Ladies and gentlemen, a very good morning to you, to all of you who are gathered here in this room with us, and as well as those who have dialed into the live webcast of Olam Group's consolidated earnings for the six months ended June 2024. I'm Hung Hoang of Olam Group Investor Relations. I'd like to draw your attention to this cautionary note on forward-looking statements here on this slide. You can also read this on your mobile device if you scan the QR code that is provided to you, or download the presentation on the webcast. Our leaders here at Olam Group, Co-founder and Group CEO, Sunny Verghese, Group CFO, N. Muthukumar, and CEO of OFI, Olam Food Ingredients, A. Shekhar, our presenters for today's briefing.
So as per our usual protocol, Muthu, as Group CFO, will take us through the group's consolidated results and provide also the context in which these results have been achieved. As we move into the operating group financials, Shekhar, as OFI CEO, will walk us through OFI's segmental results, after which Sunny, as the CEO of Olam Agri, will cover Olam Agri's financials, as well as those for the remaining Olam Group. Outlook and prospects for the group will likewise be covered by Sunny before he ends with the final messages for us to take home. We have, of course, time allocated for questions, and if you are participating online, you can start posting your questions now, and we'll address them after the presentation. So thank you very much for your attention. I'll p. ause and hand over to Muthu.
Thank you, Hung Hoang. Once again, a warm welcome to all of you, ladies and gentlemen, for the group's first half 2024 results. As usual, I will start with the Olam Group's highlights, financial highlights for the first half at a glance. We had 24.3 million tons of volumes in the first half, 9%, 13.9% growth year-on-year, with revenues touching $27 billion at 9% growth, with EBIT at $888 million. Here again, an 8.3% growth. Many of you in the region are aware about the significance of 888, an auspicious number.
We had a PATMI steady at $48 million, offset of the increase of the EBIT by higher financing cost because of increase in working capital requirements and higher interest rates, which I'll talk about later in the other slides. Consequently, our gearing, which is the headline gearing, increased from 1.74 times to 2.6 times.
However, important to note is that bulk of the increase has been because of the increase in working capital requirement, because of volatile and elevated commodity prices that we saw in our portfolio in the first half of this year, which we believe that it'll ease in the third quarter of 2024, had resulted in just a marginal increase in our adjusted gearing from 0.86 times in first half of 2023 to 1.04 times in H1 2024. So very resilient EBIT growth of 8.3% at $888 million. Here, highlight is OFI delivered a 71.5% growth in EBIT of $475 million, led by very strong growth in the ingredients and solutions segment, and had an adjusted EBIT of roughly $500 million.
Olam Agri achieved a EBIT of $512 million, an 8% reduction on a year-on-year, particularly after a very strong H1 2023. As I had indicated earlier, PATMI stood at steady $48.1 million, significantly impacted by a higher net interest cost and increased taxes that offset the EBIT growth. So I wanted to talk, dwell, a little bit on the higher interest rates and challenging market conditions that we witnessed in the first half of 2024.
As you may see, there are a significantly higher working capital, up from roughly $10 billion to $14.5 billion, a $4.5 billion increase in working capital on a year-on-year basis, primarily due to increase in commodity prices, particularly in the OFI operating group, such as cocoa and coffee, and that had impacted, cycle time, gearing, and our free cash flow. Despite this, I'm pleased to report that we have managed the risk well and delivered commensurate margins and returns, and, and more importantly, keeping invested capital growth much lower, below the rate of the input price increases that we saw in our portfolio. Needless to add, sufficient liquidity of roughly $24 billion available to us as at end of June 2024, and we expect some easing of the working capital pressure in the following quarter.
The board of directors have declared an interim dividend of 3 cents per share, consistent with what we declared in the first half of 2023, which also stood at 3 cents per share. We take a consolidated results by operating group. As usual, 91% of volumes was delivered by Olam Agri, and with OFI contributing 7% of the volumes out of the total 24.3 million tons. The remaining Olam Group contributed to 2.2% of the volumes. Revenue stood at $27 billion, with 62% contributed by Olam Agri, and roughly 36% by OFI, and the remaining by the rema- Olam Group. EBIT, a strong contribution from both Olam Agri and OFI. Roughly 58% of the EBIT at $512 million was contributed by-...
Olam Agri, and $475 million of EBIT, which is 53.5% of the $888 million contributed by OFI, as indicated earlier, a 71.5% increase year-on-year. Invested capital also grew, as I had highlighted, to $25.8 billion, mainly due to increase in working capital requirements, particularly in the OFI operating group, more so in cocoa and coffee, and I'm sure Shekhar will talk about it more in detail as part of the operating group performance for OFI. Sales volume was up at 13.9%. As you can see, the bright orange there, bulk of the increase in volumes is in Olam Agri, roughly 3,000,000 tons, primarily contributed by cash trading of grains and oilseeds.
Which had a slow start in the H1 2023, particularly in South America, due to delayed harvest and port conditions that we saw in Brazil and Argentina. And with the normalization of our trading volumes, the volumes have increased by 3 million tonnes year-on-year, to 24.3 million tonnes for the first half. We had an improved operational performance, with EBIT growing 8.3%. OFI contributed $198 million of growth, EBIT growth, during the year, with Olam Agri marginally declining by $47 million, and the remaining Olam Group continue to have some negative EBIT due to gestating assets and exiting assets contributing to the negative $83 million. Overall, adjusted EBIT stood at $916 million. And here again, Shekhar will talk about it more during the OFI operating group performance.
Operational PATMI stood at $73.5 million, as I had reported earlier. PATMI was steady at $48 million, primarily due to, you can see, the net finance costs increasing by $217 million year-on-year, with taxation also marginally increasing by $11 million, but resulting offsetting the strong EBIT growth to have a steady $48 million PATMI for the first half of 2024. I talked about the higher working capital deployment earlier, and that had led to the invested capital increase and consequent increase in the gearing ratio. You can see that the bulk of the increase has been primarily from increase in working capital from roughly $10 billion in the first half of 2023 to $15.5 billion in the first half of 2024.
