Good morning to all present here today and to those who have logged onto our live webcast of our full year results briefing for the year ended December 31st, 2022. I would like to bring your attention to our disclaimer statement that is on page two and page three of our presentation on forward-looking statements. I'm Hang Hoeng of Olam Group Investor Relations. Today, I'm joined by our senior management team here, led by our Co-Founder and Group CEO, Sunny Verghese. Group CFO, N Muthukumar, on my extreme right, as well as the CEO of ofi, Olam Food Ingredients, A. Shekhar. We are pleased to share with you the results we have achieved in 2022 and to date on our reorganization journey. Muthu will begin our narrative by first taking us through the consolidated Olam Group results.
ofi CEO, Shekhar, will then take over to discuss the financial and operating results of ofi. Sunny, as the CEO of Olam Agri, will follow on with the performance of Olam Agri, as well as of the remaining Olam Group businesses. He will also share his views on the business outlook and prospects, and recap the progress we've made in the reorganization before summing up the key takeaways for us. We will then open up the floor and webcast for Q&A. You can actually now post your questions on the webcast, which we will address during the Q&A session. I'll stop here and let Muthu take over from now. Thank you.
Thank you, Hang Hoeng. A warm welcome once again to our second half and full year results of Olam Group for 2022. here and yet another very strong results for 2022, culminating in a two last three years where we have navigated through the pandemic, the onslaught of Russia-Ukraine war, the significant global supply chain disruptions, rapid increase in interest rates and other geopolitical uncertainties. It is a testimony that we have stress-tested Olam Group's strategy across these last three years, especially, and 2022 is again a very strong evidence of the differentiated strategy that the group has adopted.
In terms of the highlights, you can see we have sales volume of 43 million tons, resulting in a revenue of SGD 55 billion, an operational PATMI of $782 million, and a very strong free cash flow to equity of SGD 1.9 billion of switch of SGD 3 billion, and an EBIT of SGD 1.6 billion and an adjusted EBIT of SGD 1.655 billion, and net gearing at 1.47 x as compared to 1.72 x this time last year. I will talk about each of these metrics more in detail in the rest of the presentation. EBIT grew 13.1% on a year-on-year basis, with the remaining Olam Group really turning around from a - SGD 151 million of EBIT in 2021 to the positive territory of SGD 4 million.
Olam Agri, here again, had a very strong 13.9% growth in EBIT on top of a very strong performance in 2021. ofi had a lower EBIT of roughly $74 million and adjusted for some of the amortization that we have done in terms of the recent acquisitions. It is much lower, and primarily the decline has been in the global sourcing segment, and I'm sure Shekhar will talk about it more in detail. We have very strong cash flow generation, as I had talked about in the earlier slide, of $1.9 billion of free cash flow to equity and $2.7 billion of free cash flow to firm.
On top of a very strong, robust cash position of SGD 4.8 billion, and adjusting for readily marketable inventories or secured receivables and unutilized bank lines, we have a very healthy liquidity position of roughly SGD 25 billion. That gives us enough headroom of roughly SGD 8.5 billion for us to take care of any commodity price rises or any of our CapEx and working capital requirements going forward. We are pleased to announce that the board of directors have recommended a second and final dividend of SGD 0.045, and taking up to SGD 0.085 for the full year for financial year 2022.
We have reduced our gearing from 1.47 x from 1.72 x on account of very disciplined working capital management, significantly lower CapEx, and also on top of concluding our private placement of 35.43% equity sales take to SALIC in Olam Agri. Here we have a peak of the consolidated financials by operating group. Volumes, and no surprise here, primarily 89% of the volumes is contributed by Olam Agri, roughly 8.4% by ofi and the rest by the remaining Olam Group. Similar trend in revenues. We have 67.2% of the revenues contributed by Olam Agri, roughly 30% by ofi, and the remaining 3% by the remaining Olam Group.
EBIT at $1.6 billion, 53% from Olam Agri, 47% from ofi, and roughly 0.3% or $4 million of positive EBIT from the rest of the Olam Group. You can also see in terms of the invested capital of total of $19.3 billion, a marginal increase of 1.7% compared to 2021. Roughly 60% is in ofi, 26.5% in Olam Agri, and roughly 14% in the remaining Olam Group. As you all know, during the year in 2022, we had reorganized moving some of the assets within the operating groups, and that we had talked about in detail in the first half presentation in August. Here we have just a disaggregation of our sales volume.
Sales volume declined roughly 2 million tons from 45 million tons in 2021 to 43 million tons in 2022. As you can see in the slide, most of the decrease has come from Olam Agri and primarily in the origination and merchandising segment, largely due to reduction in our trading volumes from Russia and Ukraine after the onset of the conflict. Point to note is that in spite of a significant decline in our inability to trade volumes from Russia and Ukraine belt, we have been able to more than 50% offset the volume decline from other sources of products that we have gotten from other origins. That, again, demonstrates the resilience in our global sourcing presence that all our customers love. In terms of EBIT grew 13.1% to $1.6 billion.
Olam Agri had an increase of $105 million on top of a very strong year in 2021. As I had indicated earlier, the remaining Olam Group has contributed strongly, a swing of $155 million from a -$151 million in 2021 to a +$4 million. Here again, all around contribution from the deprioritized assets, the continuing and gestating assets. Sunny will talk about it more in detail in the rest of the presentation. As I had indicated earlier, ofi had a marginal decline of $74 million, primarily in the global sourcing segment. That contributed to an overall EBIT of $1.6 billion for 2022.
Operational PATMI stood at $782 million, down 18.7%, primarily due to significantly higher interest costs and also some tax provisions we had earlier flagged as part of the reorganization. There will be some continuing tax dyssynergies, that had gone through, which has happened as expected. The rapid rise in interest rates through 2022 had resulted in a significant increase in net finance cost that is about roughly $317 million that you can see in the slide. The change in operational PATMI you can see is only $180 million, which is clearly a reflection that a bulk of our interest cost increase have been able to pass through to our customers.
There has been a marginal increase in invested capital from $19 billion to $19.3 billion. Very disciplined fixed capital management, almost flat year-over-year, and roughly $300 million of increase in working capital, in spite of very significant increase, continued increase in commodity prices, especially in the first half of 2022. Gearing, as I'd highlighted earlier, came down from 1.72 x in 2021 to 1.47 x on top of very disciplined working capital management, significantly lower CapEx, and also on account of the divestments that we had done during 2022. Adjusted for RMI and secured receivables, we are at a very healthy position of 0.64 x in 2022. Very strong positive free cash flow to equity of $1.9 billion.
The free cash flow to firm stood at $2.7 billion. A swing of $3 billion on a year-over-year basis, contributed by operating cash flow, contributed by change in working capital, as well as significant cash generated through divestments, including the SALIC deal that was completed late last year. Offset by a higher interest paid of $322 million, resulting in $1.9 billion of positive free cash flow to equity as at 2022. With that, I will hand over to Shekhar to take through financial and operating performance for ofi. Thank you.
Thank you, Muthu, a warm welcome from my side too. I will talk through the business of ofi, as all of you know, after the reorganization in January 2020, five strong platforms in cocoa, coffee, nuts, dairy, and spices were put together and came up as ofi. That journey today is progressing very well. We are today a $16.5 billion entity with roughly $1.1 billion in EBITDA and roughly $800 million in EBIT. More importantly, the whole focus on building the value-added part of the business, as we reorganized, we were building on the strong global sourcing platform that we have built over the last 33 odd years.
