Presentation on theme: "22 Olam is a leading global integrated supply chain manager and processor of agricultural products and food ingredients Presence across 16 platforms,"— Presentation transcript:
22 Olam is a leading global integrated supply chain manager and processor of agricultural products and food ingredients Presence across 16 platforms, 5 agri- commodity segments across 4 value chain steps Over 18,000 employees operate in over 65 countries delivering to over 12,300 customers worldwide Olam is listed on the Singapore Stock Exchange In 2007 Olam purchased Qld Cotton Cotton: #1 private ginner #2 merchant globally Who is Olam?
33 1989 Start-Up 1 product - Cashews 1 country - Nigeria 1 end Market 4 customers 2 employees S$0.15m Book Value S$0.15m Mkt. Value FY 2013 20 products 65 countries 50 end markets 12,300 customers 18,000 employees S$15.7 bn turnover S$444.6 mm PAT S$6.3 bn Mkt. Cap Transitioned from a Trader to an Integrated Supply Chain Manager Sales CARG of 51% and PAT CAGR of 48% over the last 21 years History of Olam
44 CUSTOMER Managing Risk at Every Stage Integrated from farm to factory gate ORIGIN End-to-end Supply Chain Capability Marketing Solutions & Services Farming Origination LogisticsProcessing Trading & Distribution Our Business: Supply Chain Manger of Agricultural Raw Materials
55 A$513 per bale Futures Exchange Rate Basis Components of the cotton price
66 A Futures contract is a contract between two parties to buy or sell a specific quantity and quality of a product at a given price for delivery at a specified time Futures contracts were originally used solely by producers and consumers for hedging. They are now also used for speculating by individuals and large companies Futures Contracts
88 Cotton Futures are the most volatile of the three components of the price and therefore needs to be the most closely monitored Every cent movement in the Futures price will change the cotton price by approximately $5 per bale The Australian $/bale price is calculated using the closing price of the May contract - if this is not available we use July or December Impact on Cotton Price
99 Basis is the difference between the cash price and the futures price. It occurs due to differences between the product that the Futures contract represents and the worth of the product in the marketplace This is a variable cost Basis
10 Example: July 2014 Futures 85.61 US cents/lb QC 2014 Cash Price 90.36 US cents/lb 2014 Buy Basis = Cash price - Futures = 90.36 – 85.61 = 4.75 US cents/lb This is referred to as a basis of 475 pts ‘on ’ Calculation of Basis
11 A basis will generally strengthen (increase) on weaker NYF price A strengthening of basis generally signals improving demand in the export market – this generally occurs in a weaker market A basis will generally weaken (decrease) in a firm NYF price. This generally indicates a lack of demand in the export market. Relationship between Basis and Futures
12 The exchange rate is the value of one currency relative to another - eg 1 AUD equals 0.8915 USD The exchange rate trades 24 hours a day starting the day in New Zealand and then moving to Australia, London and then New York The exchange rate can be traded with all banks Exchange Rate
13 Exchange Rate High @ 1.0545 (11 th April 2013) Low @ 0.8684 (24 th January 2014) Average @ 0.9548 V Today @ 0.8965
14 Price = (Futures price +/- Basis ) x 500 lb/bale Exchange Rate = (0.8561 + 0.0475) x 500 lb/bale 0.8867 = A$510 / bale Calculation of Cotton Price
15 1.Cash Fixed Bales 1,000 bales @ AU$510/bale 14 days after ginning payment OR Call Pool payment (75% July/25% Dec) 2. On-Call Fixed Bales 1,000 bales @ 90.65 US c/lb FX to be fixed prior to FND 14 days Payment OR Call Pool Payment 3. Balance of Crop Flexibility regarding number of bales Discounted from cash price Marketing Contract Types
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