Primarily due to increase in elevated commodity prices, resulting in higher inventory and margin deposits for some of our commodities in our portfolio, and also some transitory increase in receivables for shipments that were made in the last week of June 2024. And as I had indicated earlier, we expect the working capital pressure to ease in the Q3 of 2024. Consequent to the increase in working capital, there is a direct correlation with the increase in net debt, and that had resulted in a gearing going up, headline gearing going up from 1.74 times to 2.6 times. However, very important for us to note that adjusted gearing, after adjusting for readily marketable inventories and secured receivables, only marginally increased from 0.86 times in H1 2023, to 1.04 times in H1 2024.
Free cash flow, because of, increase in working capital requirements and consequent, increase in net debt, had a $5.4 billion of negative free cash flow to equity, but primarily contributed by the changes in working capital of $4.9 billion. As indicated earlier, we have sufficient liquidity with diversified pools of capital, with $3.5 billion of cash, roughly $8 billion of readily marketable inventories, $3.2 billion of secured receivables, and more importantly, $9.3 billion of unutilized bank lines, totaling up to $24 billion of sufficient liquidity, and having comfortable headroom of $1.7 billion.
As you all know, we had announced recently, after the H1 2024 results, secured an 18-month, $1.5 billion loan facility at the group level to refinance the existing debt. I would like to take this opportunity to thank all our bankers who are present here, as well as who are watching us remotely, for your continued support that you have given us through the reorganization of the last three and a half years, and continuing, and very valuable your support has been for us to ensure that we are on the right path of what we intend to do as an organization in terms of the reorganization goals that we intend to achieve. With that, I will hand over to Shekhar for taking us through the OFI operating performance. Thank you.
Hi, good morning, and a very warm welcome to you all, and thank you, Muthu. So Muthu has already kind of positioned me for a few of the changes that he indicated. I must admit, in 33 years of work life in this business, this half has been quite an interesting and intense one. A lot of you would have seen the headlines on the cocoa prices, which kind of moved up three times during the six months, went up and down. Coffee prices, 50% up. Two products that are not reported very much, the cashew prices are about 50% up from six months ago, and pepper prices have doubled. So that covers four out of the five platforms that OFI participates in.
To say this was an interesting half would be a gross understatement. But nevertheless, very pleased that while all this has been happening, the business has remained very focused on optimizing the risk, because the risk in such volatile market environments is the first thing to manage, managing cash flows, and I will come to the increase in capital and how that capital has been deployed. But you'll see that the increase in capital compared to the rates of increase in prices that I talked about is a small subset of that. So we have managed capital despite these kind of increased prices in a very efficient form. So that's the second part. And then ensuring that we get appropriate returns for the risk-adjusted capital deployed and the risks and volatility in the marketplace.
So we have been focused on all three across all our platforms, and that's probably the number 1 point that I want to make. Net of all the noise of market prices, which do impact business, but we have stayed focused on managing our business for the business that it is and the business that we are building. So that's point number one. The second is, if there was any time where our integrated business model has been tested and validated, this first half shows that across the 4 platforms that I talked about. Ever since the creation of OFI, we have built these platforms over the last 30 years and 35 years.
But in the last 5 years, we have had a COVID impact, we had a COVID recovery, we had a war, we had energy crisis, we have had inflation, we have had interest rate increases, and then we have had this period. So the platforms and the business has been subjected to all this, and the capacity of this platform to withstand this is because the integrated business model that we have built and established over the last 35 years as Olam. And that resilience is what is showing up today. So it's not something that we managed to navigate through efficient trading or risk management alone. It is the capacity on the ground to secure volume. It is the ability to provide access to those volumes to our customers, and continue with the differentiated sustainability impact, innovation impact that we provide.
And the ability as an integrated model to do this through this period, and getting the support of our customers, ensuring that we support our suppliers as well, and manage this with our heads down, managing the risk, cash flows, and returns, has been the second very critical thing. So this half shows more than the results of this half, shows the importance of this integrated business model going forward. The last bit is, which I again want to say that in all this noise, we could just forget about what we are building. But, we have tried to stay focused on ensuring that the OFI, the strategy that we have presented to you over the last five years, we have stayed true to that strategy, focusing on deepening the differentiation that we have been building.
So you would have seen the launch of the, Choices for Change, which is our refreshed new sustainability strategy for OFI, and that is our commitment for the next, in 2030, what we want to do in terms of actually creating the impact and making differences in the material areas that matter to our business. You would have seen the announcement of the new and expanded innovation center in Chicago and Shanghai, and the fact that we have commissioned our private label plant in, US for nuts. So we continue to focus on deepening our differentiation, continue to focus on growth, while we have managed to deliver through this period. So those are the three points I want you to kind of keep in mind in terms of what this half means to our business and what this half has really demonstrated.
So moving on to the numbers, which I'm sure you're quite keen to look at. So on a headline level, EBIT has grown 71%, which is a very good reflection of the risk return that we wanted in this or have demonstrated during this period of immense volatility and elevated prices. If you look at the number on EBIT per ton, which really is what we are focused on in driving the margins. So that is a very important number, and that's been a number that's been growing over the last five years, and that's been the focus area. There's been ups and downs, but over a five-year period, we have demonstrated increase in that margin, so the focus has not been on volume. Overall, OFI volumes, as Muthu pointed out, is roughly down by about 2%.
So the focus has been on ensuring that we improve margins and dollars per ton, because margins, again, because the price changes could mean different things, but it's a margin per ton, which is a very critical focus. And if you see that in the ingredients and solution, which I will just talk about in a minute, that has been even greater. So that's the second point I'd like to highlight. And if you look at the difference in EBIT between ingredients and solution, which grew at roughly about 112%. So the focus for OFI has been in building the ingredients and solutions part of the portfolio, while the global sourcing is a platform on top of which we are building the value-added business.
But that combination has both grown with real margins coming up in what we've been able to supply to our customers on the ingredient solution side. So that's on the EBIT growth, the EBIT per ton, which I wanted to focus on. Coming to the invested capital, Muthu pointed out that on an overall basis, we have had a roughly $5 billion increase in working capital. It's almost entirely in OFI, if you look at the total. And the second point is that it's almost entirely in hedging our sold inventory, the value of the sold inventory that we are holding, and the secured receivables we are holding. So which is why the change in our gearing, net of RMIs, has been very nominal.