A sustainable, traceable, differentiated platform that we got across all these businesses. On top of that, the value-added journey has accelerated, and you'll see both in terms of investments as well as EBIT, that journey continues, and we are quite excited by that. Having said that, FY 2022 unfortunately has been a bit of a disappointing year, and we need to contend with the factors that impacted many people in the marketplace, but certainly had its impact on us. I would classify that as a set of two circumstances. One were some major events, the energy shock immediately after the war, which contributed to a big jump in energy prices, especially in Europe, which impacted the execution against our sold contracts. That was one big shock.
We talked about, a little bit about that at the start of the in the half-yearly results. The second big aspect was the impact on continued lockdowns in China or a harsher lockdown in China, which impacted some parts of the global sourcing business, and prices especially in some of the nut categories and partially in dairy. These two external shocks were offset by a very resilient performance across the rest of the portfolio. What gives us confidence is that while these two shocks, we are all aware of the what happened behind this, I don't need to explain that.
The business was not only able to contend with it, both in terms of managing the customer supplies, managing the disruptions, managing the high inflation, energy and others, but also working very closely with the customers to recover the pricing which has started flowing through in Q3 and Q4. Therefore, as we enter into 2023, we feel quite confident that the trajectory that we established during 2020 and 2021 post reorganization we'll be back to that trajectory. This dip in 2022 is obviously disappointing, but also in a sense, we feel more optimistic because net of this, the business was resilient enough to come out of the shock. If I just look at the numbers in front of you and you got here the 2020, 2021 and 2022.
We had a very strong recovery in 2021 from COVID, both global sourcing as well as ingredient solutions both did very well. Compared to that, and if it, we had a fall in global sourcing, which Muthu had also highlighted earlier. Net of the energy shocks and everything else, the value-added ingredients and solutions part of the business still was able to maintain its EBIT despite those knocks. Therefore, there was growth in the rest of the business which was not impacted by that. That was quite, we feel quite heartened by that. On an overall basis, if you look even at the trajectory of 2020 to 2022, not just the difference between 2021 and 2022, there's still a 4% EBIT growth across the portfolio, and which we believe net.
If you remember, we had provided a guidance that this business will be looking at a medium to high single-digit EBIT growth over the medium term. We feel quite confident that that trajectory will return in 2023 and onwards. On the invested capital side, sorry, the other thing I should mention is that this EBIT growth beyond some of the events that happened is also absorbing a lot of depreciation amortization of the new acquisitions that we completed, as well as the CapEx that we have invested in, which was invested through 2021 and 2022. The results of which are still not flowing through. Net of the one-off events, net of the very strong 2021, the business, this results have to be seen in the context of those two parts.
On the invested capital side, therefore, you see both on the fixed capital and the working capital, the impact of the investment that we have made, and most of them you're all aware of. Last year we made two acquisitions in Club Coffee in Canada, and Märsch, which is a private label company in Germany, both doing quite well. Those investments were made in the middle of the year, and so the full impact of that will flow through. We have also invested in the soluble coffee factory in Brazil, which is expected to be commissioned in the second half of this year. The New Zealand processing, New Zealand dairy processing project again, expected to be commissioned in August. A lot of these investments are pretty much complete, but the EBIT has not happened.
You'll see the increase in invested capital with the impact, the EBIT impact, on the overall portfolio. Looking at the global sourcing per se. Global sourcing we have had the impact primarily in the nuts category and predominantly because of China. That has been the big impact. There has been, of course, a little bit of lower coffee volumes and EBIT in the Q4 because of what was happening in Brazil. Overall terms, the big impact to this business coming from the nuts category is predominantly also impact of almonds and almond pricing, again, which was impacted by lack of demand from China. The across all platforms, if I look at cocoa, if I look at dairy, if I look at coffee, the global sourcing business did very well.
What is happening there is the sustainability certified traceability premium that we are getting across those businesses. It's not about growing volumes, it's all about really managing a differentiated impact for the sustainability platform that we have built across these businesses. That's been the focus of this business. Despite a significant increase in prices, if you notice overall, ofi has almost had flat volumes with a 16% growth in revenue. We had a significant increase in prices, but the business has managed working capital in a very disciplined, efficient manner. Therefore, you'll see even in global sourcing, there is a reduction in working capital despite the increase in prices. That is global sourcing.
On ingredients and solutions, like I mentioned, it's been a flat performance, and this is after taking a big knock on energy, especially in Europe, both across cocoa processing and coffee soluble coffee processing and in other areas. That's been a big impact. A lot of the new acquisitions that were invested in during the course of the year have still not started yielding fully. Net of that, this business has maintained its EBIT, and that is primarily because the industrial spice business, the nuts manufacturing business, the nuts private label manufacturing business, the soluble coffee business in Asia, the cocoa processing businesses in other parts of the world, all of them have really made up for that impact.
A flat performance despite the one-off impact and the incremental depreciation that we have taken for the investments is actually we feel quite a heartening thing. If you look at the overall scheme of the business, all our investments and the EBIT growth is really gonna come out of the value-added ingredients and solutions business. Being built on a very strong global sourcing platform. The value-added business really gains from the global sourcing platform, but the investments and the growth in EBIT and growth in margins and growth in returns are going to come from this segment going forward. Pulling all this together, what I'd like to leave you with is probably two thoughts.
ofi is a business that was carved out and curated out of Olam three years ago. The journey, the principle rationale, the commercial logic of ofi is very strong in terms of how we are working closer with customers, selling more. More importantly, upsell and cross-sell across this portfolio. Increasing the value-added scope of this portfolio in the ingredients as well as the solutions increasingly that we are doing with our customers. The new capabilities that we have invested in, which are beginning to show results, whether it's in innovation, in digitization, in sustainability, in across the customer solution center that we have built, are all invested for and are beginning to show results.
We feel quite confident that notwithstanding this, dip in 2022, the business is poised to deliver on the medium-term guidance that we have indicated. We feel quite strong and optimistic about the prospects in 2023 and beyond. Thank you, and I'll hand it over to Sunny.
Thank you, Shekhar. Thank you, Shekhar. Good morning, ladies and gentlemen. It's my pleasure to walk you through Olam Agri's financial performance for 2022, as well as a few key takeaways from that performance and how we are positioned for the future. Many of you would recall that Olam Agri is organized into two main operating platforms: Food and Feed, Fiber, Ag Industrials and Ag Services. Within these two main platforms, we have three reporting segments. In the Food and Feed business, we have the origination and merchandising segment, and we also have the processing and value-added segment. The last segment is Fiber, Ag Industrial and Ag Services. If you look at the scale and scope of this business very quickly to summarize, we have a top line this year of $36.9 billion.
We have volumes that we moved of about 38 million tons. We operate in about 30 countries. We have 9,500 employees, and we have more than 55 Tier One manufacturing facilities. I want to call your attention particularly to the financial track record and performance of this business. It has generated an EBIT of $858 million. Most importantly, in the last four years, it has grown EBIT at a compounded 31%, and that is significantly better than our primary peer reference group, our competitors. In case of EBITDA, we have grown EBITDA about 28% compounded over the last four years. This year we reached an EBITDA in excess of $1 billion, $1.068 billion.
