Olam Group Limited (VC2) Earnings Call Transcript & Summary

Those who have locked into this briefing by Olam Group Limited on the proposed initial public offering of Olam Agri. My name is Hung Hoeng from Olam Group's Investor Relations. I'm pleased to be sitting alongside our Senior Executive Group Co-Founder and CEO of Olam Group, Sunny Verghese, who is also the CEO of Olam Agri. A very warm welcome to all of you, and I hope the New Year has started well for you. It certainly started well for us as we bring you this good news and to share the progress we have made in our reorganization plan, the highlight being our plans for the Olam Agri IPO. Before we start, it's important that you take note of the cautionary statement, on forward-looking statements that will be made in this presentation that's on Page 2 of the presentation. I will pause here and invite Sunny Verghese to elaborate on our message today. We'll then take questions after the presentation. Thank you very much.

Thank you, Hung Hoeng. And on behalf of the company, let me welcome you all to this afternoon's media and analyst briefing on OGL's proposed IPO listing of Olam Agri, a subsidiary of the Olam Group. I've organized this presentation into four parts: First, we will just quickly recap the reorganization journey of Olam and where we stand today in that journey; second, we will talk about the proposed Olam Agri IPO and the strategic rationale for the IPO, including the timing of this IPO; third, we will give you an update on the progress of the OFI IPO and demerger and therefore, what will happen to the remaining Olam Group after the OFI IPO and the Olam Agri IPO; and finally, we will just have one slide that summarizes this afternoon's presentation. As Hung Hoeng mentioned, we have scheduled about an hour. We started about 4 or 5 minutes late, so we can go up to probably 4 or 5. I will take about 15 minutes presenting the proposed IPO, and then we will have about roughly 45 minutes for Q&A. With that, let me start with just recap emphasizing the journey itself for the Olam's reorganization journey. So as all of you are aware, in January of 2020, we announced a transformational reorganization of the Olam Group and we intended to split Olam into three distinct new operating groups or entities. One was OFI, Olam Food Ingredients. The second was Olam Agri, which is the subject of today's discussion. And the third is the remaining Olam Group called OGL, Olam Group Limited. The idea of the reorganization exercise was with a view to unlock what we believe to be the hidden value in the Olam Group and develop strategic pathways to further increase long-term value for our continuing shareholders. And the way we thought we could achieve that is by, first, simplifying and focusing our portfolio. We were pretty diverse with 16 platforms and many SBUs. And we felt that at this time, we have 53 SBUs and we felt that it was difficult for investors and analysts, et cetera, to put their arms around our business and model the prospects of the business as there were lots of moving parts. So we felt that if you could reorganize the business and the guiding principle for reorganization, the organizing idea behind that was if you could bring together similar businesses underpinned by very distinct industry trends for that group of businesses, we would have a better underlying logic that will tie the component parts of the 3 new operating groups together better, more coherently and then for each of these new entities to develop their own equity story, their own differentiated business proposition and a new game plan of how they will continue to grow profitably and create long-term value. So this exercise took us about 2 years because we have a very complex organization in that we had more than 250 distinct operating entities across 60 plus countries and therefore, taking the businesses of each of these three operating groups and separating all the assets, cash and fixed assets and working capital and liabilities. People into these three operating groups required a lot of effort in getting that done. So at the beginning of 2022, we had substantially completed the separation and carve-out and the splitting of the Olam Group into these three new operating entities. And then each of these operating entities had developed their own business propositions, equity story, strategy and new game plans to continue to grow and create value in the business. Then in March of this year, 2022, we announced a transformational strategic transaction when the Olam Group sold a substantial minority stake in the Olam Agri business to SALIC, which is a wholly owned subsidiary of the Saudi PIF, the Pension Investment Fund. And they valued Olam Agri at the time at USD 3.5 billion, which when the deal closed in December, as we had to get regulatory approvals and antitrust approvals from multiple jurisdictions, the deal closed on the 23rd of December. At the closing date, the deal valuation of Olam Agri was equivalent to about roughly 85% of the combined market capitalization of the Olam Group, which also includes, as you know, OFI and the remaining Olam Group. So it has, therefore, achieved four or five things for the group. So the first is it has unlocked value for the group as this contributed 85% of the combined market capitalization of Olam. Secondly, it set a benchmark valuation for Olam Agri, which will then guide how we look at the Olam Agri IPO in terms of how the company would get valued. So that was an important price discovery for us in terms of crystalizing a certain benchmark for the Olam Agri valuation. Thirdly, it further enhanced our shareholder register, and we now have very strong shareholders led by SALIC, Temasek, Mitsubishi Corporation, the Kewalram Chanrai family, management team, et cetera. So we have got blue-chip shareholders, which gives us a solid housekeeping stamp. And more importantly, their networks and their capacity and expertise will add a lot of value to the Olam Agri franchise. We were also significantly able to rightsize the parent, Olam Group Limited's balance sheet and rightsized its capital structure significantly reduces leverage because the entire sale of the 34.4% substantial minority stake was a secondary sale and all of the cash that was raised did not go into Olam Agri, went to the parent, Olam Group Limited, to dramatically degear, rightsize the capital structure and release headroom for growth of the remaining Olam Group business, or OGL, Olam Group Limited. And most importantly, this has crystallized significant partnership synergies with now a strategic investor, SALIC because SALIC's mandate is to ensure food