So it is, and all of you, and many bankers in the room who understand, this, it was very important for us to ensure that we secure our sold contracts, remain hedged during this period, and ensure that we manage the risk, so that we can continue to supply the contracts by maintaining and if not locking in our margins, through this period. So that's been very important. So while there is a $5 million increase in working capital, we believe that this will be as the, sales flow through the books, this money will come back, and if the prices adjust, then again, this capital, the, the value of this capital will come back.
So it is not something we are worried about, it's something that had to be managed, and we believe that we have managed it well, keeping the risk, cash flows, and returns, all, optimized during this period. So, that's the on the, invested capital side. Probably, the segmental picture gives it, a better look. So the focus on global sourcing has been to ensure that we manage all the sustainability programs for our third-party, customers. But real focus in global sourcing has been to ensure that we fill up the capital capacity in manufacturing that we have. And that is really where the global sourcing has really proven the spread, the depth, the capacity on the ground that we have built across these platforms that has been tested during this period.
And the global sourcing value and the EBIT is not the most important thing. It is the basis on which we have been able to keep our factories going and make the ingredients and solutions which matter. And so the importance of global sourcing is not in the 2.1% increase in EBIT. It is a platform it has given to our ingredient solutions ability to deliver the EBIT growth there. So the increase in invested capital is kind of proportionate to that. Again, much lower than the price increases that were there in the raw material products that we talked about.
So roughly out of the $5 billion, $2 billion increase in working capital, there's very little movement in the fixed capital, almost $2 billion increases on the working capital side. And then if I move to the ingredient solution, this is where we've seen real value. It's almost doubling the EBIT per ton, 100 more than 100% increase in EBIT, and roughly $3 billion increase in invested capital here. And a few things to point out on the OFI side, which we have been also discussing in the past. So obviously, a lot of the value here has been in areas that we've been investing over the past few years.
So cocoa, the entire ingredients of the cocoa, the products, the liquor, the powder, has obviously been in significant demand during this period of volatility. That's been one area which has grown very well during this period. We've also installed a new dairy facility in New Zealand, and pleased to say that we are already built up capacity in less than 12 months, as well as an expansion in the Malaysia plant that we had, that's also now full up on capacity. So both those have added to the ingredient solution value this year.
The nuts private label, as well as the spices private label, in Olde Thompson, which had struggled last year, the Olde Thompson part has really come up, fighting the price increases that happened, the cost and efficiency that we planned has happened, and we've got some really good value customers and new SKUs going. So that business is on track, and a part of this value is coming out of the change in the EBIT from the spice private label business in the U.S. And the nuts private label has also done very well during this period.
So there's been an all-round performance in the ingredient solution business, coming out of the investments we have made over the last few years, and that is quite pleasing, that this is not in one product or the other, one platform or the other, it's a well-rounded performance. And again, $3 billion of invested capital increase, all predominantly in working capital, has been in this segment. So, overall, what I'd like to say again, is the same 3 things. It's been a very intense period, a very volatile, and a very turbulent period compared to even the usual volatility we are all used to.
We have navigated it well, but must also say equally that the volatility is not over as yet, and we believe that the next 3-6 months, we'll have to watch very carefully and be very navigate these markets cautiously. We hope what we have performed in the first half, we can sustain in the second half, but it is still not over as yet, so there is still going to be some yet to navigate during this period. We are focused on growth, we are focused on the capabilities that we are developing, and that's remained a focus.
Most important of all, we are absolutely committed with the model that we have built and the capabilities we have built to support our customers and support the suppliers, the supply base that we have built, and that's going to be the focus for the next six months. Thank you, and I'll hand it over to Sunny, and take questions, in the Q&A.
Thank you, Shekhar. As far as, so as far as the Olam Agri business is concerned, the operating entity is organized in three parts. So we have a food and feed platform, which has two sub-segments: an origination and merchandising sub-segment, as well as a processing and value-added segment. And then in the fiber, agri-industrial, and ag services, which is a second platform, it is organized and reported in one segment. So we will take you through the performance of the two platforms, comprised of these three main segments. So starting with overall, Olam Agri first half performance has been a drop in EBIT of roughly 8.4%, which means a SGD 47 million. These are all in Singapore dollar numbers. A SGD 47 million lower performance than the first half of last year.
The principal drivers to the contribution between the three segments, 21% of the operating profit was contributed by the origination and merchandising segment, and about 21% was contributed by the fiber, agri-industrial, and ag services segment. Whereas the processing and value-added segment compensated somewhat for the underperformance in these two segments or the lower performance in these two segments, compared to the processing and value-added segment. So that has contributed to about 58% of the earnings. The total operating earnings for the first half was $512 million, which is, as I mentioned, 48% lower. The EBIT per ton has been in the historical range, which, as you have seen in the last three years, has been between $19 per ton to $24 per ton.
Last year, we had an exceptionally high margin year, where we generated about $29 per ton. As against that, this year, we are generating about $23 a ton. Sorry, sorry. This year, we're generating $23 a ton, which is at the high end of the historical margin per ton. So the historical margin per ton, as I said, was between $19 and $24. This year, we are at $23, but this is lower than the exceptionally strong first half of last year. In terms of invested capital, we had an increase of almost SGD 1 billion of increased invested capital, one of which was a timing difference. We received or collected receivables of roughly $507 million on the seventh of July, which is after the closing of the year.
Therefore, the real increase was roughly $500 million of working capital, largely on account of increased cycle time in the origination and merchandising segment, and also in the fiber, agri-industrial, and ag services segment. We would expect this to start normalizing from the second half of the year, as also the commodity prices in the two segments, origination and merchandising segment, as well as in the fiber, agri-industrial, and ag services segment, are also declining, and we expect the markets in the second half to be softer than what it was, in particularly, the first quarter of 2024. If you move on to the origination and merchandising segment, we had a decline of roughly $47 million of operating profits from last year to this year. A 31% decline, led by a margin decline from $10 to $6.
$10 is an exceptionally high cyclical margin. $6 is more in the range that we had between 2019 and 2022, which is roughly the normalized range of operating margins in this segment. We had about roughly $600 million of growth in invested capital in this segment in the first half, of which almost $507 million is accounted for by merely a timing difference, so no real material increase in invested capital in this segment. If you move on to our processing and value-added segment, we've had a growth in operating profits from $283 million to $292 million. It's about a 5% increase, but we had an exceptionally strong first half last year.