The other takeaway is that we have a very high capital efficiency measured as pre-tax return on invested capital, EBIT divided by invested capital. That in 2022 reached 16.5%, and the average of the last three years is 15.5%. That is about 50% higher than the primary peer reference group in our industry. We have achieved a return on equity of 39% in 2022, but the average for the last three years is about 44%. That is roughly 4 x the industry mean or the industry average. The differentiated business model of Olam Agri has allowed Olam Agri to demonstrate or deliver high growth, profitable growth, high capital efficiency, and high returns. Let me just walk you through the three segments first. First, overall, our EBITDA as...
our EBIT, operating profit, has grown roughly $361 million from $497 million in 2020 to this year's $858 million. That is a 73% growth from in just the last three years. Therefore, the compounded annual growth rate over the last three years is 31%. You will see it is fairly well-diversified. The origination and merchandising segment contributes to 31% of our operating profits. The processing and value-added segment, which is now the largest segment, has contributed 49% of our operating profits. The Fiber, Ag Industrial and Ag Services segment has contributed the balance 20%. If you look at the bottom row on, EBIT per ton, that is the key lead indicator for our performance.
EBIT per ton has almost gone up almost doubled over the last three years. From $12 a ton in 2020, it is now $22 a ton. That's 1.83 x increase over the last three years. That is the 33% CAGR and margin for ton improvement. On the invested capital, invested capital has come down marginally by 2.3%, $5.242 billion in 2021. We ended 2022 with $5.124 billion, that's largely driven by the decrease in invested capital in the fiber ag industrial and ag services segment, as we will see subsequently. This has translated to the attractive pre-tax return on invested capital of 16.5%, which is a 0.6%, 60 basis points improvement over the prior year.
If you go to the first segment within that, which is origination and merchandising, it delivered another year of resilient performance despite all the geopolitical fragmentation that we saw and its implications on global food feed trade flows, and also the macroeconomic uncertainties with very high inflation, the highest that we have seen for a long time, but also the most accelerated pace of interest rate increases that we have seen in the last 50 years. A combination of both this has impacted the business, but even though that was the case, our EBIT operating profit only marginally declined from the prior year. The prior year was a very robust year for us.
It has only marginally declined by about 1.6%, coming down from $267 million in 2021 to about $263 million this year. Interestingly, the EBIT per ton was maintained despite all of these headwinds, and the EBIT per ton at $8 was similar to the EBIT per ton of the prior year of $8 per ton. The EBIT per by IC, the pre-tax return on invested capital, has declined quite significantly in this segment last year. It has come down by about 8.8%, 880 basis points from 32.1% in the prior year to 23.2%. We are not overly worried about it in terms of the underlying trend.
We believe that we will come back in this business, which is primarily an asset-light business, very different from that of our competitors, back to our historical high EBIT/IC margins. Within this portfolio, we had more headwinds in the grains oilseeds business, largely on account of disrupted trade flows from Ukraine and Russia. We had a decline of about 5 million tons compared to the prior year in Ukraine and Russian trade flows, and that therefore reduced the volumes that we could trade. That was more than compensated by growth in North America trade flows, South American trade flows, European trade flows, all of this Australian, Indian trade flows. All of these compensated for the big shortfall that we had in Russia and Ukraine, and therefore our net decrease was only about 2.8 million tons.
The rest of the shortfall that we had in Russia and Ukraine was made up by the other regions. We had very strong performance, however, in edible oil flows across the globe. We also had strong performance from the freight business, and we also had strong performance from the edible oil business and the rice business. Moving on to the next segment, which is food and feed processing and value-added. This had a stellar year last year. It grew operating profits by 54% from SGD 275 million in the prior year and ended this year at SGD 423 million of operating profit.
It had a 72% increase in margin per ton, which went from $61 a ton to $105 a ton, which was one of the fastest increases in margins that we have experienced in the recent past. Primarily this was driven by our wheat milling and pasta business in Africa. We are in many countries in Africa. We now have an Africa market share of 40%. three years ago, four years ago, we had a market share of 8%. We have increased our market share by 32% in the last three, four years.
That is a testament to how we have differentiated the business in terms of our technical and milling expertise that allows us to have higher efficiencies in terms of extraction efficiencies, allows us to have much lower cost per ton because we have much better capacity utilizations. In terms of invested capital, it grew about 11.2%, primarily driven by higher wheat prices in this case. Nevertheless, our pre-tax return on invested capital, EBIT by IC, actually grew 5.3%, 530 odd basis points, which was a strong performance for this segment. With that, I want to move on to our final segment, which is the fiber ag industries and ag services segment, which includes cotton, rubber, wood, and our commodity financial services business.
This had severe headwinds in 2022. Therefore, operating profits declined in this business by 18.4% from $211 million last year to $172 million this year. More importantly, the margins dropped by 23% from $95 last year per ton to only $73 this year, which is almost. Yeah, so there was a drop in margins as well, primarily led by our cotton business and our fund business, both underperformed last year. The cotton business, largely on account of the prolonged lockdown in China, which is now over, and hopefully. China is one of the largest textile milling centers in the world, and the capacity utilizations during the lockdown had plummeted. We expect that now to come back to normalcy in 2023.
That drove some of the underperformance in the cotton business last year. The rubber and wood business, which is what we call ag industrials, those two businesses performed exceedingly well and even grew over a very strong 2021. With that, I'll just summarize on the key takeaways on how the Olam Agri business is positioned. I think the first thing that to remember about the Olam Agri business is that it is a high growth, high capital efficiency, and a high return business. Significantly better than the industry peers in terms of growth, in terms of capital efficiency, 50% better, in terms of return on equity, 4 x that of the industry median. That's the first point to take away.
The second point to take away is that we have a very differentiated business model that allows us to deliver these outcomes. The first part of the differentiation is that we are focused, and we have built leading positions in select trade corridors. While we source globally, we have leading market shares in select trade flows. From a standpoint of scale, at $26.9 billion or SGD 36.9 billion, we are smaller than the big boys in this industry. That, however, does not give us a cost disadvantage because in the trade corridors that we participate, we have leading market shares and growing market shares and a very solid competitive position, which does not therefore confer any disadvantage to us. That is one way we are differentiated.
The second way that we are differentiated is that we have a fixed asset cost light model. Fixed cost light model, operating model, and low overhead cost model. Since we are not invested in the origination countries, in terms of origin infrastructure, no railroads, no ports, no terminals, no silos, that we maintain the nimbleness and the flexibility to source from multiple origins. Most importantly, that leads us to our third advantage. I mean, the related part is that we have a very low overhead cost per ton. That also leads us to the third advantage, that we have no direct channel conflicts with the producers and growers in these large producing countries. At the same time, we have no channel conflict with our customers in the destination market. We don't process in China, we don't get into bean crushing in China.
All our competitors are there. They have a direct channel conflict because the processors in China will be suspicious of your intentions if you're also supplying the beans to them and also competing with them and processing there. Therefore, the information you supply to your customers about when to buy, how much to buy, and all that stuff, they don't trust the information you give them. Whereas in our case, we have been seen as a true independent trader in the producing countries by the large grower exporters, and we don't compete with them there. Therefore, we get a first call on their volumes. In the destination markets, because we don't compete with the processors, we get a first call. That's how our market shares have grown, and that's how we have become very salient in these select trade flows.
The fourth way that we are differentiated is our fixed asset investments are targeted and focused in high growth in consumption markets, which offer higher growth, higher margins, and excess returns. That is why we talked about the wheat milling business and pasta manufacturing business. We are in Nigeria, we are in Ghana, we are in Cameroon, we are in Senegal, and we have other places to go in these high growth and consumption markets which have higher margins and excess returns. That's another way we are differentiated. Finally, our overall Olam Agri operating model, which is the way we farm, the way we originate and source, a multi-source model, flexible model. In some products like cotton, we source with the farmers and growers. We have more than 300,000 farmers that we directly source from in cotton.
