A very good morning to all, ladies and gentlemen, gathered here with us in this room today for the presentation of Olam Group's second half and full year results for the period ended December 2023. A very happy New Year as well, a happy Lunar New Year, while we're still in the month of February. And to those who have joined us on the live webcast, a very warm welcome. I'm Hung Hoeng of Olam Group's Investor Relations. First and foremost, it's my responsibility to point out this cautionary note on forward-looking statements here on this slide, so please read that carefully. Now, surely many of you already know our leaders here, whom I'm pleased to introduce again, Co-Founder and Group CEO, Sunny Verghese. And on his right, CEO of ofi, Olam Food Ingredients, A. Shekhar.
Seated at the extreme right, on my right, is Group CFO, N. Muthukumar. As per usual, we will hear from our Group CFO, Muthu, on the group's results, the second half and the full year consolidated results of the group. ofi CEO, Shekhar, will follow on with the operations and financial results of ofi. Sunny, as the CEO of Olam Agri, will present the performance of Olam Agri, as well as that of the remaining Olam Group businesses. We will hear his take on our business outlook and prospects, and in particular, the latest update around our reorganization plan, before closing the presentation with today's take-home messages. We will then open up the floor and webcast for questions. In fact, you may start posting your question now, for those who are online, which we will address during the Q&A session.
As this is a forum for earnings, we'll focus on questions pertaining to the financial results and the business and operational updates, which are the subject for the day. We do hope you'll ask more questions on these areas, and less on those on commodities, market, and outlook, which we can take offline separately. So thank you for your attention. I will pause here and hand it over to Muthu. Thank you.
Thank you, Hung Hoeng. Once again, a very warm welcome, ladies and gentlemen, for our full year results briefing for 2023. I'd like to take this opportunity to first begin with the what has been a very strong second half 2023 performance, both in comparison to the first half of 2023, as well as in comparison to the H2 2022. You can see from the slide that we had 23 million tonnes of volumes, a 12% increase year-on-year compared to H2 2022. EBITDA at SGD 1.3 billion, a 13.4% increase on a year-on-year basis.
EBIT stood at SGD 952 million, a 19.3% increase over H2 2022, and PAT was a whopping SGD 234 million in the H2, compared to SGD 157 million in H2 2022, and SGD 116.7 million in first half of 2023, both an increase of 49% and 100%, respectively. PATMI stood at SGD 231 million compared to SGD 200 million this time in 2022, a 15.5% increase. Mind you, that in 2022, we had made a divestment of our equity stake, 35.43%, in Olam Agri to SALIC, the food security company of Kingdom of Saudi Arabia.
Even after a very strong increase in minority interest, we have been able to deliver a 15.5% growth in our PATMI at SGD 231 million, and operational PATMI stood at SGD 274 million for the second half, a marginal 10% decline, as indicated, due to a very strong increase in minority interest. With that, I will move on to the full year annualized results for 2023. A 44 million tonnes of volume, a 3% increase. Revenues at SGD 44.48 billion, roughly 12.12% decrease due to decrease in commodity prices in most of our portfolio, barring a few commodities, especially in ofi.
EBIT at SGD 1.8 billion, a 10% increase, up from 10% increase, and more importantly, EBIT over invested capital, the pre-tax ROIC, which is a key operational metric that we track and report, increased from 8.4%- 9.1% on a year-on-year basis. Free cash flow to equity was lower at SGD 914 million, primarily due to increase in working capital that we had witnessed, especially in the last quarter of 2023. PATMI, as I had earlier indicated, stood at $278 million, a decline of 55%, primarily due to increase in minority interest due to the equity stake sale that we had done in late 2022 to SALIC.
Gearing increased to 1.73 times, still very comfortable, again, due to increase in working capital that we witnessed in the second half of 2023. In terms of operating group-wide performance, ofi delivered 11% growth in EBIT to SGD 829 million, primarily led by strong growth in Ingredients and Solutions segment, and more importantly, adjusted EBIT stood at SGD 874 million. Olam Agri, again, achieved 13% growth in EBIT at SGD 968 million, primarily driven by strong growth in Processing and Value-added segment, and I will talk about it later in detail.
PATMI, I had talked about, declined 55.7%, [due to] significant increase in higher net finance cost of roughly SGD 400 million, again, I will talk about it, as well as lower share of profit from Olam Agri due to the increase in minority interest. There was increase in net CapEx, working and interest paid, that led to the negative free cash flow to equity. Working capital cycle time marginally increased, but we are very comfortable that we have been able to keep a very tight control on our working capital cycle time. And we have very sufficient liquidity of SGD 21.3 billion, and net gearing marginally increased to 1.73 times. Still very, very comfortable.
But more importantly, adjusted for readily marketable inventories and secured receivables, was at a very healthy 0.65 times, compared to similar levels that we had in December 2022. More importantly, we are launching a share buybacks, buyback scheme of up to maximum of 5%. This is the current general mandate that we have from our shareholders, and hopefully continue to do the same after the mandate renewal that we will have in the forthcoming AGM in April 2024. We are pleased to announce and recommend a final dividend of SGD 0.04 per share, an increase of SGD 0.01 per share compared to the interim dividend that we declared of SGD 0.03.
In terms of consolidated results by operating group, you can see that as per trend, 90% of the volumes were contributed by Olam Agri, roughly 7.4% by ofi, and the rest, 3%, by the rest of the Olam Group. Similar trend in revenues, roughly 65% contributing from Olam Agri, 32% from ofi, and the remaining 3% from the rest of the Olam Group. EBIT, 55%, or roughly SGD 927 million of EBIT, contributed by Olam Agri, SGD 829 million, or 47% of EBIT contributed by ofi, and the rest by the rest of the remaining group. In the case of invested capital, 60% of the invested capital is represented by ofi, 28% by Olam Agri, and 13% from the rest of the remaining Olam Group.
As I had earlier indicated, sales volume is up by 3% at the portfolio level, but particularly the growth came from Olam Agri, especially in the grains and edible oil trading that we've invested in the second half of 2023. Remaining Olam Group also witnessed a growth in sales volume, primarily due to increase in volume by Jiva in its Indonesian operations, thereby having a total sales volume of 44 million tonnes for the full year. We had improved operational performance in EBIT, a 10% increase on year-on-year. Here again, ofi had an SGD 83 million of increase in EBIT, Olam Agri of SGD 110 million, and the remaining group had a lesser loss of SGD 30 million, thereby contributing to an overall of SGD 1.8 billion of EBIT for the full year 2023.
Adjusted EBIT also look was roughly SGD 1.826 million, post adjusting for amortization. Operational PATMI at the group level was SGD 458 million. You can see the bridge that we have. What is stuck is that in spite of increase of 163 million of EBIT or operational performance growth, we had a massive increase in our interest costs, primarily driven by increase in interest rates. Overall, the working capital was a marginal increase, but that did not impact the increase in net finance costs, but primarily driven by increase in interest rates that we witnessed throughout 2023.
And also, as highlighted earlier, the increase in minority interest due to the sale of equity stake to SALIC, that contributed to a negative SGD 150 million on a year-on-year basis, thereby having our PATMI at SGD 280 million. We had a very marginal increase in invested capital, which stood at SGD 19.75 billion, roughly similar quantum of SGD 10 billion in fixed capital and SGD 9.8 billion in working capital. And gearing, as I had indicated earlier, stood at 1.73 times, but more importantly, adjusted gearing was at a very healthy 0.65 times after adjusting for readily marketable inventories and secured receivables. That brings us to the free cashflow. Free cashflow was at negative SGD 915 million in 2023.
Here again, the primary differences are due to changes in working capital of roughly SGD 1 billion, as well as a swing in the investment because of the big divestment that we had in terms of the realization of sale of equity stake of roughly $1.24 billion that we recorded in the end of 2022, consequent to the sale of our 35.43 equity sale to SALIC, the food security company of Kingdom of Saudi Arabia. However, our operating free cashflow to firm stood at a positive SGD 215 million.