The margins, however, have been lower, well within the normal range of margins, but not a repeat of the very high cyclical margins that we enjoyed last year of $141 per ton. Average margin this year was $122 per ton in this segment. Our working capital was more or less... Sorry, total invested capital was more or less flat in this business, although we have made two investments in terms of fixed assets. One was the acquisition of Avisen, which is the animal feed plant in Senegal, which has now been completed in terms of integration of the acquired facilities. And we have very strong performance in the asset that has been acquired, much better than what we had hoped, what we had expected, what we had planned for.
And secondly, we are in the process of commissioning in the last quarter of this year the soluble, I mean, the soybean processing facility in Nigeria as well, as far as this segment is concerned. In the last segment, which is our fiber, agri-industrial, and ag services segment, there are some changes in this segment. So firstly, the sugar business as well as our ethanol business, which was classified as a deprioritized exiting assets in Olam Agri. Because we have invested in the biofuel complex and the multi-feed raw material biofeed. We have now decided to continue to support that business, but we have moved that business from the remaining Olam Group to Olam Agri. In Olam Agri, this has now become part of the fiber agri-industrial and ag services business.
This also does apply after the exit of a fund business and the closure of our quantitative fund business. We have taken the risk management solutions business and also put that under the under this platform, fiber, agri-industrial, and ag services. And this comes under the ag services business, the risk management solutions business, which was erstwhile in the origination and merchandising business, and the food and feed segment has now moved to the fiber agri-industrial and ag services business. So the fiber agri-industrials and ag services business includes fiber business, which is our cotton business. It includes our agri-industrial businesses, which includes really three main businesses, which is our rubber business, our wood business, and now our sugar and ethanol business.
And then it includes the ag services business, which included our risk management solutions business, our trade and structured finance business, which are all now part of the ag services business. In the future, when we report, we will show you the disaggregation of these three pieces, which is fiber, agri-industrial, and ag services. So the decline in operating profits was about 10%, 10.6%, from $123 million last year in this segment, to $110 million this year. The margin per ton has also declined from $120 to $92, so this is more reflective of the historical cyclical margins, through the cycle margins. Last year, in all three segments, we had exceptional margins across all the three segments.
From invested capital standpoint, we had an increase of 23% in this segment, from $1.95 billion last year to about $2.4 billion this year. And some of this was because of higher working capital and some increases in fixed capital as well, particularly, as I mentioned, in the sugar and ethanol business, there is a significant increase in capital. $58 million is the cost of the project for moving into ethanol in that segment. There's also been increased working capital in the cotton business in particular, because of longer cycle times as a result of destruction of demand in the cotton business, as well as increased working capital investment in the commodity financial services business, largely on account of the risk management solutions provided to cocoa customers.
Although that cocoa business is housed in OFI, the risk management solutions for people who are buying physical cocoa that this business or this segment provides for also had significantly higher working capital involvement last year, I mean, 24 compared to last year. So that is the business overview. We'll be happy to take more questions on the underlying business performance. But let me finish the presentation, and we'll open up the floor to questions. The second part of what we wanted to present today was the remaining Olam Group. The remaining Olam Group, as all of you are aware, has some deprioritized assets earmarked for exit. Second, it has some gestating businesses, which are continuing businesses that we are continuing to nurture to full potential. And thirdly, it has some startup businesses, particularly the ventures businesses, as part of the segment.
There has been a significant change in performance from an operating profit standpoint, from a SGD 17 million negative operating profit for the remaining Olam Group businesses. It has declined from SGD -17 million to SGD -99.5 million, let's say SGD -100 million. Most of that decrease is coming from both our deprioritized, exiting assets, decline in the performance in that segment, and also in our continuing gestating assets, which has also had worse performance in the first half of this year compared to the first half of last year. The incubating businesses at a smaller loss than the losses that we incurred last year. So against a SGD 33 million loss in this segment last year, that has come down to about SGD 24 million this year.
The invested capital has more or less remained flat from $2.65 billion last year to about $2.62 billion this year. The deprioritized exiting businesses, we will exit over time. We will not do any fire sale of the business and release that capital from the deprioritized businesses. And from the gestating business, we will improve the operating performance and convert it from a loss situation into a profit situation. We have a few specific plans that will allow us to achieve that transformation in the gestating businesses. And as far as the incubating businesses is concerned, primarily the Nupo Ventures business, we have really two major ventures businesses. We expect that we will reduce the losses from this business towards the end of next year after which then both those ventures will become profitable and contributing.
So that's on the remaining Olam Group. With that, I want to move on to just a brief commentary on our business outlook and prospects. The first point that I want to highlight is that we expect operating conditions to remain tough, particularly in light of the two wars that are underway, both the Russia and Ukraine war, as well as the Arab, the Palestinian-Israeli conflict. There is a lot of uncertainty about how this will develop, and we are assuming that we will continue to see a lot of uncertainty generated by these two situations. I think the macroeconomic conditions, whether growth will slip into a recession is a question mark.
Our view is that we will see as a result of these developments in the macroeconomic front, that we will see inflationary pressures easing and potentially interest rate cycle to turn, with potentially a first interest rate cut even as early as September, but definitely before the end of this year. And if unemployment is rising and recessionary conditions are a potential eventuality, then we would see more recessionary market conditions and therefore potentially lower interest rates, which has a definite impact on the prospects and performance of our business. I think Shekhar has already outlined the prospects for OFI, so I won't go on to repeat it.
As far as Olam Agri is concerned, the strong performance of the business in the last few years and the performance this year, as all of you have seen, that we have already announced... We've already seen the announcements from our peers, four of our peers, including one which is unlisted, Cargill is unlisted, but they announced the results yesterday, and Wilmar has announced its results today. So three out of the four peers have had significant decline in earnings in the first half of this year compared to the first half of last year, with, Bunge's first half earnings declining 75% and ADM's first half earnings declining 44%, and Cargill's first half earnings, not quantified, but substantial decline qualitatively that they have mentioned in their first half results briefing.