In other cases, we buy from village-level agents, farmer cooperatives. In some other cases, we buy delivered in store at the port city. In other cases, we even buy FOB and sell CNF. We have a very flexible origination sourcing model that provides us an advantage. We have strong processing and manufacturing capabilities which really allow us to buy poorly performing manufacturing assets. In the wheat milling business in Nigeria, we first acquired a company called Crown Flour Mills. It had capacity utilizations of 32%. We took it to 90%+ capacity utilizations. It had mill extraction efficiencies of 74%. We took it to 79%. Dramatically reduced our costs. And as a result, we were able to make that acquisition very value accretive for us.
We rolled up by acquiring BUA, which is bigger than Crown Flour Mills, ultimately acquired Dangote Flour Mills, which is even bigger than BUA, which gives us this 45% + market share in the Nigerian market as an example. Our processing and manufacturing capabilities is part of the Olam operating, Olam Agri operating model. We have logistics capabilities, both in terms of inland and marine logistics, ocean freight in particular, where this year, that business did 22 million tons captive from Olam Agri straight flows, but did more than 40 million tons with third parties. The fact that we can do ocean freight for third parties, reflects the competitive advantages that we have built in the managing ocean freight. That's another part of the Olam Agri operating model that gives us an advantage. Finally, it is about...
Not finally. Last but one, it is about a sustainability advantage that we have delivered with proprietary sustainability assets, whether it is AtSource, whether it is farmer information system like SPIDER, whether it is being recognized as the number one sustainability company in the industry by Oxfam. 20 amongst the 350 companies ranked in the World Benchmarking Alliance for the food and consumer product. Food and agri sector industry. This has all been publicly acknowledged as well, as well. Finally, it is about our data analytics, our proprietary market intelligence through the data analytics and very bespoke IT system that we have developed over the last 33 years to capture, monitor, manage, measure risks on a real-time basis intraday. We don't even wait for end of the day to understand what our market, mark-to-market position is.
We have real time intraday mark-to-market. That whole data analytics infrastructure, proprietary market intelligence infrastructure. Just in the grains and oilseeds business, we have 28 research analysts just in one product category. All of that gives us a proprietary advantage in skills, and that's what we call the Olam Agri operating system. If you put these five points of differentiation together, that explains how we are able to grow the way we are able to grow, how we are able to generate the capital efficiency and the returns that we have generated. With that, I want to move on to the last part of this presentation, which is on the remaining part of Olam Group, which has got really three component parts. The first part, as all of you know, is Olam Global Holdco, OGH.
Olam Global Holdco has two kinds of assets. One is what we call gestating assets, and we have four gestating assets in the portfolio. That includes our palm plantation business in Gabon, OPG, Olam Palm Gabon. It includes our consumer product business in Africa, branded food consumer products business in Africa called Caraway. It includes our ARISE port and infrastructure platform, and it includes Rusmolco, which is the dairy farming assets that we transferred from ofi into Olam Group towards the beginning of last year. We have other assets in this that we have earmarked for exit. Deprioritized and earmarked for exit. In 2022, we sold various assets and released about $333 million of cash. These were deprioritized assets earmarked for exit.
We also did a very large transformational deal in bringing SALIC in for 35.4% stake in Olam Agri. It generated cash flows of SGD 1.24 billion to reduce the debt and gearing and right size the capital structure of the remaining Olam Group. Most importantly, it gave us a capital gain of SGD 1.2 billion, which should be recognized in a profit and loss statement. Because we did not sell controlling interests, when you sell an asset and you don't sell controlling interests, the gain that you have generated from selling that stake goes directly to your equity and reserves and does not flow through your profit and loss. If you had sold 51%, this not SGD 1.2 billion, but proportionately more would have come into our P&L statement this year.
Because we only sold 35.4%, that SGD 1.2 billion of capital gain has flown directly to our equity and reserves, and that is why the gearing of OGL has dramatically fallen this year as its equity and reserves has considerably increased. The second component part of the remaining Olam Group is Olam Ventures, which is really a foundry or incubator to start to create new startup ventures based on the twin engines of sustainability as well as digital expertise that we have built over the years. Finally, our third component part is Olam Technology and Business Service Solutions, which has now been relaunched and rebranded as Mindsprint.
This provides legacy IT services to the erstwhile Olam Group companies, ofi, Olam Agri, the remaining Olam Group, but is now being charged with the mandate to develop a third-party business and become a truly independent digital services and solutions company from a historical IT legacy company. That transformation is also happening quite fast. I won't go through the next slide, which we have presented many times over in terms of the current state of play as far as the new Olam Ventures initiatives is concerned. I will just pick up two things and just highlight that. One is Jiva in 2021 had revenues of $15 million. It has grown revenues almost five-fold to $72 million.
From 50,000 tons of volumes it did in 2021, in 2022, it ended up doing 250,000 tons of volumes. It has now got almost 600 people in that startup, so we are already now up and running. It is getting real good traction. We only launched it in one country, Indonesia, only in one crop, corn. We can go into multiple crops in Indonesia. We have launched a smaller version of that in India. We're getting good traction in India, so we can make this a very fungible model, so it is getting good traction. This is a smart farmer management platform for smallholder farmers.
The second is our decarbonization platform called Terrascope, where we are trying and helping companies in their decarbonization journey. I gave you the example in the past of why it is very important for us to measure Scope 3. Only 15% of the world's companies measure Scope 3, and out of that 15%, 90% measure it wrong. Therefore, most companies' decarbonization journey is only focused on Scope 1 and 2. In Olam Agri's case, Scope 1 and 2 only accounts for 0.8% of our emissions. 99.2% of our emissions is Scope 3. When I say we want to reduce greenhouse gas emissions by 50% by 2030, if I don't do anything with Scope 3, there's no way I can achieve it.
To get to net zero by 2050, if Scope 3 is 99.2% of my emissions, I won't get there unless I can impact Scope 3. We now got seven customers at the end of the first year, last year, 2022. We have, in the first two months of this year, we have already added another three customers. We expect to end this year with more than 30 customers with annual recurring revenue run rate of about $4 million. It is really getting traction because this is a problem for most companies in their decarbonization journeys, how to tackle Scope 3.
We not only help them to have a more accurate measurement of Scope 3, but we also help them manage their emissions and how do they pull different abatement mitigation reduction levers to actually be on that pathway and journey towards net zero. Those two things I'll just highlight there. Let's just go to the results of the remaining Olam Group. The remaining Olam Group last year in 2021 had an operating profit loss of $151 million. That was contributed, $27 billion loss came from the deprioritized exiting assets. $47 million of that loss came from continuing gestating businesses, and $77 million came from the investments that we are making in Engine 2, which is the Olam Ventures business, primarily. It includes a few other things.
Against that, the deprioritized business has improved profitability by $40 million year-on-year. From -$27 million it has become +$14 million, so that is very positive trend. The gestating businesses have moved from -$47 million in the prior year to +$52 million, so almost a $100 million delta between 2021 and 2022 in the continuing gestating businesses. In the case of the investments that we are making in Engine 2, that has reduced from $77 million to $62 million. That's a $15 million improvement over the prior year. You can see that invested capital has come down. Invested capital has come down also because we have disposed of our ARISE Integrated Industrial platform, completely 100%, and we have also sold out the infrastructure services business—ARISE Infrastructure Services business.
