.
Olam has received public recognition for the effectiveness of its business model and for innovating successfully to find growth and create value in low growth and low margin markets. It was nominated as one of the six finalists under the Environment, Energy & Agriculture category in the Computer World Honors Award. The Computer World Honors Program is an initiative between the leaders of the global IT industry and the Smithsonian’s National Museum of American History to identify, document, archive and honour the work of organisations that have applied technology innovatively in their respective fields.
It has also been recently featured in a Harvard Business Review article titled “Growth outside the core” authored by Chris Zook and James Allen (HBR December 2003 issue), alongside companies such as Nike, Vodafone, Dell, Li & Fung etc. as a globally successful example of a company that has achieved sustainable profitable growth in difficult, low growth markets.
Olam was also featured as an anchor case in a recently published book titled “Beyond the Core: Expand your market without abandoning your roots” authored by Chris Zook and published by Harvard Business School Publishing Press. Olam was one of the only two examples from Asia, while the other examples featured includes well recognized global leaders like Nike, Dell, Walmart, ST Microelectronics, Lloyds Trust Bank, UPS, Vodafone etc.
Despite tough market conditions during last year, the Company posted excellent results for the FY 2003 – growing its revenues and earnings at 21% and 19% respectively. The company expects to grow its sales revenue and after tax earnings by 12% and 18% CAGR respectively, on a conservative basis, over the next three years.
“We have identified a host of growth opportunities for value chain integration in various businesses – both upstream in value added processing as well as in downstream distribution in the consuming markets. In terms of geographical expansion we see a lot of our future growth coming from the BRIC countries (Brazil, Russia, India and China). While we have been present in India for some time, we have set up direct operations in the other three markets over the last 18 months. We are therefore uniquely poised to capitalize on the exciting growth opportunities offered by these markets in the coming years.
While the Company has performed well in the past, we are even more excited about the future. With the enhanced equity capital, as well as the involvement and support from our new shareholders, we are well positioned to take on the challenges of this next phase of our evolution,” said Mr. Verghese.