So the only of the four peers that are listed is only Wilmar, that has bucked the trend and reported a 5% growth in earnings for the first year. And Olam Agri has reported an 8% decline in earnings for the first half of the year. We will see how the second half pans out, but we believe that, we will be able to maintain the first half performance for the second half as well, and that we won't be way off our plans for Olam Agri in the second half. Finally, as far as the remaining Olam Group is concerned, I've already explained to you the three constituent segments and how it is doing.
It has been a worse performance than last year, but we hope we will improve this towards the end of this year, in the second half, as far as the remaining Olam Group is concerned. With that, I just want to make a very quick update, and we can take more questions on this as far as our reorganization update is concerned. As you know, we are committed, as we mentioned in the first half's results, but also as we have guided you during our AGM in April, that we remain committed to completing the IPO of OFI and completing the IPO of Olam Agri, and there is no change towards that, and we are working towards achieving that.
We also mentioned to you in our AGM that we are also concurrently developing other strategic options which can help us achieve similar outcomes. Both the IPO plans as well as the other strategic options are being developed as we speak, and hopefully, we will have some progress report which we can share with you whenever anything material is to be disclosed by us. The internal and external factors that we'll have to keep in mind has not changed. We have been stating these factors that will guide our decisions in terms of when we will do the IPO, and the external factors include the macroeconomic conditions, and specifically the capital market conditions, in terms of how the equity capital markets will be when we decide to pull the trigger on the IPO. It'll also depend on the operating units' performance as well.
With the strong performance that OFI has had and what Olam Agri has had, both these entities are, if this tracks for the second half of the year, then both these operating entities will be ready for an IPO, if this performance trajectory holds good in the second half of this year as well. And final thing, which is not in our control, is the regulatory approvals. Because one of the IPOs, which is the Olam Agri IPO, is being planned with, Saudi also in mind as a dual listing venue. And the Saudi government has now completed the consultation on a white paper that it issued for allowing foreign companies to list in Saudi Arabia. That consultation process has now drawn to a close.
We have to wait and see when the regulators will finally convert this into a law, allowing foreign companies to list in Saudi. So we are monitoring the regulatory approvals environment as well. So I think, we can conclude the presentation by saying that the EBIT growth in H1 2024 and the steady PATMI performance delivery in the first half, despite high interest rates and very volatile commodity prices during this period, reflect the collective strength of the portfolio, both the OFI part of it, the Olam Agri part of it, and what we are trying to do with the remaining Olam Group entity.
We expect operating conditions to be challenging in the second half, but we think that we have enough diversification and an ability to manage the geopolitical and macroeconomic risks that the industry will potentially have for the second half of this year, with the positive that inflationary pressures are likely to be receding in the second half. We did a share buyback, as we announced. We bought about 25 million shares. That will continue. We can go up to 5% of our outstanding shares, so that program will continue as well.
And finally, just want to say that we remain committed to the listing of both OFI and Olam Agri, and are also as a concurrent measure developing other strategic options in the event market conditions remain tough for doing successful IPOs of both these companies. There are other options that we are evaluating and developing as well. With that, I will pause, and all of us on the floor here would be happy to take any questions you might have.
Thank you, Sunny. Thank you, Shekhar, Muthu, for the presentation. We're happy to take your questions, but because this is a forum for earnings, so we will prioritize the questions to focus on the results and the business updates and the reorganization updates. Of course, we can take one or two questions relating to the markets in cocoa and coffee, as well. So, if you're on the floor, please pick up the microphone from my colleagues and state your name and where you come from. Thank you.
Thank you very much. Chris Wright for the Financial Times. Thank you for your presentation. Just regarding your update on the reorganization, if you do find yourself in a position where equity markets are more welcoming to IPOs, and this happens before you have the necessary legislative change in Saudi Arabia, would you consider listing without Saudi and doing a subsequent listing in Riyadh, or do the two have to go together? Secondly, no doubt you saw the Wall Street Journal reported a week or so ago about a potential trade sale of a business to a Saudi Arabian entity. I wondered if you have any comment on that. Thank you.
Yeah. So as we have indicated in the past, our preferred option would be to list in Saudi and Singapore as a dual listing. That's our preferred option. Obviously, we cannot wait for regulatory approvals forever. So we are discussing with the Saudi regulators, and we think the Saudi regulation to allow foreign companies to list in Saudi, a non-GCC-registered company. GCC-registered companies have already listed. Non-GCC-registered companies, we need that explicit regulatory approval. The Saudi authorities are very keen to allow foreign companies to list in Saudi. They are looking forward to a marquee listing like Olam Agri. So we will be patient. So if that means it'll take us another six months, we are happy to wait, but we will not obviously be able to wait forever.
So at some point in time, we will decide if Saudi market is not available from a regulatory standpoint, we will look at other options. So that's the first part of your question. The second part of your question, in terms of newspaper report, everything that we needed to disclose, we have fully disclosed in our AGM and in today what we have said. There is absolutely nothing that we can add to that at this point. But if any developments were have to happen on the strategic options or on the IPO plans, more specifically, we will make specific announcements as soon as disclosable material information is there to be disclosed. Otherwise, there's nothing more to add on what we have already disclosed in April in our AGM, as well as today in today's briefing.
Great, you answered my question.
You... I wish you were the regulator.
Any other questions? Yes, please wait for the microphone. Thank you.
Hi, it's Ezien from OCBC Credit Research. So I have two questions that are more financial related. The first one is, I think your unadjusted net gearing is typically less than 2 times. So given that it's now 2.6 times, just wanted to know if the company has a new internal guideline as to what that number should be. And then I think Shekhar mentioned earlier that OFI is trying to hedge the price volatility. Can you give us more explanation as to how the company is doing that?
The first part of the question, Muthu will take. The second part of the question, Shekhar will take.
Yeah. So obviously, because of the unprecedented and elevated increase in commodity prices, and Shekhar talked about cocoa and coffee, pepper and cashews, there have been elevated inventory value and consequently, and also margin deposit that we had to pay to keep our hedges alive. It has been an increase in direct correlation in terms of increase in net debt. That has resulted in typically being under 2x to, I would say a 2.6x. But, as I had earlier talked about, the real gearing for us is the adjusted gearing after adjusting for readily marketable inventories and secured receivables, which is at 1x.