As indicated earlier, we have a very strong liquidity position at SGD 21.3 billion, contributed by SGD 3.5 billion of cash, SGD 6 billion of readily marketable inventories, roughly SGD 2 billion of secured receivables, unutilized bank loans of roughly SGD 10 billion, taking to us unutilized and available liquidity of SGD 21.3 billion, a very healthy SGD 5 billion of headroom compared to the gross borrowings, which stood at SGD 16 billion end of 2023. We from the Olam Group, once again, take this opportunity to wish you all the best for the Year of Dragon, and now I will hand over to Shekhar to take us through the ofi operating and financial performance. Thank you.
Thank you, Muthu, and great to be back with all of you again, to take you through the operating results for ofi. Let me start by wishing you all a very happy 2024, and hope good health and prosperity for all of us. As Muthu highlighted already, it's amidst a very tough operating macroeconomic condition, the business overall has done very well. And I'm pleased to report that ofi, in terms of operating results, as well as the strategic progress we have made, in how we are wanting to reshape that business, on both those, we are quite pleased with the performance. And when you look at the operating performance in terms of trajectory, there is both how H2 improved over H1 of last year, as well as H2 of prior period.
On an overall basis, at an EBIT level, we had 11% increase in EBIT. And what is also pleasing is the change in the portfolio mix on how the growth has been significantly higher in the Ingredient Solutions segment, and I'll just talk about that in a moment, which saw a 31% growth. So you can see the portfolio mix changing from what was a 50/50 Global Sourcing and Ingredients and Solutions business. It is now roughly a 65, a 2/3s, 1/3 kind of a portfolio mix. Important to state here, which I've said that probably every time we meet, that this is an integrated business. So this is not about moving away from Global Sourcing into a 100% Ingredient Solution business.
Our differentiation is based on a very strong Global Sourcing platform, a sustainable, traceable origination platform that we have built over the last 35 years, on top of which we are building greater capabilities to deliver ingredients and category solutions to our customers. So it is that combined business that is growing at 11%, but our investments over the last three to four years have been predominantly in the Ingredient Solutions business, and we can see that trajectory growing, which also gives confidence of the strategy. We are staying focused on that strategy. And this is despite the fact that some of the businesses in that segment are still gestating and are not at full potential, so there is, therefore, greater scope for this business to grow as well. You look at the margin structure, again, you'll see the change in margin structure.
The fact that we are moving and pivoting this business to an Ingredient Solution business is predominantly not just because we want to do that strategically, but there's also greater value to what we can offer to our customers, as well as what value we can make, and that is reflective in the margins per ton. You know that margins percentage can be not as accurate because of prices going up and down, but margins per ton is a real reflection on how that growth is. You're aware that the market, especially in some of the products that are in ofi, have been quite volatile through the year.
But despite that, we have maintained our invested capital at almost just over 2% increase for delivering 11% overall increase, in EBIT earnings, which means that obviously we have grown our returns, and that's, again, quite pleasing. So moving on to the segmental. The focus last year was on really not on volumes, so you will see what Muthu pointed out, roughly 300,000 tonnes reduction in volume. And we have been very calibrated and very deliberate on the volumes that we want to do, the customers, where we want to support that volume growth, and it has not been really chasing volume. So... And some part of the volume reduction came in Global Sourcing, and you'll see that commensurate impact on capital as well as earnings.
One part of the earnings was also impacted because of almonds, which we have talked about in the prior period, as well as peanut business, the shelling business in the US. So those were some of the reduced areas where we reduced volumes voluntarily. But otherwise, the cocoa business, the coffee business, the rest of the nuts business, the rest of the world in spices, all grew quite robustly and quite deliberately in terms of where we were focused on. Going to the Ingredient Solution, which has kind of been the big growth for last year, and it's, again, it's very focused growth coming out of investments that we have made in the last three, four years. So to call out a business that we made a big investment in in 2021, second half, Olde Thompson.
So that business faced some challenges in the first 12 to 18 months, which I have talked to you about. But, because as soon as we took over, we had a big inflationary impact, and we were therefore in the process of recontracting, and that took a while, and there's always a lead lag. But very pleased to say that through 2023 and second—certainly in the second half of 2023, those are falling through, and therefore, you can see that big shift in the performance there.
Also, the synergies that we were focused on in terms of integrating that business with our Global Sourcing business in Vietnam and other origins, that's also been beginning to pay dividends, and therefore, now we are running that as an integrated business, and we have managed to increase our footfall and SKUs with customers and retailers that we acquired through that. So quite pleased with the improvements there. It is still a business that we are building on and investing behind. But one part of the growth and one part of the shortfall that we saw in the prior period because of the high inflation and lead lag in pricing, I think we quite feel good about that. Both the ofi segments in cocoa and coffee, again, witnessed a lot of impact of energy price increase in 2022.
Again, they've come out of that and have priced effectively. It's not about increasing our prices, but coming back to the pricing margins that we were anticipating from those businesses. That's also happened very well. Both those businesses have had a very sharp recovery from 2022. The other two parts of the businesses, the dairy, where we have invested, you've seen reports in the second half when we expanded our capacity in Malaysia, as well as set up a new processing in New Zealand. Again, very strong Ingredient Solutions focus areas have performed very well and, as has the rest of the world, industrial spices that I talked about.
Probably the only area which has not performed as well is the U.S. industrial spices, where we have seen a bit of demand contraction, and that remains an area where we are focused. That's caused the entire industry is carrying extra inventory, and we also have our share because we have a large market share there. So overall, it's been a well-rounded performance. It's been a performance coming off where the business has shown resilience in coming out of the massive inflationary impact and being able to reprice and get back to margins. It's been coming out of investment that we have made, and so it's a well-rounded performance with more to come as these businesses get to full potential and full capacity. Again, here, invested capital went up more, obviously, because of both the fixed capital investments as well as the working capital investment.
But you can see the big jump in IC in terms of returns, and that's where it's a higher margin, higher return business, of course, very based on the large global sales sourcing platform that we have built. So, to leave you with, I just want to kind of recap. This is a slide you've all seen, before. This was the basis for setting up ofi. We had five large global leadership positions that we had built over the last 35 years. These products were complementary in the nature of capabilities that we had, the customers that we were accessing, the end-use categories that we were serving, as well as the channels that we were using to service those customers.
Putting these together on a very strong Global Sourcing, sustainable, traceable platform, and then building the capabilities for ingredient solutions is what we have been deliberately focused on over the last four years. That's, that's a process that will take a long time, but we are quite pleased to see the results even in this period. And so what I want you to take back is, this is a business that we created four years ago. The world has seen a lot, COVID, a COVID recovery, a war, inflation, higher interest rates. But the strategy speaks for itself in the resilient, resilient execution and recovery despite these tailwinds, some which we can do something about, and some we have to react faster and better than anybody else.
Through this cycle, we have grown the business quite substantively, we've grown the returns quite substantively, and we are making targeted investments where it matters in this business, whether it's organic or inorganic, and also investing behind capabilities improvement. You've seen announcements, a steady stream of announcements. We set up a Singapore Innovation Centre in November 2022, and Amsterdam opening in second half of last year, and an expanded capacity that we're gonna open later this year in the U.S. We are investing a lot behind innovation, a lot behind category insights, consumer insights to provide greater value to our customers, on top of the strong origination, supply security, traceability that we already have.
That customer-first focus also bringing all of ofi across all product groups, across all channels to all our customers through our dedicated key account management. And you've seen recently in this year, at the start of the year, we announced the Food and Beverage Solutions group, which is going to more focus on this value-added space in providing that focused attention to the customers. So it is a business in the making still, and there is a long way to go, but we're very happy with the progress, and I hope you'll all see proof points of that, both in the financial delivery as well as in the execution against the strategy that we announced. Thank you, and I'll hand over to Sunny now.