That has released cash, and that has reduced our invested capital in the business primarily as a main reason by 11.5% last year. With that, I just want to go to the business outlook and prospects for next year. As most of you, I'm sure will have different points of view on what's going to happen in 2023. None of us know for sure, but our house view is that goods disinflation has happened, including commodity price disinflation has happened. Services disinflation is far more sticky and is not going to come down in a hurry. Therefore, we believe that inflation headline coming down to 4% is on course. That 4% to 2% will take a much longer time.
We don't see any prospect, at least as Olam, of the Fed pausing or reducing interest rates in 2023. There's a lot more to be done. While Powell has been explicit on that, we've all been skeptical about that being the case because we saw the equity markets rally, the bond markets rally in the first part of this year. We believe it is bear market rally and short covering mainly that has led to that correction. We believe that there will be at least 5.2%-5.5% as Fed rates, and then they might pause after that. That means there is potentially an additional 50%-75% basis points hike.
As Muthu explained in our results, one of the big issues for us between 2021 and 2022 was the most accelerated pace of interest rate rises that we have seen in our history. I think the fastest pace of interest rate hikes in probably 50 or 53 years. Most of it we have been able to pass on to the market, but not all of it. There's a lead lag effect. In Olam Agri's case, for example, our interest costs more than doubled from 2021 to 2022. Yet our EBITDA and EBIT grew, but our PATMI declined marginally as a result of not being able to pass 100% interest costs through.
Next year we are budgeting for higher interest rates than in 2022, which is already very high because our view is that the Fed will get to a restrictive conditions of 5.25%-5.5%. We, however, believe that other goods and disinflation will continue. We had major gas price inflation and fuel cost inflation. That was a big headwind for all our businesses, but particularly in the ofi business. We have a lot of manufacturing plants in Europe, and gas costs went up 10-fold plus, I think 15-fold, I think, at one point in time in Europe last year. We believe that those other costs, inflation will come down, service inflation will continue and will be a little bit more difficult to tackle.
We are worried about the growing fragmentation of global geopolitics and the potential impact that would have on food feed trade flows globally. Today, food and feed is not under any sanctions, but all that can change depending on the course and trajectory of this war. If it is going to worsen, and it's an unknown unknown, nobody knows what's going to happen. The uncertainty surrounding that, can potentially bring food feed also under sanctions, which will dramatically disrupt trade flows. It is therefore important to be very diversified like we are, and if we were not in Australia and in Argentina and in Brazil and in North America and in India, and make up for the shortfall in volumes from the Russia-Ukraine trade corridor, that can have an impact on our business.
Because we have a rule of being in 85-90% of the producing countries for every commodity that we are in, we can navigate that a bit better. That is other issue that we expect will be there. For Olam Agri, we see a big catalyst in our partnership with SALIC. For example, when we announced the SALIC transaction in March of 2022, we had no business in Saudi Arabia. We had very limited business in Saudi Arabia. Between announcing the transaction in March, closing the transaction in December 22, just wheat we sold 1.2 million tons to Saudi market. In the prior year, we had sold 0. They are interested in 20 commodities, 12 of which are what they call strategic commodities for their food security. We are in many of them.
We expect this partnership with SALIC to release a lot of partnership synergies. In the case of ofi, I think, all of the headwinds in terms of the massive cost inflation is behind us. They are focused on executing the strategy. We expect a much better outcome in 2023. They are sticking to their guidance of volume growth, as Shekhar mentioned, in the low mid-digit volume growth and EBIT growth in the high single digits, which will provide attractive returns, total shareholder returns to our shareholder. In the case of OGL, and the remaining Olam Group, we will continue this momentum of the turnaround that we are beginning to see and stay focused on that. We will continue to now focus on getting the Olam Agri IPO done in the first half of this year.
ofi is fully ready, prepared, and committed to do its IPO as soon as market conditions would allow it based on prevailing market conditions. Those are the key takeaways in terms of outlook and prospects. I just want to spend a couple of minutes on the reorganization, which most of you are aware of. We have now completed the carve-out and separation of the three new operating entities within the Olam Group. It was a complex process, but we've been able to do it on budget on time. We have completed a landmark deal with SALIC by selling 35.4% stake in Olam Agri to SALIC at a valuation pre-money of $3.5 billion equity value, which has allowed us to raise about $1.24 billion.
A capital gain that was there of SGD 1.2 billion as a result of the transaction, which has gone to shore up the equity position of the remaining Olam Group and rightsize the capital structure of the Olam Group. third, as a new. At this point in time before the ofi IPO and the Olam Agri IPO, the Olam Group Limited as a parent holds 100% of ofi, holds 100% of the remaining Olam Group, and holds 64.6% of Olam Agri, with SALIC now becoming a 35.6%, 35.4% shareholder.
Finally, Olam International went into ofi, and therefore, OIL that was existing before has now become OGL, and that is a company that is now trading in the Singapore Exchange. OIL was delisted. This is just to show you the. Oh, sorry. I didn't move the slides. Okay. This is to show you now what the reorganized structure looks like. It's self-explanatory. Let me just finish with the next steps. As far as ofi is concerned, continue to deliver the strategic plan and continue on the journey to list ofi on the premium segment of LSE and a concurrent secondary listing in Singapore. This will now take place following the Olam Agri IPO, and this is all subject to prevailing market conditions.
As far as Olam Agri is concerned, as all of you know and we have announced, we are planning a dual listing in the Singapore Stock Exchange as a primary listing of ordinary shares. We are also exploring the possibility of a concurrent listing in the Saudi exchange Tadawul, subject to prevailing market conditions. We will be soon seeking shareholder approval for the concurrent Olam Agri IPO, both on the SGX and on Tadawul, and also the distribution of specie to the Olam Group shareholders of their shareholding in Olam Agri. As it becomes an independent, fully de-merged, spun-off entity. I will close with these three takeaways.
First, the reorganization, the journey that we have been on has already started yielding us results because it has resulted in simplifying our portfolio, enable much sharper focus, and that improved performance is evident in our results of 2020, 2021, and 2022. Second, we have made significant process in the execution of the reorganization plan in terms of completing the separation carve-out, being ready for an Olam Agri IPO as soon as the first half of this year, and planning for the ofi IPO as soon as market conditions allow us to do that. As a result of all that, Shekhar described and Muthu outlined and what I described, we are cautiously optimistic our prospects for 2023 and for the stat plan period 2023 to 2025.
Thank you for listening to our presentation. We are now happy to take questions. I'll hand over to Hoeng.
Thank you, Sunny, Muthu, and Shekhar for the presentation. We'll now start the Q&A session. As the main subject of today's briefing is on results, we would like to concentrate the questions mostly on the results and leave the questions on commodity prices outlook towards the end of the briefing. I would like to give the opportunity for those who are present here in the room who would like to ask the first question. Could you just take the mic from one of our colleagues and let us know where you come from? While we wait for you to think about the next question for us, we'll take some that have already come online. The first question is regarding the performance of Olam Agri. In the second half, it looks like the delivery of the profits are lower than the first half.
Would you like to explain the reasons for the performance and also provide the guidance for the next half versus the second half of last year?
Yeah. We don't provide guidance, and we won't start now. We have. You have to go by what our historical track record in Olam Agri has been. I've gone to some lengths in elaborating that we have been able to grow operating profits EBIT by 31% over the last three years. If you take a four-year period also, it is about a 31% CAGR. Similarly, EBITDA has grown at 28.5% over the last three years. We have given you some indications of how our EBIT by pre-tax return on invested capital as our ROE is. You can model what assumptions you want to make on what our 2023 forecast would be like.