So most of the bankers here, they understand that the nature of our business is primarily driven by working capital and more so in inventory and receivables, and that is something which is a true reflection of our real gearing, right? And as we expect some of these commodity price increases and volatility to ease, not guaranteed, but as Shekhar was alluding to when he was talking about this OFI operating group performance, as and when we are able to see these prices going down and adjusting, we will automatically see the working capital utilization and consequently the net debt utilization coming down.
To your question on the hedging, as you're aware, we have products in the portfolio which have derivative markets and products which don't have. So the consequence of that is that as a part of our normal day-to-day risk management, we would be looking at either selling forward the physical product and/or hedging it on the derivative market, depending on the product. So in the case of OFI, cocoa and coffee have derivative markets, and the nuts and spices, for instance, don't have derivative markets. So that would be a normal sequence when we buy the crop, and we expect to process and ship it, we would be selling forward and hedging it in the derivative markets.
Now, after that, if the markets go up, especially in the derivative markets, you therefore will have a consequent margin that will have to be covered. And that is absolutely necessary, apart from the fact that that's a reputational thing of managing it. But from a pure risk management perspective, you have bought and sold, you have a contract to a customer, and you're going to carry that inventory for the period until the delivery to the customer. You'll have to keep hedged and therefore securing your margins and your ability to deliver to the customer. So that's when your inventory value will go up because of the margin calls that you pay, and that's the elevated nature of our balance sheet today. So we do not buy the link with what Muthu said.
So as long as the working capital is covered by sold inventory, hedged inventory or secured receivables, the nature of that working capital, and hence the nature of the gearing, is not that worrisome. Obviously, it's elevated. We'd like it to come down because interest costs are high. But, as long as we are sure that it is being, it is covering the risk of our sold contracts and our secured receivables, it is something that we would think is a prudent thing, the right thing for, for us to do. And so that's really. So out of the $5 billion of working capital increase that you have, almost entirely, that is covered by, RMI.
Thank you, Ezien. Yes.
Hi, Hailey with Bloomberg News. Could you be a little bit more specific about the outlook for cocoa and coffee prices in the second half of the year? And what kind of specific measures you're doing to deal with maybe still upcoming volatility and challenges in those commodities markets? Thank you.
Right. So if you're asking for a prediction on price, I will not give, because that's not our business, and that's not the nature of our business. What is important is to understand the differences, because both prices have gone up, and they've gone up and down in the last six months. So if we take cocoa, from last year itself, the markets were looking at a deficit forming, and we have been signaling that from last July. Telling our customers, but also otherwise saying it, because there was a real supply-demand deficit, because of shortage of supply and robust demand. That played through the second half of last year, and we were expecting that to play through the first half. So the price increases in cocoa had a justifiable supply deficit.
But then post-February, the markets have exaggerated significantly above what would be the supply deficit. And so what you have seen in the cocoa market is a market going from GBP 2,000 to, let's say, GBP 3,000 in the whole of last year, and going up from GBP 3,000 to GBP 9,000 in the first six months of the year. So that obviously is an exaggerated situation because of various things. And therefore, we expect the new crops that are now building up will start from in the West Africa from October. Currently, the crops look good, although things can change, but currently, the crops look good. It looks like a much better crop, better than a normal crop, not just last year, but like it was the year before. So the crops develop.
We believe that these markets will correct. When they will correct, there'll probably be some more volatility until the real crops show up and the physical crops show up. So that could take another three months, four months. But if you see the forward prices, they're already indicating something like a GBP 4,000-4,500 in the first half of next year, and that's probably more indicative of where the market will settle down compared to where it is in the next three, four months. Coffee is slightly different in the sense that coffee was headed towards a surplus in this year, as in the 2024 crop.
And so the move in coffee in April, and then the fall in May, and then the subsequent move again in May, June, has been a bit surprising from a supply-demand fundamentals. Because we are seeing big crops coming out from Brazil, and they're now started flowing out. So we think that the supply-demand led logic for a price increase in coffee is less compared to where it was in cocoa. So all other things being equal, again, that should correct itself when these crops flow through. Slightly different between Arabicas, which are happening now, and Robusta, which will happen in the latter part of Q4. But again, if those crops and the way the crops are developing and the way the crops are flowing happen, again, we don't see any rationale for these elevated prices in coffee.
Again, whether it happens in two months or four months, no one knows. From a business perspective, which was the last part of your question, we have to continue to buy, continue to supply our customers, not just with our current contracts, but what they need. And that's what we'll be focused on, on securing our margins in the way I was highlighting earlier. How we protect our margins, how we get appropriate returns for the elevated cost of capital and elevated risks today. And that's what we will do with our customers. So prices will come down in three months or six months or nine months, it really doesn't matter. We'll stay, do exactly what we have been doing and what we'll continue doing.
All right, if we have no questions, I'll move on to the questions that have come online. So I think the question that has been asked by several participants is regarding the movement of the interest costs, as the U.S. Fed rates has kind of peaked in August 2023, and we have seen also our high interest costs in the first half of this year. Does it mean that this is the peak period? If we are past the peak period of high interest costs, and we should expect overall interest costs, our interest costs, to drop from H2 onwards. Muthu, would you like to comment?
Yeah. So obviously, we believe that we have seen the peak of the interest rates. And with the macroeconomic conditions panning out, we also see that inflationary pressure is easing going forward. And that will hopefully mean that the interest rate curve will, in the minimum, flatten, if not turn, sooner than later. And that will automatically augur well for us in terms of the working capital-related interest costs that we have seen elevated in the first half due to increase in commodity prices, resulting in increase in working capital utilization, and consequently, increase in utilization of debt and increase in interest rates, interest costs. All have been pretty much linked. And from that perspective, we believe, we hope and we believe that the second half, the interest cost should not be higher than the first, first half.
Notwithstanding the seasonality, and notwithstanding what Shekhar was cautioning in terms of some of the commodity prices still being elevated, and when will they ease, will automatically determine whether we will have higher or lower interest costs.