Thank you, Shekhar. Good morning, everybody, and thank you all for coming. I will present two parts of this results announcement. The first part will be on Olam Agri, and the second part will be on the remaining Olam businesses, what we call the Remaining Olam Group, and then conclude by summarizing a few key takeaways. So starting with Olam Agri, for all of you who have been at our results briefing in the past, you would all know that Olam Agri is a global and market-leading and differentiated food, feed, and fibre business focused on high growth and consumption markets, and we are differentiated in multiple ways. We are differentiated, first, in the fact that we focus on fast-growing trade corridors for food, feed, fibre, and other Agri-industrial products.
So for example, soybean trade flow from Brazil, which is one of the most cost-competitive producers of soybean, to China, is a fast-growing emerging trade flow, and we have leadership positions, for example, in that trade flow. So we have many such trade flows we focus on, which are fast-growing, emerging, focused on high growth, emerging market trade flows. That's one way in which we are differentiated. The second way in which we are differentiated is we have a very fixed asset light origination trading model in the major producing countries. That is to retain our flexibility to source from the most cost-competitive origin in the world.
If wheat, at one time, the most cost-competitive producers were in the U.S. and Canada, and now the most cost-competitive producers are Russia and Ukraine, by being asset-light, we have the full flexibility to move to the emerging, most cost-competitive producers of these various agricultural commodities. That's the second way in which we are differentiated. The third way in which we are differentiated is we are a little bit more fixed asset intense in fast-growing destination markets for food and feed. For example, in Africa, where in West Africa, we got wheat milling and pasta manufacturing in four different countries. These countries have average per capita wheat flour consumption of 25 kg per capita. Even in North Africa, not outside of Africa, in the North African region, the per capita wheat flour consumption is almost 245 kg per capita.
So in the markets that we have chosen, there is a long runway for profitable growth, and we have built market leadership positions, roughly 45% plus in these markets that allows us to participate in this excess return, faster growing, opportunities. So that's the third way in which we are differentiated. The fourth way in which Olam Agri is differentiated is that we are seen as a true independent intermediary or trader, because in the origins, we don't typically compete with the smallholder farmers or the small exporters. We buy from them, so they see us as having no channel conflict with them. And in the last destination, markets like China, et cetera, we don't compete with the major players who are processing soybeans or crushing soybeans or any other processing activity.
They are our customers, so there's no channel conflict with them, so they see us as independent. So both in the key producing countries, we are gaining share of wallet from our suppliers, and the key consumption destination markets also we are gaining share from our customers. And finally, we are differentiated as a result of the Olam Agri business model, comprising of our core capabilities. So in farming, in origination and sourcing, in processing and manufacturing, in logistics, in trading and merchandising, in data analytics, risk management, we have built and compounded our strengths and capabilities over time. That gives us an advantage. So these are the five ways in which we are differentiated. Our mission, our purpose, is to really transform global food, feed, and fibre systems so that we can secure a more or realize a more food secure future and sustainable future for all.
That's, that's the purpose that we are trying to execute. Coming to the 2023 results for Olam Agri. As you know, the business is divided into two platforms: a Food and Feed platform, and a Fibre, Agri-industrials and Ag Services platform. The common thread or underlying logic that brings this portfolio together across these two platforms is, in both these platforms, we supply products which are living essentials, daily living essentials. The food that you consume, the feed that is required to produce the food that you consume, or for clothing, fibre, cotton, for shelter, wood, for mobility, rubber. So we deal in life's daily essentials. That's what we provide. Everything has an agricultural or farming base, and from where they originate. Within these two platforms, we have three segments.
In the Food and Feed platform, we have the Origination & Merchandising segment, and we have a Processing and Value-added segment. And In the Fibre, Agri-industrial, and Ag Services, that constitutes our third segment. Let's start with the consolidated results. As you see, the consolidated results, we have grown operating profits, EBIT, by 12.8% compared to last year, to reach SGD 968 million. A 110 million Singapore dollars growth in operating profits as a whole for Olam Agri. Interestingly, we have grown our margins, which is EBIT per ton, from SGD 22 - SGD 24. Nearly a 10% growth in margins has resulted in this 12.8% growth in operating profits. In terms of total invested capital, it has grown by 6.5%, lower than the growth in operating profits.
But interestingly, our capital efficiency, which is the pre-tax return on invested capital, EBIT, operating profit divided by invested capital, has grown from 16.5%- 18.3%, so almost 180 basis points growth in capital efficiency. This is the highest in the industry. Our return on invested capital pre-tax is almost two times, 2.2 times, that of the industry median. So it's a very highly capital-efficient business. Moving on to the three segments, we'll start with the Origination & Merchandising segment. So if you look at the Origination & Merchandising segment, we've had a tough year.
So our operating profits declined by 10.9%, and our margin per ton declined by SGD 1, from SGD 8 a ton to SGD 7 a ton, which contributed to this decline in operating profits. It was particularly a tough year in two parts of the Origination & Merchandising business. We have many SBUs within that business. So one is the freight business. The freight markets are extremely volatile, and there were geopolitically induced freight disruptions, particularly in the Capesize market. We are in all classes of freighting. That includes container freighting, but most importantly for our bulk freight, it is Handymax, Handysize, Supramax, Capesize, Panamax. So we trade in all of these markets. It was a particularly difficult situation for us in the Capesize markets, so the freight business underperformed last year.
We are just building out edible oils global trading business, cash trading business. That business last year, as part of the reorganization, also underperformed, and these two underperformances contributed to a decline in operating profits for the Origination & Merchandising segment. As a result, our capital efficiency, pre-tax return on invested capital, ROIC, has also come down from the prior year, where we had 23.2%. It was a very highly capital-efficient business with high fixed asset turnover because we are asset light, but also a high working capital turnover. As a result of what I explained, our capital efficiency came down from a very high 23.2% last year to 16.4% this year in this segment. Moving on to the Processing and Value-added segment. This segment hit the ball out of the park last year.
This includes our wheat flour milling business in different countries, our pasta manufacturing business, and our animal feeds business. So this business grew by 40%, its operating profits, from SGD 423 million in 2022 to SGD 591 million this year, and the margins were extremely robust. So we moved from EBIT per ton of SGD 105- SGD 143, roughly SGD 38 increase per ton in operating margins. This is one of the best years that we've had in the Processing and Value-added business.
we also had a decline in total invested capital, roughly about 5% decline in invested capital, largely led by lower prices for our raw materials that we use, which is wheat in particular, and later in the year, soybean and corn are also declined as far as prices were concerned. So our total working capital requirements in the business declined by roughly 5% compared to the prior year. Moving on to then the final segment, the third segment, which is our fibre, which is the cotton business, the Agri-industrials part, which is our rubber and wood business, and our Ag Services part, which is our funds business and our RMS risk management solutions business, and our trade and structured finance business. The platform declined by about 16.8%.
This decline was led first by a decline in the performance of the funds business, which turned into a loss last year in 2023, followed by a slowing down in the cotton business globally, which also contributed to the decline in the operating profits of the segment. We've had good growth in rubber and wood, and the risk management solutions, and the trade and structured finance business. As a part of our strategic realignment of the portfolio, we look at our portfolio continuously and see what justifies remaining in the portfolio, what are the what parts of the portfolio we want to invest and grow, and what part of the portfolios we want to dial down or exit. And we took clearly a decision to exit our funds management business.
We were in that business for about 10 years, but on a risk-reward basis, we believe that this is not a business that we want to continue to invest and grow. There'll be about 14 employees and colleagues are going to be affected by the closure of our funds management business. We will try and look at all opportunities for redeploying them within the rest of the Olam Group. These 14 employees are both in Singapore as well as in China, two places where we have funds management people based.
We will try and see who we can redeploy into other parts of the Olam Group, but we are also offering them a severance package to choose from, and we'll provide outplacement services, and we'll help them as much as we can to transition if they choose to move on and accept the severance package. With that, I want to move now on to the Remaining Olam Group. The Remaining Olam Group, as some of you would recall, consists of three component parts. The first part is a set of businesses that we have earmarked for exit, and we want to responsibly divest this over time. We don't want to do a fire sale of any of these businesses, so that process is underway.