We've also described the macro backdrop and set-settings and that some of the headwinds that we had in 2022 is unlikely to be there in 2023. The first thing I want to say is Olam Agri is not much of a seasonal business. Olam Group overall is a seasonal business. ofi has a little bit more seasonality by the nature of its products and where it's grown, et cetera. Olam Agri, really the first half, second half is roughly the same. It could be 48, 52, 50-50, but in a small range, not much seasonality. The many reasons of why the second half in 2022 was not as strong as the first half is first half we had very strong performance.
Fed started increasing interest rates from the end of March last year and then did 375 basis point hike, a couple of 50 basis point hike, and then ended with a 25 basis point hike. That is the sharpest increase in interest rates that we have ever seen in history. That has been a headwind in terms of the second half PATMI performance of Olam Agri. We have now budgeted for all these increases plus an additional potentially 50-75 basis point increase for next year. We've also demonstrated that with some lead lag, most of these higher interest costs can be passed through. I think it is fair to assume that the second half of 2022 will hopefully be better than the second half of 2021, but I won't be able to provide you any precise guidance.
The second question which I receive from the webcast is regarding the remaining Olam Group businesses. has been a SGD 100 million drum in the contribution from the continuing and gestating assets. Sunny, would you like to just give an idea of how that has happened?
We first, for the gestating assets, as we said, we have four assets. OPG has become EBITDA positive. It is a gestating asset, it was EBITDA positive last year. Although our budget was we didn't expect it to be EBITDA positive. Because of very favorable palm oil prices and improved operational efficiencies in terms of yields and costs on the plantation, we were able to become EBITDA positive last year. That was one big delta. The biggest delta came from Rusmolco, the Russian operations, which had a fantastic year. They had EBITDA of almost $50 million and PAT, which is also quite high. All significant improvement over the prior year. The third asset is the Caraway business, which is our African consumer business, which also had a very good 2022 compared to 2021.
The only asset that did not have an improvement over last year was the remaining rice port and logistics asset, which you know, has now become an exit asset for us. Over the course of the next year or two, we will find a way to sell that asset as well. Of the four gestating assets, we had significant improvement in performance in 2022 compared to 2021 and the remaining exit assets that were deprioritized, all of them performed better than 2021 in 2022. That includes our sugar mill in India, our edible oil refinery in Mozambique. All of these businesses did better than last year, although these are now deprioritized businesses. We are re-looking at all of that based on what happened in the last two years in these businesses.
That is what drove the improvement in performance in the remaining Olam Group.
There's a follow-up question and also know how the progress has been made on the packaged foods business, as you have talked about seeking strategic partnerships for the business. Can you discuss the progress?
The packaged foods business from a macro environment standpoint, particularly since it is a Sub-Saharan Africa-focused business, basically its operations are in three countries, Nigeria, Ghana, and Côte d'Ivoire, of which Nigeria and Ghana had significant headwinds last year. They had hyperinflation, sharply devaluing currencies, high interest costs, and therefore, we had to take several pricing actions to restore our margins as cost and inflation was rampant. Therefore, designing to cost and value and exercising our pricing power to take pricing up allowed us to improve performance despite terrible macroeconomic conditions. We don't think this is the right time for us to do a transaction. We are exploring doing a transaction, but I think we'll get better value as market conditions improve. We don't then have to sell it at a significant discount to fair value.
We will watch the space. We will continue to focus on improving the operating margins and improving sales growth. We will bide our time and responsibly divest this asset when conditions are suitable.
Let me just pause here and ask if there's any questions from the floor. Gentleman in front.
Good morning. Gregory Hutton from Rabobank. Sunny, I was very much interested in hearing, you know, your views on the business model and the asset-light business model. A few years ago, it was all about being vertically integrated, for the food security, for the security of supply. We've seen a lot of, you know, competitors, the ABCDs rushing into, the acquisition of assets, especially on the crushing plants in the Black Sea, for instance, to capture the margins. Which leads to two questions. One, do you think it's something that will be a kind of a reverse trend in the market? A lot of players, you know, just withdrawing from the fixed asset. That's the first question. The second question is related to the OGA business in general.
Because eventually when I see the EBIT per ton, I mean, the margin is extremely strong. It's a strong performance, I have to say. Probably because also you are benefiting from a very high operational leverage.
Mm-hmm.
Low fixed assets and eventually, you know, higher volumes leads to direct EBIT. It's also probably a consequence of the high price. In a world that is at the moment, you know, seeing a little bit of disinflation-.
Yes.
Decreasing in price, you just mentioned that there is no seasonality, but do you think it could be a disadvantage when considering the cyclicality?
Yeah.
i.e., a slower-
Yeah.
I mean a decreasing price, going forward?
Thank you. Those are excellent questions. Firstly, if you study really how agribusiness companies have evolved their strategy and developed their strategy, typically they start with the notion that we need to control supply, and therefore we need to have on the ground presence across the supply chain from the farm gate to the port, and then from the port, control the logistics to take it to the destination markets. As a result of many developments, they will first decide to go into one region, producing region. Say, if they go to Brazil, they will say, "Okay, these are the four producing regions in Brazil. We will start with one." Then they find that in some years because of climate-related disruptions and weather-related disruptions, the availability of crop in that region is very little.
It's significantly below what they anticipated. They will say, "We need to therefore be in more regions and diversify." They go to more regions in the country. They find that suddenly Black Sea has become more competitive. The cost of production of wheat in the U.S. is $230 a ton. The cost of production in Russia is $135 a ton. They'll say, "No, being in just Brazil doesn't make sense, or in the U.S., we should go to the Black Sea ports and go into Russia." Slowly they are in all parts of the country. They are in all producing regions in the world, and they're stuck with these assets. There are many years these assets will not be fully utilized, and they have all the burden of carrying this cost.
Because they shifted trade flows is happening as more new origins become more cost competitive, they are stuck with these assets. It is very difficult when you have one of our competitors has 800 silos. Yeah. Owned silos, not leased silos, 800 owned silos. They have railroads, they have rolling stock, they have port terminals. They even own ports. What happens as a result? You have high overhead cost per ton. To manage these assets, you need good people who can run these assets very, very efficiently, so your costs goes up. We believe we have $1.50-$2 overhead cost per ton, not fixed capital cost per ton, overhead cost per ton. We believe our competition has between $12-$15 cost per ton.
In a business that is generating $9 margin, that is a huge advantage. I'm not saying they're wrong, we are right, et cetera. I'm just saying we all make independent choices based on whatever our point of view on the competitive structure, et cetera, is. What happens is when you have these high fixed assets and high asset intensity, then when the business goes through a down cycle, you bleed. You have all of these costs to absorb, and you have a high cost infrastructure and a high cost of operations. Therefore, in a down cycle, you really have very volatile performance. If you have a very low cost position and low asset intensity, then even in a down cycle, you're okay. You don't bleed as much. Time will tell, and the jury is still out.
If you take a 20 of you, who will be right, who will be wrong, but that's fine. We believe this gives us a distinct advantage. Also it gives us an advantage from the fact that this allows us to be seen as a truly independent trader, both in the origins and in the markets, and therefore, no channel conflict in Brazil and Argentina with the large growers and exporters, and in China with the large crushers and processors. That is the reason why. Otherwise, this industry has been cozy for a long time. The ABCDs, et cetera, have been there for 150, 200, 250 years. How is it that we came in this business? The grains and oilseeds business started for us only in 2008.