Thank you, Muthu. The next question is on OFI. How would OFI be looking at in terms of metrics improvement in the second half? How does this look like for the two segments versus the preceding second half of last year, as well as H1 2024?
So, I think, in a normal year, we always, the OFI business in the current form has roughly about 40% in the first half and 60% in the second half. That's been the normal, like, the last few years. Normal seasonality, that's the way it will happen. Obviously, with these current elevated markets, if you look at the EBIT, the cost of carry and cost of interest has to be covered, so therefore, you have that incremental EBIT coming out of the incremental risk, as well as the elevated cost of capital. That, if it continues through the second half, we would expect a similar kind of impact in the second half of that.
But that notwithstanding, the business itself, we feel that the trajectory of growth, the medium-term guidance that we have given is that we'll be a high single-digit EBIT growth over the medium term. We feel quite confident that we will maintain that guidance. Halves might change a bit, but we feel quite confident about that. We have invested for that, and the way those aspects of our business are developing, and as mentioned, some part of that on the ingredient solution side, we see that panning through the second half. So overall, cautious about the markets, but optimistic about the business.
Still on OFI, Shekhar, I think there's a question on how you think about the OFI's performance vis-a-vis your comps, your competitors in the food ingredients industry.
I think, I wouldn't like to talk about competitors. I'd like to talk about what I see as the differences that we are trying to build and maintain, maintain and build. And it's really about the integrated nature of our business, our ability to source on the ground... to manage the sustainability capacity on the ground, take it through our manufacturing plants, and deliver it to our customers, now with increasing amount of sustainability differentiators as well as innovation differentiators. So that is the nature of our business, and whether it's cocoa or whether it's coffee, or whether it's nuts or spices, that's what we are doing. Whether it's a retail customer or whether it's a branded global player or a regional brand, that's exactly what we're doing across all these platforms.
I think that part of the business and that business model, in these markets specifically, are probably proving and compared, when we look at what customers are seeing, what suppliers are seeing, we are getting the support for that. So we are growing volume on the ingredient solution side. We have grown volume this period despite many other parts of the businesses, or many other businesses not growing volumes. We are growing EBIT, and we are able to support that, so feel quite confident. Others have different models, nothing good or bad about it. Others have different models, and they will be looking at how to capitalize on their models. But our model, we feel quite confident and more so in these kind of markets.
And like I mentioned, over a five-year period, it's been tested in different kind of market scenarios. We feel that this is resilient and has proven resilient to our customers. So that's really what I would like to say rather than talk about relative to comps, which all of you can analyze on your own.
Okay, thank you, Shekhar. So, one other question that has come, it's on Sunny's comments on whether global recession is still a question mark, whether it will come or not. But assuming that it's the case in the next two years, how should we think about the performance of Olam Group over the next two years?
Forecasted performance. So, I mean, we are not making any forecasts, but we are confident about our prospects. And that is because, like Shekhar alluded, that both OFI and Agri, their competition in this... Which partially, partly explains the outperformance of these two businesses relative to the industry. So the OFI's performance in the first half, despite unprecedented volatility, so balancing risk and investments and margins, and the risk analytics and the risk management capability to navigate those kinds of extreme volatile market conditions. Our ability to be able to fund and meet the requirements of these elevated commodity price environments, the sustainability differentiation that we have achieved, and being able to get premiums because of new legislations that is coming about in this area, whether it is EUDR, UKTR, and other regulations, where we are well positioned to be able to take advantage of that.
Our manufacturing and technical capability, our customer capability, all of those strengths, which have now turned into differentiators that we have built in OFI and Olam Agri, gives us confidence that we will be able to build a sustainable and enduring business. That we can say, but we cannot say what is exactly going to happen next year or the year after. And I think the investors and shareholders and stakeholders who are supporting OFI and Olam Agri and the remaining Olam Group see that, and are backing us because they believe that that will happen. So we don't make any short-term or medium-term forecast. I mean, short-term forecast.
We can make medium and long-term forecasts based on our planning cycles, that we can give you some, which is what Shekhar said, like, you know, OFI will grow low to mid-digit growth in volume terms in the medium term, and high single digit growth as far as EBIT growth, operating profit growth is concerned. So those kinds of guidance we can provide. But, mostly, we will take time in explaining to you how we are getting differentiated and how we are building advantages, and then you will have to make your judgments, what that will mean in terms of financial performance to follow.
Thank you, Sunny. There's a question on foreign currency loss that has been reported in the current first half of the year. One of them has been cited to be the devaluation of the Nigerian naira during this period. Muthu, would you like to comment on how that has affected the earnings, and how is it going to impact the earnings going forward, if any?
So, Nigerian naira, ever since, let's say second, beginning of the second half of last year, which was, artificially managed and controlled by Central Bank of Nigeria for quite a few years. When there was a political regime change, as part of their manifesto, they had said that they will converge, the various rates that were prevalent in the Nigerian foreign currency markets, and that is what led to, I would say, a devaluation of the Nigerian naira. And end of the last year, it moved from middle of year of 455 naira to a dollar, to end of year, 904 naira to a dollar.
Between first January 2024 and, let's say, thirtieth June 2024, this 904 NGN to $1 had slipped and went up to 1,630 NGN to $1.
...And then it has been volatile, flip-flop between 1,400-1,500 NGN. But directionally, what we see is that because of high food price inflation and other essential inflationary pressures that Nigeria is witnessing, we can directionally see that it may further devalue towards the end of this year. The impact on our businesses have been very different. Different businesses have. For example, in Olam Agri, where we have the primary food staples, like the flour, wheat flour, and pasta and rice and edible oil, we have been able to largely pass through the impact of the foreign currency devaluation into our selling prices. So you would have seen that the processing and value-added segment within the food and feed has performed very strongly, in spite of the currency depreciation.
However, if you— on the other, if you look at the packaged food branding business in West Africa, both in Nigeria and Ghana, which is part of the remaining Olam Group, that business had a significant impact because of the devaluation of the currency, naira. Because we have not been able to pass through the price, pass through the impact of the foreign currency devaluation into the prices of this packaged food branding business. So a major part of our business in Nigeria has been able to successfully navigate through this currency depreciation, but a smaller part of the business has not been able to effectively do that.
That's all from the webcast participants. Does anyone here in this hall who have any questions? Yes, at the back.