The second part of the remaining Olam Group within this OGH, as we call it, is continuing and gestating businesses which are gestating in nature, and we're continuing to invest to nurture it to full potential. And in addition to the OGH business, which is the first component part of the remaining Olam Group, we have the startup ventures business. We call it Nupo Ventures, and we have incubated many startup ventures, and I will give you a brief description of the status update on those ventures. And the third and final part is our erstwhile technology business, Olam Technology and Business Services business, which is essentially our erstwhile IT business. That business has also been separated and carved out and launched as Mindsprint.
Because in addition to providing captive IT services and support, and digital services and solutions, and AI support to the three operating entities of the Olam Group, they are also now providing the same suite of services to third parties and developing a third-party business. So these are the component parts. For segmentation purposes when we announce our results, these three component parts are divided into these three categories, as you know. One is our deprioritized and exiting assets. So if you see, last year, that contributed SGD 14 million of operating profit, that set of businesses. This year, there is a swing of almost SGD 25 million from last year's SGD 14 million operating profit to a negative operating profit this year of SGD 11 million. The second category of businesses that we have are continuing and gestating businesses.
Last year, it delivered SGD 52 million of operating profits. This year, it is delivering SGD 53 million. Over time, these businesses, as they complete their gestation, will grow and contribute more to our profitability. And then finally, we have the incubating ventures business, where we are—these are startup businesses we are investing, but they are not yet at, become profitable. In 2022, the total investment in that business, and therefore the losses that we had, was SGD 62 million. This year, it has gone up by another SGD 5 million- SGD 67 million. So overall, if you look at the remaining Olam businesses. We had operating profit last year of SGD 5 million, which was the first time we've had an operating profit in the Remaining Olam Group businesses.
It has turned into a loss of SGD 25 million this year, so there's a SGD 30 million swing in operating profits, EBIT, in the Remaining Olam Group. I talked to you about briefly the Nupo Ventures business. It has really got now three ventures that we are incubating and scaling. The first is Jiva, which is a farmer services platform, and we are gaining good traction. We have launched it only in Indonesia. We launched it only in corn. We are now moved from corn to cassava last year, and this year we are adding chilies, getting good traction. It provides input services to farmers. It provides off-take services to farmers at the farm gate itself for all the produce that they make.
We offer microfinance insurance services to them, and most importantly, we have agronomy nudge brain or a crop care advisory services, where we provide daily nudges to our farmers, smallholder farmers, as to the next best action they can take on the farm. Terrascope is to help companies based on Olam's experience of our decarbonization journey on how to decarbonize. So it is an enterprise-grade SaaS business, which is using technology to help companies in their net zero journeys. We have now built over 25 customers last year, so we're getting real good traction across industries. While we are focusing on customers in the food and ag sector, we are also offering a decarbonization solution for other industries as well. The third and final venture is TRACT. TRACT is now a co-developed venture, co-created venture by collaborating with our competitors.
So Cargill, ADM, and Dreyfus, along with Olam, own 25% each of TRACT, and that is to really help the global food and ag sector to become more sustainable. So it looks at all the key sustainability factors across 10 sustainability topics, 350 sustainability metrics, and we are trying to get the whole food and ag ecosystem to talk the same language in terms of traceability or granular traceability, or improving living incomes, or decarbonization journey and carbon emissions, and how they can reduce their carbon emissions. All of the major ESG topics. This is, again, a digitally enabled solution to help the industry pivot to becoming more sustainable.
In this set of startup ventures that we've incubated, the other announcement that we are making today is that we have closed 1 venture down, which was called Re, which is a purpose brand business. We had launched that purpose brand only in Singapore as a pilot to see whether Singaporean consumers are willing to pay for sustainability, which is traceable, deforestation-free, child labor-free, water conservation-based products. But, Singaporean consumers have not yet... are not willing at this point in time to pay the premium. Probably we should have launched in Scandinavia or in other markets where the sense of sustainability, sustainability sensibility is much higher. But we have decided to withdraw from that business, and we have shut that business down now, today, and we have 9, 8 employees, yeah, 8 employees that are affected.
Six of them in Singapore, one in Malaysia, one in India. Just like we have talked about in our funds business, we will try and redeploy some of them in our other parts of Olam Group, and we offer a generous severance package to the remaining who want to leave, and we will support them with our placement and other services. That is as far as Nupo Ventures is concerned. Finally, Mindsprint, which is the erstwhile Olam Technology and Business Services business. This will provide services to the captive, services to Olam Group, Olam Agri, and ofi. But in addition, it's now developing third-party customers, and just in the last six months, which is when it was launched formally, it has already got seven, eight new customers apart from the Olam Group customers.
So that is very exciting and interesting, and I think they've developed some unique, uniquely differentiated capabilities, and we believe that this can be a successful growth business for the Remaining Olam Group. With that, I want to move on to a few other updates that we want to provide you. We've already made a public announcement on the Nigeria situation. As all of you recall, or some of you would recall, that on the 8th of September or ninth of September, there were two online publications carrying six allegations about Olam's operations in Nigeria. On Monday, the 11th of September, the company issued a public statement, which you would have seen, which categorically refuted all of these allegations. Both these online dailies were not credible publications. None of the mainstream media in Nigeria actually carried any of these allegations.
But these online publications allegations then became viral and was on social media widely transmitted, and we therefore came up with an announcement categorically refuting all of these 6 allegations. But the board, as part of good governance, launched an internal investigation. It was an extensive internal investigation. And it has taken us about 5.5 months to complete that investigation, and last week we announced the results of that investigation. The investigation was for a period of 8 years, from 2015 to 2022. In that 8-year period, we've Olam Nigeria and its subsidiaries had transactions which are about 77 million records. There were 11 subsidiaries in Olam Nigeria, 77 million records. So we appointed we have created an internal.
The board created the board's ARC, Audit and Risk Committee, created an investigation team that consisted of external legal advisors, both in Singapore and Nigeria, the leading legal advisors. An external independent auditor, not our auditors. External independent auditor, top four. Appointed a political and sovereign risk consultancy, a U.K.-based, internationally ranked, very highly political and sovereign risk insurance agents, risk management consultancy, as part of the team and other advisors. So they worked. There was a scope to go through each of the six allegations and ascertain whether they found any evidence of any wrongdoing on Olam's part on these allegations.
And they've concluded their report and said that they have found no evidence on any one of the six allegations, on all of the allegations, and that is what we have published. So that, hopefully, we have not been charged by the Nigerian authorities on any of these allegations so far. So even though we were not charged, we did this internal investigation to clear our name, and our businesses in Nigeria are operating normally. Nigeria is important and a critical part of our strategic plans going forward, and we intend to continue to invest and grow our business in Nigeria. But all through these five or six months, there was no disruption to our business. There was no raid on any of our premises or any of our businesses. All our businesses are operated normally and at full throttle.
Now, the internal investigation that was quite extensive, that was done, has completed and cleared the company of any wrongdoing on any of the allegations. So that is something we have already announced, but I thought it is important. Many people have asked us the question: "Why did you maintain radio silence between the time you came up with your first announcement on the 11th of September, till the final announcement on the results of the investigation now?" Is because the investigation is ongoing.
We cannot prejudge the outcome of the investigation, and we can't give you partial progress update, saying that, because there's—it is such an extensive investigation, we had to wait till it ran its course and was fully completed, and the report was submitted to the ARC, and the ARC accepted that report, went to the board, and the board accepted that report before we could finally announce the results of that investigation. So it is not because we didn't want to inform you or we didn't want to update you, but it's not possible till an investigation is complete to give you any partial updates. So that was the reason why that was not communicated over the last five, six months. I want to then move on to the business outlook and prospects.