In a fairly short span of time, how did we take share? How were we able to grow this business profitably? It is because of the way we are differentiating, and that differentiation is a part of it. Will margins be volatile? Yes, it will be. Our business model will reduce the volatility for us. There's no way of escaping the cyclicality and volatility of the business. Our business model can reduce that volatility for us, and that is what we have seen for the last 10 years of Olam Agri's performance. Across cycles, the business has been fairly predictable.
Just continuing the conversations on Olam Agri, I think the concern among the analysts is about how we recover from the loss in volumes from Russia and Ukraine. Do you wanna talk about that?
Yeah. As I already mentioned, we have a rule to be present in at least 90% of the producing regions for all the key commodities that we are involved in. Since we are not very asset intense, we can be present in all the global trade flows in a very asset-light way, which gives us multi-source origination flexibility and multi-model flexibility of buying FOB, buying DIS, buying farm gate, farming ourselves. We have a lot of flexibility. That is why despite the fact that the war happened on the 24th, the ports started closing soon after that, an agreement was reached, the ports partially opened, the corridors partially opened, we are now fully prepared for it. Our volume plan for next year assumes that the corridors will still be not fully open.
Therefore, all the volume growth is coming from all the alternative producing countries where we will increase our presence and our market share and our volumes to make up for any shortfall, given the uncertainty of how this war will be prosecuted and what the trajectory of the war will be. We are quite comfortable that unlike the big surprise that we had last year on the 24th of February when the war was underway, about 10 days before that, we had sent a note to the board where we had assigned the probability of a full-fledged war of Russia invading Ukraine at 10%. Right? We're completely unprepared that there would be a full-fledged war. We gave four scenarios, and this scenario was the least probable scenario. We were caught by surprise, but not next year. Not in 23.
For Olam Agri, who do you consider to be your closest peers in terms of business mix, strategy, and competitive position?
We have four buckets of peers that we look at. The first bucket of peers is our primary peers. Three of them would be listed peers, where data is a little bit more available to compare, which is ADM, Bunge, and Wilmar. We have many unlisted peers. That includes Glencore, Viterra, COFCO, ED&F Man, ECOM. These are unlisted private companies, and they are also in the same business. Louis Dreyfus, they are also in the same business. They are our unlisted peers. This group of companies is the first bucket. Our second bucket is regional agri businesses, like Andersons in the U.S. It's basically in U.S. and Canada. We have three companies in that category who are largely regional players in one or two countries.
They are also our competition because they're in a similar space. The third peers is more regional processing companies. As you saw, 47% of Olam Agri's profits, operating profits is coming from the processing and value-added segment. In the next few years, we are going to be significantly investing additionally in the processing and value-added segment. We are comparing ourselves with large processing and value-added players, whether it is CP Group in Indonesia or in other parts of the world, or Avanti in India, which is a large animal feed manufacturer. We have a large integrated animal feed and protein business. We've got about 12 companies who are in different countries who are large midstream value-added processors like us, and those 12 companies are also our peer group.
Finally, because we are planning a dual listing in Singapore and in Saudi, we are looking at the food companies that are listed in Saudi. We have a few food companies that are listed in Saudi. Savola, for instance, as an example, Almarai is an example, and they're also our peers. If you put all this together, we have about 25 peers. Some closer peers, some a little bit more distant peers. And we are benchmarking ourselves continuously across this peer group.
There was a question there.
There's a question in the back. Thank you.
Yes, good morning. I work for UniCredit. Firstly, congratulations on your full year 2022 results. I have two questions. The first one relates to finance charges, and the second one is price action and demand elasticity. On the finance charges, despite a reduction in your debt stack, we've seen a 16% increase in finance charges.
Yeah.
I was wondering if you could peel that figure so that we get an understanding of what's one-off and, you know, what's likely to continue. On price action and demand elasticity, I wanted to know if you see further price action during 2023. On 2022, what was the result of your price actions on demand elasticity? Thank you.
I think we'll ask Muthu to start with the first question on interest costs. Probably Shekhar can explain the interest cost increases in ofi, and I'll explain the interest cost increases in Olam Agri. Shekhar and I can take on the elasticity of demand in both our businesses. Muthu, would you like to start with the interest cost?
Thank you for the question. First, I would like to take this opportunity to thank all our banking friends here who have come here physically and also watching us remotely for your continued support that you have been with us through the reorganization in the last three years, helping us to reshape our debt portfolio into optimal that is fit for purpose for ofi, Olam Agri, and for the rest of the Olam Group. I want to place on record our sincere appreciation on that. Coming to your question on the finance charges, there are no one-off finance charges that we have recorded in this year. The primary increase in finance charges is due to the rapid increase in interest rates that we have seen, witnessed, especially after the onset of the Russia-Ukraine conflict.
As you know, we have both fixed capital and working capital, and we have at a group level, our net debt to equity on a net gearing basis, net of cash, was at 1.47 x. Beginning of the year, it was at 1.72 x. That means that all our assets, whether it is on a fixed capital basis or on working capital basis, are levered. As the interest rate goes up, our interest costs accordingly goes up, whether it is on servicing the fixed capital that is being funded by long-term debt or on working capital that is being funded by short-term debt. That has been the primary reason why you have seen this sharp increase in the overall finance costs between last year and this year.
Having said that, Sunny had talked about it, I had talked about it. We have been able to pass through bulk of the increase of interest costs through our sales throughput, albeit at a little bit of a lead lag, but we have been fairly successful in doing so.
Maybe I'll take both your questions from an ofi perspective together. Interest cost is broadly what Muthu outlined. If you take the ofi balance sheet, which is slightly different from the rest of the group, it's roughly 50% fixed capital and 50% working capital because of the nature of the business. The working capital cycle with our customers and the interest cost pass on because there is a cost for everybody, and that increases for everybody. That's happening. In the revised pricing that we have done from the second half of the year, that pricing is being passed on. There will always be some lead lag because we sell forward 6-12 months. The next cycle we cover up that. We're not really worried about passing the interest cost because that's...
as long as that's the same for everybody. We are as competitive on that. On the impact of on demand, that's quite different business to business and market to market. Therefore not easy to kind of just give a single size fits all answer. When I look at it, that if you look at the cost inflation, it's had many parts. Labor cost increase are probably here to stay. They're not gonna come down. Energy has already adjusted itself, is coming off. If you look at transit, marine freight and inland transit, again, gone up a little bit. Coming off beyond the gas price changes, which is probably going to be staying, all the unnatural price increases that happened in marine, et cetera, has all started coming off.
Commodity price, some part of the input raw material prices have started coming off. Of course, in some markets that's still not there. When I look at the cost inflation impact
There's probably labor and interest costs which are probably here to stay. Everything else is kind of ups and downs. From a business perspective, we feel quite confident because these are not new to us. We have been managing this as part and parcel of our business. Our relationship with our customers is on the basis of a fairly transparent pricing model. Markets have gone up and markets have come down. Because of that, our pricing with our customers, we have moved very fast. If the cost increases are real, the customers understand that, and we've been able to pass that on. That cycle is quite, I won't say instantaneous, but it is, the pricing changes happen quite fast. They may come into effect because of lead lag of forward sold contracts.
That pricing is there in the market, some up, some down. The impact on demand, we don't see significantly for ofi. There are some uncertainties, some businesses. That's primarily coming because last year, first half, because the high inflation across everything coming off 2021 and 2022, a lot of people stocked up quite a bit. There is a little bit of restocking happening in the second half. People therefore are reducing the tenure of contracts or reducing the quantum of contracts. There's a bit of uncertainty on demand in some categories, in some markets. That's caused a little bit of, let's call it a change. Overall demand across most of our business, we don't see anything, and 5% might come to 4%, but it won't be 5% growth will fall to, you know, -10%.