Hi, Andy from DBS. Two question. The first is actually on the Olam Agri, with respect to the strategic supply cooperation with SALIC. Maybe could you give us a sense of how much contribution in the last six months or a year? And in the outlook statement, they're saying that there are supposed to be more that's come. How much more can we expect on this? If you can share more color on it. Second is actually on the outlook. I know we talked a bit about our outlook. I mean, there are pros, or rather, there are expecting to see inflationary pressure easing, which I presume will be positive.
But, with respect to the macro challenges, it seems to be on the negative side. So maybe, to help us, as in which actually has a greater bearing on balancing both, and what are the key risks, what are the factors that you are looking out for? What keeps you up awake at night, if I can put it that way. Thank you.
So I think, with regard to the strategic supply and cooperation agreement with SALIC, it is basically got two aspects. One is, ability to supply SALIC's requirement for the various commodities it has prioritized as part of its, food security plan. And that is, not only for the Gulf, not only for the Kingdom of Saudi Arabia, but also for the Gulf Cooperation Council region. So they are food deficit. That whole region, including the kingdom, imports a large part of the raw materials and ingredients they need for food security. So they have prioritized a list of commodities, 11, 12 commodities, and they today buy about 22 million tons of all these commodities put together. Olam will probably end up this year doing about 2 million tons, out of the 22 million tons that the Saudi government, imports.
But over time, we believe that we could get a significant share of the requirements of the Kingdom of Saudi Arabia, plus we could use that as a platform to expand into the Gulf Cooperation Council region. So this story is yet to be fully played out, but the start has been very solid in terms of getting a significant share against global. They're not buying exclusively from us, although they own 35% of Olam. There's no exclusivity. We have to bid like everybody else. But the fact that we've been able to win that business and win a substantial part of that business is a good testament to the potential and prospects there is to develop this. That is part of the strategic supply and cooperation agreement.
This includes helping them, giving them market intelligence, and all the associated things that go with the strategic supply and cooperation agreement. We also have teams from both sides evaluating how we can participate in developing the local agri-food system in Saudi Arabia. So there are more than two dozen projects in the various commodities of interest to SALIC and Saudi Arabia, and where Olam clearly has demonstrated strengths of developing the Saudi food system, ecosystem. So many, many projects, more than a couple of dozen projects, we are currently evaluating, and it's in various stages of evaluation at this point in time. But we see a lot of prospect in what they call their domestic food security agenda and in the global champion agenda. They have two agendas.
One is they want to be a global ch ampion in the food business. Second, they want to be, achieving food security for the kingdom and the Gulf Cooperation Council region. So, so, so this, partnership, we think, will be pivotal and crucial in the next phase of growth for Olam, Olam Agri. The second question you asked was about, the impact of the various. So I think we have to suffer the geopolitical pressure. There's not really anything we can do. And therefore, it's important, to work on the basis of that this will be a prolonged conflict, and there is no immediate or easy resolution. If there is, that is, a positive surprise and something that can, spur growth.
But if the current stalemate lasts, in many of the commodities that we are dealing in, which is essential food commodities, I think in some way or the other, business will carry on. One, it carries on because even the archrivals, U.S.-led coalition and, China, Russia-led coalition, food is not currently banned. Even under, the U.N. sanctions, et cetera, food and medicine are excluded from any restrictions. So therefore, even today, we are able to do business in food and food ingredients and products. But war is a problem because it results in disruption in terms of ports and the availability of ports, and the cost of shipping, and the additional war insurance and costs of insuring your cargoes. All that disrupts flows. That is very difficult to predict.
So we want to remain diversified across origins and markets. So if there's a shortfall in principal trade flows, we would still hope that global trade will not come to a halt. There will be continuous global trade as well, and therefore, we can participate in the domestic growth opportunities, in the domestic trade flows, rather than just the international trade flows. So our domestic trade flows and our domestic businesses are growing in every country as a hedge to potential restrictions or disruptions in export trade flows or international trade flows. So that's one. The second is really the macroeconomic conditions. That we can have a more informed view. We cannot entirely bank on that view, but we can have a more informed view. What is likely to happen to economic growth? What's likely to happen to currency markets?
What's likely to happen to commodity prices? These are areas in which we have information, and in some cases, we have proprietary information, and we can leverage that both in terms of the risk analytics and managing the risks, but also in the trade and profitable opportunities that we can pursue on an opportunistic basis. So that we can do with a little bit more informed understanding of how these markets are likely to trend. We can't do anything about political uncertainty, which is many countries having impending elections. A lot of large economies have just had elections, and all the consequences of these elections and change in political power and dispensation can also have an impact. Very difficult to predict this, but we have to live with it. So being diversified is very important.
You won't be there for one country or one product. So OFI is present in five platforms. Olam Agri is present in nine platforms. This allows us sufficient focus so that we can improve performance and returns and efficiency, but it also allows us to diversify and not put all our eggs in one basket. So that's how we have sort of positioned ourselves. It's a global business. It's a diversified business. It'll stay global and diversified from product and geography and value chain standpoint.
And probably the thing that I would like to add is that while all this has to be navigated and all the diversification, domestic, international, we'll do, we are in the food, fiber, and feed business, and that is required to run the world. So therefore, despite all the things, we remain optimistic that the business that we are in will remain moving with all the complexity that we'll have to manage. So we feel, there will be no drop-off or demand and fall off the cliff kind of a aspect in consumption. Some changes will happen, but the nature of our portfolio is very robust.
Our demand is very predictable. It's population growth, per capita income growth, and once you have a good view on what that is likely to be within a range of outcomes, the demand part is very, very stable. What is difficult for us to predict is supply, because of weather-related phenomenon, climate change impacts, biodiversity collapse. Supply can be out of your control, and you can't predict exactly supply. So you can... You have to therefore, navigate that risk. That is why you need to be diversified. If there's a short crop in one country, a disruption because of a war, in terms of the availability and flows of that commodity in another country, by diversification, you try and manage that better.
Are there any more questions? Any comments, final remarks from presenters? If none, we look forward to seeing you, six months later, if not earlier. Thank you.
Thank you all.
Thank you very much.
Thanks for coming.