I won't go through in this in detail, because Shekhar has covered this for ofi. I have covered this for Olam Agri, so I don't want to repeat all that we have discussed. We expect continuing difficult... Although we believe growth has peaked, we believe inflation has peaked, we believe interest rates have peaked, and we believe that most of the advanced economies will slow down, with the exception of the U.S., and the other major engine of growth would be India. But across the globe, we will see in the second half, economy slowing down. We are already seeing signs of that. Commodity, consumption, and demand is a little bit of a lead indicator to how economies are going to perform in terms of economic growth. So that's our best case view. We expect interest rates to come down later part of this year.
That will be positive for us. As you saw in Muthu's presentation, we had a dramatic increase in interest costs between last year and this year in US dollar terms, that I recall and remember is about $315 million of increased interest costs between last year and this year. So we are working for all of you. Many of you are bankers here. We are really working for you because we had $830 million of interest costs in the group US last year, and that was an increase of SGD 315 million.
50% of that growth in interest costs, we were able to pass through, and that is why although we had EBITDA grow by double digits and EBIT grow by double digits, the conversion of the growth in EBITDA and EBIT to PAT and PBT was lower, because a lot of the increase in EBITDA and EBIT was accounted for by higher interest costs. But we believe that growth has peaked and inflation has peaked and interest rates have peaked, and we expect, of course, it'll all be data dependent. Nobody can predict what exactly is going to happen in the next few months. But our best-case scenario is that we will see slowing economies, we will see reducing interest rates towards the end of this year or second half of this year, and that will offer us a tailwind.
Just like the high interest rate regime over the last three years has been a huge headwind for our business, we hope that will turn and change going forward. The other important update is on reorganization. We stay committed on the plans that we have outlined to you about project about our reorganization plan. So we think, based on our experience post the reorganization, the reorganization included carving out and separating the Olam Group into three new operating entities, ofi, Olam Agri, and the remaining Olam Group. Each of the new operating entities have got a new game plan for profitably growing the business. Shekhar has explained that for ofi, I briefly explained that for Olam Agri, and we have talked about the remaining Olam Group business. So the first question is: Has this separation and carve-out really helped the company?
Very clearly, you can see, if you've attended our investors briefing in the past, the focus that has been brought about by the reorganization, with Shekhar and his leadership team focusing on the ofi business, Muthu and me focusing on the Olam Agri and the remaining Olam Group business, along with our leadership teams, that focus has really helped us grow both these businesses very significantly. And one of the contributing factors for really strengthening these two operating entities has been the reorganization, the separation, and the carve-out, and the resulting focus that it has brought about. So we are very clear that the decisions that we have taken to undergo this massive reorganization and radical restructuring and transformation of our business will pay significant dividends in terms of creating a lot of incremental value for our continuing shareholders.
There has been delays in the second part of the reorganization because we want to list ofi, and we had announced that we're listing it in London and in Singapore. We want to list Olam Agri in the Kingdom of Saudi Arabia and Singapore, and the remaining Olam Group will stay listed in Singapore. This was the plan, but the plans have been delayed for a variety of reasons. When ofi was ready to launch its IPO, we had the Russia-Ukraine war, capital markets froze, and there was no real meaningful IPOs being launched, and this was estimated to be a very significant IPO in the London market. In the case of Olam Agri, the main issue has been the readiness of the Kingdom of Saudi Arabia's regulatory regime of the capital markets, to allow the listing of foreign companies and allow the issuance of Saudi Depositary Receipts.
We will be the first non-GCC incorporated company to list in Saudi if we get the approvals down the road, and we will be the first company to issue Saudi depositary receipts. So the regulatory regime that will govern the permission of foreign companies to list in Saudi Arabia and to issue Saudi depositary receipts are not yet ready, and the Saudi ecosystem is working very hard to put in place a regulatory regime under which companies like us, who intend to tap into those markets, can do so. Saudi Arabia is very critical for us because we are rapidly growing our business in the Gulf Cooperation Council region. Our 35% shareholder, therefore our single largest shareholder in Olam Agri, is SALIC. Temasek is the second largest shareholder in Olam Agri at 32%.
SALIC is at 33%, and SALIC is at 35%. So for us, listing in Saudi and Singapore is very important for maximizing the full potential value of the Olam Agri business. The last point that I want to make is we will remain flexible about the sequence of the IPOs. When we started and announced this reorganization, we said we will first have the ofi IPO, followed by the Olam Agri IPO. Then we updated and told you we will do the Olam Agri IPO first and followed by the ofi IPO. Right now, we are being flexible on our options, depending on market conditions in the jurisdictions in which we want to list, business performance of these two entities, macroeconomic conditions, and regulatory approvals.
These are the four factors that will help us determine whether we should list first ofi or Olam Agri. We want to maintain flexibility on that. We are fully prepared as a company to do these listings when these conditions allow us to do the listing. The last thing I want to say about the reorganization update is that in addition to the IPO, we are also evaluating other corporate actions that can unlock value, and I cannot be specific on what we are contemplating for each of these operating entities. But, we are not only, putting all our eggs on the one basket of an IPO and demerger, which is our ultimate goal. Whatever we do in terms of corporate actions that I'm alluding to, will still not mean that we are not going to IPO. We are definitely going to IPO, that's the end game.
But in the route to IPO, we might do other things as well, to meet our value creation objectives, and that is something that we will update you as and when that happens. So finally, a few takeaway messages. Muthu very articulately explained the second half performance. So if you look at the trajectory, the second half performance has been extremely stronger than the first half performance. So we think we're entering 2024 with good wind behind our backs in terms of the trajectory of second half performance versus the first half performance. We have had significant industry-leading operating profit and EBITDA growth, but because of high interest costs, that has not translated into proportionate increase in profit after tax.
Secondly, we remain very confident of our business model and our growth prospects, and because we are in the food sector, the business is quite resilient. Even if macroeconomic conditions are poor, people will have to eat even if there's a recession. And therefore, we are confident about the resiliency of our business, the growth prospects of our business, and most importantly, the way we have differentiated these businesses to compete and win in the future. The third, Muthu referred to, we are launching a share buyback program, and it is a material share buyback program.... Our share buyback mandate is we can buy back up to 5% of our outstanding shares. We are going to go to the full extent of that general mandate that we have.
This mandate was approved by our shareholders in April 2023, allowed us to buy back roughly 192 million shares. Over the course of the year, before we had inside information, because of which we couldn't buy back our shares, we had bought 20 million shares. So what we can now buy back is an additional 171 million shares. That is, as you know, quite many months of buying. Based on our average daily trading volume, and we can't buy all of our trading volume in a day. There are some restrictions on how much we can buy on a given day, et cetera, but we believe that our business is undervalued. Now, you could say that no self-respecting CEO will ever admit that his business is fully valued, right?
So don't take my word for it. We can look at concrete data points. So in December 2022, we completed our transaction of selling a 35.4% minority stake to SALIC. And they valued the Olam Agri business as $3.5 billion, right? If you translate that into Singapore dollars, today, the Olam Group overall, not Olam Agri, which was valued at $3.5 billion by SALIC, the overall Olam Group is valued at SGD 3.8 billion this morning. I thought based on last night's close, SGD 3.8 billion, SGD 3.8 billion, roughly $2.7 billion .
So if you got, $3.5 billion for Olam Agri, they're saying the whole of ofi, which is a sought-after business, based on the investor reactions that we are getting, and the remaining Olam Group business combined, they are ascribing a negative value of about $800 million . So it's obviously not right. We, therefore, fundamentally believe our business is undervalued, and we could not express that view by buying our shares back because we had the internal investigation going on on the Nigeria thing and everything else, so we had to flush all that into the market when the, investigation was completed. We have now flushed all that into the market, so there's no inside information that we have, which the market does not have. That allows us to now buy back.
If we have a view that our share prices are trading at a huge discount to what we think is the fair value of these businesses, one of the best uses of capital and surplus cash that we have, in terms of return to shareholder, is to buy back our shares. We're putting our money where our mouth is and announcing up to the maximum that we can buy back the share buyback program. The other takeaway is we have now, as far as we are concerned, drawn a line on Nigeria and can move ahead with confidence, both in terms of our investments in Nigeria and other parts of Africa, which is important for our strategy plan, at least for the Olam Agri business.