That won't happen in our business despite the prices. Long answer, the three aspects to it, there are some costs which have gone up will stay. Other costs are coming off, therefore the markets are adjusting accordingly. The impact of these price increases, net-net of both these ups and downs, we don't think it'll hurt demand long term for our businesses. The pricing changes that we have done, we are recovering back our margins, and we feel quite confident in the support of our customers who understand that and are supporting us with the changes in pricing as required.
On the first question on interest costs, as far as Olam Agri is concerned, in 2021 we had total interest expense of $85 million. In 2022, it became $171 million. That is because interest rates went up and more than doubled from 2021 for us to 2022. We had an increase in interest cost expenses of $86 million. That increase in interest cost expenses has only resulted in a $27 million reduction in PATMI. A lot of the interest cost increases we have been able to pass through. With the lead lag impact that we talked about, we are quite confident that most of the interest cost increases will pass through. The second question on pricing power, it's not very. We are all price takers, at least in the Olam Agri business.
There is a price discovery through the futures markets, and it is a transparent real-time price discovery. We are price takers. We don't have any pricing power unless you're in with the exception of some businesses, but most businesses, we are all price takers. If raw material costs go up, which is 90% of our costs, then prices will also go up. If raw material costs go down, farm gate prices go down, then selling prices will also come down. The important thing for us is we can't control that. We're not in control of headline commodity prices. What we have to be focused on is in the spread. How much can we make in terms of the spread? And that is why the margin per ton becomes extremely important.
On what can you do to improve your margin per ton? Most of it will come from how you compete on costs.
Thank you. Yeah. Gentleman there.
Hello.
Can you help him?
Hello, hello.
Yeah.
Hello. Yeah, Marcus from Daiwa. I have two questions. The first question is, what is the further decline in terms of supply contribution from Ukraine and Russia do you expect it for your new financial year? Given that there's no end in sight for the war, what do you plan to do with your operation in Russia and Ukraine? Also question two is, with lower gearing, how would that affect your acquisition decision this year? Do you expect to, you know, to increase your, you know, the debt for your funding for acquisition? Any potential acquisition?
I probably didn't hear the second question fully. Can you just repeat the second question?
Okay. The second question is how would your lower gearing-
Okay.
-uh, affect your-
Sure.
acquisition decision?
Yeah, sure. Thank you. On the first question, we do not know what the trajectory of the war is going to be. It's an unknown unknown for us. We know now that food and feed are not under any sanctions. However, even though it's not under sanctions, whether the ports will be freely allowed to export and an agreement can be extended on the allowing the ports to ship out grains and oilseeds from these markets, is unknown. There's uncertainty about it. We are fully prepared and geared and ready to export as soon as the windows continue to be available. We have significant market positions in these two markets. We will continue to be prepared to export as long as export is allowed. Export continues.
What I described earlier is that we are preparing to increase our volumes and market shares in other producing countries where we are present to make up for any shortfall from Russia and Ukraine if that happens. Some of the shortfall last year in Russia and Ukraine happened because there was a period when the corridors were shut. There were two agreements which allowed the corridors to be open. All our volume shortfall happened in the first period when the corridors were shut. Now the corridors are open, we can plan a little bit better, but we don't know whether the corridors will get shut again, and that is a possibility. We had to be prepared for, therefore, compensating for any shortfall in volumes from other producing countries and origins. That's the answer to your first question.
On the second question, ofi, as Shekhar has outlined, has a very definite strategic plan. Some of that will be growth through greenfield projects, some of that will be growth through acquisitions. He can walk you through that because some of that's already in the public domain in terms of the investments that have been recently made. The same thing goes for Olam Agri. We are not going to be changing our strategy because our gearing is lower or higher. We are very clear what our strategy is, what part of our growth is going to come from greenfield projects, what part of our growth is going to come from acquisitions, and why that makes strategic sense for us to make those investments.
I don't think our decisions on how to prosecute our strategy will change because our gearing has changed or cost of funds have changed.
Any other questions from the floor? Sunny, there is a question on commodity outlook.
There's a question there. Hello?
Yes.
Hello. Hi, this is Andy from DBS. Just one question on ofi. Just now you earlier mentioned that for ofi, the margins and was impacted by operation or lockdowns in China. Given that now China has opened, or maybe can you articulate the impact of that in the second, sorry, in 2002, the numbers. Also with China now, you know, reopening, do you see that coming back? Or what's the state of things on that front? Thank you.
Yeah. I would like to kind of provide a breakdown of what the numbers exactly were and the impact was, but the impact was really felt in two product categories, the dairy and the nuts business, which are large consumption in China. Of course, there are other businesses that also have a demand impact, but the disproportionate impact of China in these two product categories was quite high. That was one thing which impacted the markets, market price even globally for these products. Some of the nut categories where we are farming in more like almonds, that impact was more compared to other nut categories. That with the...
Hopefully now the lockdowns opening from January and demand resurrecting, we hope that both the demand as well as then appropriate price adjustments will come back. We are very well positioned in both these businesses to take care of that demand, whether it's in the incremental capacity coming up in New Zealand, which will go into China for dairy or the nut demand both from Australia or U.S. or Vietnam, which we cater to from those three. We feel quite positive. Again, we still haven't seen a complete opening up. The supply chains will need to be filled up. There's a lot of existing stock in China which needs to go through.
We think that the real change in demand will start showing in late Q2 or Q3, because there is a lot of inventory destocking happening right now which has stopped. That's really the impact of China.
Back to the question on commodity outlook. Can you share your view on how Olam's key businesses will tackle the impact of El Niño, which might come around in 2023, and its impact on the sector?
El Niño, La Niña are phenomenons that happen once every few years, but we've had a prolonged La Niña situation which is now entering its fourth year. We have to be clear that that will have an impact on supply and availability of crop, which will vary from region to region because the impact is positive in some regions, negative in some regions. On balance, it is overall negative. We have lived that with that for years. It is very important to have a good sense for the supply and demand situation, factoring in all of the factors that can impact supply and all of the factors that can impact demand. That is why we have large teams doing S&D analysis, supply and demand analysis, for each crop that we participate in.
We have a good point of view on that. That will impact prices, and that may impact margins, but we have to stay focused on what is the margin we can make, the spread we can make. Commodity prices, we can't predict precisely. We can be having an informed view, and it is important for us, and it is the nature of our business to have a good view on that. We invest a lot in getting that view to help us hedge our risks well. The climate is impacting and having more weather-related disruptions, and we are always on the lookout for what that could be for different crop in different places. We've had last month, the USDA tighten the US corn crop dramatically.
The Argentinian crop is significantly shorter than what people expected because of the weather. On the other hand, we expect Brazil to have a surplus corn crop from what was planned or expected in the original S&Ds that we had towards the end of last year. The S&D changes every day because there's new information that's coming to us about the supply availability or the supply disruption because of weather, because of logistics, because of any other factor. Because of export bans, because of tariff and non-tariff barriers being imposed. In 2021, about 14% of the world's calories were subject to government tariffs, export bans, and non-tariff barriers.
In 2022, it went up from that 14% to 23% of world's calories were impacted because 70 countries put new export bans and tariffs just in 2022 because of the food price inflation situation. We have to look at all of these factors that can affect supply and demand and make sure that you can develop your hedging and risk management strategies keeping that in mind.
That was the last question on the webcast. May I ask if there's any questions from the floor? If there are none, we thank you for your participation and your questions and your attention today. We hope to see you in the next six months. Thank you.
Thank you all.