The last message to reiterate as we continue to be committed to the listing of ofi and Olam Agri. I know that you're all impatient and frustrated that it hasn't happened as yet. We are here for the long run. It will happen. We hope we will make that an extremely successful set of IPOs for these two operating entities. With that, I'm happy to hand back to Hung Hoeng and take Q&A.
Thank you very much, Sunny, for the presentation, and to Shekhar, to Muthu as well, for their parts. We're happy to take the questions. Perhaps, the first questions can come from the floor. Yes, Zaobao. Can we have the microphone, please? Thank you.
Okay. Thank you. Yeah, hi, I'm Jia Ding from Zaobao. It's my first time here, and I would like to congratulate you on two fronts. One is your solid results and obviously for clearing your name of the incident. So my question is very straightforward. I appreciate that you are moving forward, moving towards unlocking the value of your business, so I'm just wondering, what do you think would be the potential market value that can be unlocked from these two businesses? And what would be the potential use of proceeds post the listing? Because obviously, I think as investors, they probably are very concerned about potential of a special dividend or maybe investment into the business. And I'm also wondering whether you are considering a full exit, or will you be still holding on to some stakes post the listing?
That's the first question. You can follow up later. Otherwise, it will be very overwhelming.
Yeah.
Yeah. Thank you.
So on the potential valuation of Olam's underlying operating groups, new operating groups, it's difficult for us to comment, and it is not appropriate for us to comment, and speculate on what the valuation would be. But I've given you one concrete data point, which is in the public domain, that for Olam Agri in 2022, and when the deal was completed, Olam Agri was valued at $3.5 billion. But in order to complete that deal with SALIC in December 2022, we have been negotiating with them 15 months before that. So that is one concrete data point that we have of what a market-cleared price for one of the three operating groups is. Since then, we have significantly grown our EBIT and EBITDA in the Olam Agri business.
So I would hope with that growth and with that high capital efficiency and high ROE. Our ROE is about 3.5-4 times the industry average in Olam Agri, and our capital return on capital, invested capital, pre-tax return on invested capital is also 2 times that industry average. So we think whenever we do an IPO for Olam Agri, it should be a successful IPO, but we can't speculate on what the current valuation is. The same thing with ofi. ofi is a very rare business. I don't see any other business around with that configuration and that differentiation. So we are confident about the prospects and the valuation of ofi, but we can't again speculate on what that value would be.
The company's action of buying back up to 5% of our shares means that the company's view is that Olam Group, as it is currently structured and listed, is significantly undervalued. And that is why we believe that, we are willing to, undertake that action of buying back our shares. On how much of this capital, we had earlier announced that overall we want to raise a certain amount in, Olam Agri. We have not gone public with the amount that we want to raise for ofi. ofi will be a much bigger IPO than Olam Agri. So most of the capital will be to support growth, but only very little of the capital that we are raising.
There will be some amount of the capital that we are raising, which will be secondary proceeds to de-gear further Olam Group's balance sheet. Our objective is to get Olam Group to be, remaining Olam Group, to be completely debt-free and self-sustaining. So to the extent, one major step we took was to sell that $1.3 billion worth of 35.4% stake to SALIC, get $1.3 billion, and we have substantially degeared the remaining Olam Group. In the prospective IPOs of Olam Agri and ofi, we will primarily be raising growth capital to invest and grow these businesses profitably, but there'll be some component of the capital raise which will go to secondary sales of shares, which will go to further bring down Olam Group's gearing to zero and completely self-sustaining.
Yeah. Okay. Thank you. Then the other thing that I'm also interested to know is whether what would be the criteria that you consider when conducting share buyback in terms of potential price that you start buying, and the pace of buyback that we should be expecting?
So there are many ways to affect a share buyback program. One way is to offer a, make a general tender offer. So we say that we want to buy back X amount of shares, and we make it a general tender offer, valid for a certain period of time, and see who will tender. The second is to do open market purchases. We have decided to do the second, open market purchases. The way we will look at share buyback is really what is our opportunity cost of capital? What is the expected return that our shareholders, investors who have invested in Olam, want to make? That typically is defined as a cost of equity. So you can take any number you want.
I'm not telling you what our cost of equity is, but just to illustrate how this works, let's say if your cost of equity is 10% or 15% or 20%, then that is the return that you expect to make by investing in the Olam Group businesses, right? If you believe that your shares are undervalued by 10% or 50% or 75%, then the value that you will create by doing a share buyback is your opportunity cost of capital or your cost of equity, say 10% or 15% or 20%, divided by one minus what is the undervaluation that you see. So if you see an undervaluation of 75%, then it is 10% divided by 25%. And whatever that number is, is the return you expect to make by buying back your shares.
So we are not buying back our shares out of any vain expectations of, or notions. We are very disciplined and very, sharp, that we will only buy back shares if the use of cash between investing in the company's various opportunities that we have and allocating some of this for a share buyback, that the share buyback option for creating value is higher. So in a share buyback, unless unlike dividends, where everybody who's a shareholder gets dividends, a share buyback value goes to the continuing shareholder because the existing shareholder will participate in the share buyback, and the value will transfer from the existing shareholder to the continuing shareholder.
So we are executing this buyback or launching this buyback because we believe that the Olam Group is undervalued, not because of any romantic notion that we have of the value of Olam, but because we have concrete data points in terms of the substantial market clear transaction that we did, that Olam is undervalued. And we are expressing that view by saying one of the best ways for us to use cash, and more importantly, one of the best return projects that we have today, is to also buy back shares because of the significant undervaluation that we see.
Yeah, and last question, and I promise this is the last one. To assure investors that the IPO this time around will go through, would you be able to share some more background as to why the listing attempts in 2023 did not go through? Because I believe you mentioned it was regulatory approvals, but I would like to have some background into it as to whether this will recur again, or maybe you can assure investors that the issues is now past us, and we're not-
I'll ask Shekhar to respond to how he sees the conditions in the ofi IPO and why, why, it was delayed, or why it is delayed. And then I'll talk about Olam Agri, and then we can summarize that, Shekhar....
Yeah, I think the issues that govern any IPO, not just our IPO, are fairly public, and everybody is looking at company performance, macroeconomic conditions, general capital market conditions, and the regulatory approvals. So we remain ready. Both companies were ready from an internal perspective to get those regulatory approvals. For reasons that Sunny described for Olam Agri, that has not happened, but not because there's anything that we were not prepared or we were not ready for it. Similarly, for ofi, we chose, after the war, the Russian war happened, not to proceed further, and that's true.
You see, in any jurisdiction anywhere between 2022 and 2023, there were not very many IPOs or certainly not very many successful IPOs. So we are very conscious of what we want to do. We don't have a cash pressure that we have to go out and raise money tomorrow. We want to be sure that we get the value these companies have, not just at the IPO, but significantly beyond the IPO. So we will keep tracking the markets. We are ready, in ofi, in Olam Agri, and we will launch when we believe that the timing is right and with obviously the regulatory approvals that are required. So we just want all of you to be confident that it is not because we don't want to, that we are holding back. It is just not the right timing in the market, and that's true.
You read any media reports on IPOs anywhere in the world, you'll hear the same story.
So to summarize, there are four things that we're looking out for. The first is macroeconomic conditions, because that sentiment is required for the kind and size of IPOs that we are contemplating. These are material IPOs. We want reasonably good markets to launch an IPO from. So market condition, macroeconomic conditions. The second factor is capital market conditions, the IPO market and follow-on activity in the IPO market. Post the Russia-Ukraine conflict, the IPO markets globally froze. Some of the markets are now coming back. So capital market conditions will be also important to consider what is the right timing for doing an IPO and in which jurisdiction and network size. The third would be company's own performance.
With such a massive inflationary environment that we have witnessed in the last couple of years, unprecedented interest rate increases and, as well, we have seen significant headwinds of converting our operating growth, operating profit growth, and our EBITDA growth to actual PATMI, because a lot of our growth and performance, profitable growth and performance, was being eaten up by much higher interest expenses. That is one example of company's performance. So the third thing we are looking at is: How is the company performing? And we expect better performance going forward, which will obviously allow us to have more successful IPOs and better valuations as a third. And in the ofi case, not in the...
Sorry, in the Olam Agri case, not in the ofi case, regulatory approvals are important because the KSA market is a much better valued market. It has got more liquidity, and we think Olam Agri shareholders' interest will be better served if we get an opportunity to list there, but that is not the only plan we have. If we don't have regulatory approvals, or it is delayed, or we can't list in Saudi, we will look at other jurisdictions if that is not possible. But our base case is to try and make sure that we get those approvals. That means we will have to wait a little longer. We are willing to wait a little longer. As Shekhar said, we are focused on improving the operating performance and then translating that performance into higher market value through successful IPOs and full demergers.
The idea is also to fully demerge these businesses and not to keep it commingled. So we want ofi to pursue its own standalone, independent future outside of Olam Group, and it will have its own set of shareholders who understand their business, value the business differently, and same thing for Olam Agri and Olam Group. So for example, if we had not separated and carved out the Olam Group into Olam Agri, ofi, and the remaining Olam Group, we wouldn't have raised; we couldn't have attracted SALIC to invest. SALIC was only interested in Olam Agri. They were not interested in ofi. They were not interested in the remaining Olam Group. There are many investors that we are talking to are only interested in ofi. They're not interested in Olam Agri or the remaining Olam Group, right?
And then other investors interested in our ventures and startup business, some investors who are interested in our technology, Mindsprint business. So now we have given potential investors an opportunity to select which of these businesses they want to be part of in the future, and they're willing to value those businesses differently. Otherwise, doing a sum of the parts valuation becomes very complex for them. So by separating and carving out, in addition to achieving the focus in these businesses, we are able to get the right natural long-term owners of these businesses and align those owners to the strategy of each of these operating businesses, differently. So, so that is how we are thinking about it.
Yes, Alfred?
Hi, good morning. Alfred from Bloomberg. I have three questions, too. Are you surprised by the record high level, you know, the cocoa price? What kind of the impact you can see now on your procurement and operation in South, sorry, West Africa and Indonesia? Could you tell us whether we will see the impact or the consequences in the first half result this year?
We'll take the questions one by one, otherwise we'll forget.... So I'll ask Secretary to answer that question.
Let me take all three questions. They're all related.
Oh, this was one question or three questions?
One question.
There are three questions, all on cocoa, so I'll probably handle that. Maybe therefore there'll be no more further questions on cocoa. So, we need to understand what's happening in the cocoa market. The last six weeks, eight weeks have been fairly lots of action in the market. But there's been something that's been building over. There has been two years of small deficits, which have now everybody is calling out a much larger deficit in the 2023, 2024 crop. That's still not all happened. It's, but everybody assumes that there'll be a deficit to the tune of 500,000. Nobody really knows until the supply-demand equation fully verify. So but fundamentally, the reaction in the cocoa markets are because of two years of smaller deficits, followed by now a much larger looming deficit.
That's the fundamental problem. We have been calling out this from last year when it was visible in the crop, which started in October. You know, the West African seasons are in 2023 and 2024. Starts from October 2023 and still continuing. And we had talked about this. We were positioned in terms of what we could buy. And the big difference that we saw was that because of our integrated capacity in origination as well as in manufacturing, we were able to offer optionality to our customers through this time. However, many people did not believe the size of the deficit or the fact that this would be so extreme. Even we didn't. Nobody could have predicted that. And also, people are expecting demand contraction.
But even with whatever demand contraction, we fully believe that the supply deficit is significant enough, and it is having a market impact on the market. And different people, based on their positions, on their risk appetite, on their cash flows, et cetera, are taking therefore action. So right now there is a. The markets have gone up about GBP 2,000 in London and about $2,400 in New York in the last seven weeks. This is on top. So it is a, it is something that has been built up over a period of time. It is now at a fairly excitable state. We have no predictions, and we don't as a responsible market participant. We don't predict markets, or we can't change markets.
We can do what we can do to stay calm, steady hands on the table, and that's what we would expect most of the industry participants to also do. Markets go up like this, they also come down, and therefore there is likelihood that the markets can go up a bit more before they start coming down. But there will be a negative reaction, equally or potentially violent on the downside also. So again, it is a real deficit. It is going to reflect in physical demand, supply in the coming months. There will be a bit more volatility, but we feel, to your last set of questions, we feel we are well positioned. We can't predict the markets, we can't change the markets, but we can react as good or better than others.
And that's really, well, another proof point about the integrated capacity at origin, maintaining the sustainability, traceability, and delivering through our diverse manufacturing footprint to our customers. And so right now, all hands on deck to support our suppliers, support our farmers, support the regulatory bodies on the ground and our customers. That's hopefully addresses all the questions. I don't want this to be a cocoa market briefing. Happy to take questions outside, but that's the state of the market. Thank you.
Yeah. The microphone. All right, so you only have one question.
Thank you.
Thank you anyway. Yeah. Would someone like to ask the question? There's a lady over there. Thank you.
Hello.
Ah, yeah.
Hi, Khairani from the The Edge Singapore. I'm just wondering if there is an indication for when the regulatory frameworks from the Tadawul side would be, I guess, completed?
We are in regular touch with them, but it is impossible to predict when they'll complete, because it has to go through multiple agencies in Saudi Arabia, the Central Bank, Tadawul, the Capital Markets Authority, the various committees, so it takes time. So we don't know, and we have no control on that.
Yes.
Thanks. Paul from Phillip. Just one question. For 2023, there were two, I guess, major moving parts, the drop in wheat prices and I guess the lack of better-
Drop in what prices?
The drop in wheat prices-
Yeah.
... and the so-called collapse of the Nigerian naira. So I just wondered, how did that translate or impact your Olam Agri Processing business or margins per metric ton?
Yeah.
Thanks.
So the raw material prices, coming down or going up is not very directly related to profitability. When raw material prices come down, you have to reduce the wheat flour prices, the end product prices. When raw material prices, wheat prices go up, you can increase wheat flour prices. Same thing happens in the currency. So when there's a massive devaluation, so you have US dollar wheat prices, you have the freighting cost in US dollars. It lands in Nigeria, say, in this example, at a certain CNF price. You have to pay whatever duties, et cetera, all in naira. Yeah, then you have to convert that into wheat flour or pasta. There's a conversion cost or a manufacturing cost, which is our local Nigerian naira denominated costs.
And then based on the exchange rate, you will convert all this into a wheat flour price to protect a margin that you have to make. So the more important thing is how much will demand contraction be? Because the naira prices, if it keeps going up, then the consumer in Nigeria, in this example, will find it more and more unaffordable unless wage price revisions are effective. That based on the devaluation, the government, along with the unions, et cetera, agree to maintain the consumer's buying power and have a wage settlement and increase wage prices. The bigger factor is really what is the role of wheat flour in the total calorie consumption in Nigeria? So average Nigerian calorie consumption is about 2,600 calories per capita per year.
But out of this calorie consumption, 70%-75% is carbohydrate consumption, and Nigeria only produces 20% of its carbohydrate requirements in terms of garri and cassava and millets, everything else put together. So if your calorie consumption, 75% or 70% is contributed by carbohydrate consumption, only 20% of the carbohydrates are available locally. It is a center of the plate consumption item. But that is, you cannot meet your calorie needs if you do not allocate 70% of your calorie basket to carbohydrates. So wheat flour for making bread or to make biscuits or to noodles or pasta, all this is from wheat flour. So it is a center of the plate item. It is not easily substitutable because there's no local production of wheat. Most of the wheat into Nigeria is imported.
So we have seen that demand has held up, but we've also managed our manufacturing because we feel that the consumers are hurting. And in order for us to make a normal margin, we have to see the buying power of consumers restored. So that is a bigger worry. But wheat prices, whichever way it goes, or currency, whichever way it goes, will all be reflected in the end product prices. Unless, of course, you're carrying a long wheat position and wheat prices then go up or come down, can have some impact. But typically, you work on two, three months cover based on the supply chain efficiency from where you're importing this wheat, et cetera. The more important thing is really the how much consumption power can be maintained of the Nigerian consumer or Ghana or other places, to...
But as you saw in the results announcement, the Processing and Value-added segment, which included the wheat flour milling business, has done well last year, has done well the prior year as well. And we have been able to absorb the devaluation in the currency, the volatility in wheat prices, et cetera, and that has resulted in whatever growth and performance we've had.
Can you use the microphone? Thank you.
Yeah, sorry. So, the pickup in margin per metric ton for Olam Agri Processing, was that largely from flour, or were there other components that-
No, it is from all the components in the Processing and Value-added business.
Okay.
So which includes wheat flour manufacturing, and it'll be different for wheat flour for biscuits, wheat flour for noodles, wheat flour for pasta, wheat flour for bread. The margins are different in all of those categories. Then it is in the pasta manufacturing business that we have. We have pasta manufacturing and branded pasta distribution. That has also contributed to the performance. Then we have the integrated animal feeds and proteins business, in which the poultry feed business and the fish feed business and the protein day-old chicks business have all performed well. So all of these profit centers within the Processing and Value-added segment have had improved margins, slightly lower volumes, but improved margins in last year, which is what has resulted in this performance.
Okay, sure. Thank you.
Thank you. We'll move on to the questions that have come online. A lot of questions there. Perhaps we go, topic by topic. The first come, that have come through, it's on the share buybacks. A few questions around the share buybacks. First is: How does the company intend to fund the share buyback, and does it affect the gearing? And does it affect also the free flow of the company? And there will be questions, essentially by the continuing shareholders.
Yeah. Firstly, on the source of funds for our buyback, we have sufficient cash resources, as you will see in the balance sheet. You will see the end of December cash position. We have very comfortable cash position and cash resources. So that is one. Secondly, in terms of the impact on gearing, after we pay out this SGD 0.04 final dividend, our gearing will go up as a group, and we do the share buyback when we complete the share buyback. The share buyback will take time. When we complete the share buyback, the increase in gearing will be from 2.015 net debt equity to 2.065, and we are comfortable with that gearing. So it is not going to be a material impact on our gearing.
Thank you.
There are a few bread and butter questions on the results, so I'll request, Muthu to take this question. Maybe to a certain extent, Shekhar, you would like to take that as well. I think the, passing of the interest costs, how are you able to pass through the interest costs? And I think, Sunny, you mentioned about 50%, 40% of cost is passed through. How does it work in the different business that you're in, Olam Agri and in ofi? That's the first question. And secondly, how do, the companies, Olam Agri and ofi, think about volume growth going forward?
Right. Thank you, Hung Hoeng. The first is, let me answer for the Olam Agri business, and then I will request Shekhar to take on the ofi. So as you know, Olam Agri is highly working capital intensive. The cash-to-cash cycle average is between 35 and 40 days, so it's a very fast-moving cash-to-cash cycle time. So and bulk of the trading business, which contributes to roughly 85% of our volumes, are highly capital efficient. So we are able to actually pass through by having contracting that is happening on a frequent basis. So our ability to pass through rising interest costs with every new contract is fairly easier compared to the market, and that is why there will be an ability to pass through the interest costs fairly efficiently into our contracting price frequently throughout the year.
That is applicable for Olam Agri.
I think the concept remains the same. The cycle times are longer because of the manufacturing nature of ofi. But if you see, roughly our balance sheet is 50/50 fixed capital and working capital. Working capital interest moves in that shorter cycle, and we have repriced, and a part of the EBIT growth is also coming from repricing of that interest cost for whatever carry period the customers are asking. So it happens. The lead lag could be six to nine months, but it's happening. But because of the significant increase in interest rate, not just the quantum, but the speed at which it happened, obviously that had an impact, and you saw that lead lag, especially in 2022 and 2023, which is now evening out in all the revised contracts.
The second part of the question was about volume-
Volume
... and how we are looking at volume growth. So right now, the focus has not been on really volume growth. We, we have indicated in the past, and we still maintain that guidance, that we'll be looking at low to medium single digit, kind of volume growth. So volume is not the focus. It is improving our EBIT to a high single digit, which means, improving our margins on what we are doing. That is the focus at, in, in ofi, and that remains the guidance going forward.
Just to clarify on the gearing impact for the share buyback, Sunny referred to an incremental 0.05 delta in the gearing. But intuitively, internally, we look at perpetual securities as debt, and that is why Sunny alluded to 2.01-2.06. But actually, in real terms, our net debt to equity as at December is 1.73 times, and the delta would be only the 0.05 times that will go up, so maybe 1.73-1.74. Yeah.
Thank you. Related to this question is always the question on working capital cycle, which has increased over the year. What would be your comments on the working capital cycle going forward in consideration of the Red Sea attacks, whether that could be a tailwind for, you know, the movement of your inventory out of the balance sheet?
Yeah. So the working capital increase, which you saw roughly 17 days on a year-on-year basis increase, is primarily due to, one is, the increase in the value of some of the commodities. As we have spoken now about the historical price of cocoa especially, and led to not increase in quantum of inventory or volume of inventory being carried, but the value of inventory going up because of the increase in prices. And also, to a certain extent, a temporary increase in our receivables that we saw towards the end of 2023 in the Olam Agri portfolio, because of significant increase in trading sales volumes, especially in grains and edible oils.
So that, we believe, is more one-off nature, and we believe that that will not be something which will contribute to increase in working capital in absolute dollar terms or in cash-to-cash cycle. We expect a more normalized situation going forward. But as Shekhar was talking about, one cannot predict commodity prices. Depending on where the commodity prices will be, the absolute value of working capital can go up or come down. But what we remain very focused is about constantly focusing on cash-to-cash cycle conversion, as well as having a firm fix on what volume of inventory that we would, or other components of working capital, that we would like to focus on.
Moving on, there's a question on Nigeria. I think there have been some reports on the cessation of procurement within Nigeria. I think that refers to the animal feed business.
Mm-hmm.
Do you have any update for shareholders?
Yeah. The government is worried about food price inflation in Nigeria, and they have requested the major players to try and stabilize food prices, and therefore made a request to slow down procurement of corn and soybean and sorghum, which are locally produced crops. And the industry has together have decided to align and support the government's efforts to cool down food price inflation. So that is the context, I think, of that announcement here.
Will it have an impact on the animal feed business?
We'll have to wait and see. It's just a week since the government has started this program.
I think we have addressed most of the questions. I think some of the questions are in relation to potential M&A activities, which we'd like to talk about that from the ofi and the Olam Agri point of view.
Obviously, we can't speculate about potential transactions, but both ofi and Olam Agri are focused on growing their businesses profitably. Some part of that growth is coming from greenfield organic investments. Some part of it is coming from acquisitions. You've seen all the acquisitions that ofi has done in the recent past, the greenfield projects that they are commissioning now and the investments made there. That will continue to... It's a growth business, they'll continue to do that. And the same applies for Olam Agri as well. Olam Agri will also continue to grow both organically and inorganically. And obviously, the IPOs will make a difference. The percentage of growth that comes from organic versus through acquisitions will change a little bit once the IPO is done.
There might be a little bit more bias after the IPO to do a larger proportion of acquisition-led growth versus greenfield organic growth, but always there will be a mix of the two.
Are there any more questions from the floor? I understand we are past the 12:00 P.M. mark, and we're happy that you are here and have stayed till the end of this session. And if there are no ending remarks from the management, we'll be happy to bring this session to a close. We thank you for your participation. Hope to see you—
Thank you
... in August.
Thank you all.
Thank you all.