security for the Kingdom of Saudi Arabia. Saudi Arabia today imports between 70% and 75% of its total food requirements. It has identified 20 strategic commodities, including many food staples which are critical to its food security agenda. And with the growing population and increasingly urbanizing population and the population with higher per capita incomes, the import dependency would become even more sharper as they go forward. So we believe that with this partnership with SALIC coming in as a major shareholder and strategic shareholder, we will be able to aid and help them to execute on the food security mandate, not just in the Kingdom of Saudi Arabia but also in the broader Gulf Cooperation Council region or the broader Middle Eastern region, which would be important as the Middle Eastern region is food deficit and is very import-dependent for its food security. And given the trends that we have seen about the enhanced concerns about global food security, as most of us have seen what happened in 2021 and 2022. This is a very important problem to solve for, particularly for those countries which are highly food import dependent. And now having completed the transaction, we are now looking at the next stage of this transformation journey, this reorganization journey. And that first step would be, as we have guided you from 2020 that we will be splitting the company into three and then we will do sequential IPOs of the first two companies OFI and Olam Agri. So we will start with the Olam Agri IPO, which we hope we will complete by the end of the first half of this year. And subsequently, we will thereafter do the of OFI IPO. And both these IPOs, obviously are dependent on prevailing market conditions at the time the IPO is going to be launched. With that, I just want to give a quick update on what has happened to the Olam Food Ingredients, OFI IPO, which we had announced will be primary listing in London and a secondary listing in Singapore. There is no change to that plan. We are still committed fully ready and fully prepared to launch the OFI IPO. But given market conditions post the Russia invasion of Ukraine and what happened to equity capital markets globally to contemplate size of the OFI IPO under these market conditions was not very advisable. So while we are committed ready and prepared to do that OFI IPO, we will now do it sequentially after the Olam Agri IPO. So there's no change to the plan. It will happen down the road after the Olam Agri IPO is done. Now once the IPOs of OFI and Olam Agri is completed, then what is left is the remaining Olam Group, which will also continue to remain listed in the Singapore Stock Exchange. So we'll then have three listed companies, OFI in London and Singapore, Olam Agri in Singapore and Saudi Arabia and the remaining Olam Group in Singapore. What does the remaining Olam Group then consist of? It consists of three component parts. The first is Olam Global Holdings, OGH, which warehouses our gestating assets, our continuing businesses in that space as well as the assets and businesses that we had deprioritized in our strategic plan and which we had earmarked for as exit but we want to responsibly divest this over time, and that is the role of the first component part of the remaining Olam Group. The second part of the remaining Olam Group is Olam Ventures, which is a technology and sustainability venture start-up platform, where we are trying to solve real-life problems in the global food and ag sector by technology-led and sustainability-led solutions. So as most of you know, we have already launched four ventures. One is Jiva, a smallholder farmers platform, smart platform. Second, is Terrascope which is a decarbonization platform, aiding companies to get and achieve their net zero journeys. The third is a purpose brand business, a consumer food brand business, with purpose at its heart, that is climate positive, nature positive and equity positive venture. And then the fourth is the co-created venture with the peers -- with our peers in our industry called SustainIT, which is to help the food and agri sector achieve systems transformation and becoming more sustainable and providing them an ability of a digital sustainability reporting platform, where we are measuring metrics, 350-odd metrics across 10 sustainability topics and agreeing on a common approach and methodology on how each of these metrics will be defined, how we will collect data on a transparent basis, report this data, how it will be externally validated and verified so that our customers who are on the sustainability journey will be able to then have verified assured sustainability data through this digital platform to be able to report on their sustainability performance and journey. We will be incubating every year a few more ventures, which are technology and sustainability led. So that is the second part of the remaining Olam Group. And the final part of the Olam Group is we have taken our legacy IT business which includes our shared services business, IT infrastructure, cybersecurity and our digital services business. We have innovated in digitizing our supply chains and our value chains. And we are now going to take our IT legacy business expertise as well as our digital solution services expertise and not only provide this through long term service agreements with Olam Agri and OFI and the remaining Olam Group but also develop third-party business. It is already a substantial IT outsourcing offshoring company with about $110 million in revenues in 2021. And therefore, it is already a midsized IT company in the global context, and we will make the pivot from being a legacy IT systems provider to value-added digital services and solutions company. That is the overall architecture for this transformational reorganization journey. With that, I want to move on to the Olam Agri IPO. So firstly, we are targeting an IPO of Olam Agri before the end of the first half of this year with a primary listing in Singapore and the concurrent listing -- dual listing in the Saudi Exchange. Olam Agri IPO is an opportunity for us to unlock further shareholder value over and above what has been unlocked with the SALIC transaction, tapping into the current favorable global agri business trends. And what are these agri business trends that are relevant. Firstly, growing demand for food, feed and fiber because of a growing population, because of changing demographics, because the global pin code is changing. As most of you know, we reached 8 billion population in November of last 2022. We are expected to grow to 10 billion by 2050, 2 billion more, and we expect it to grow to 11 billion by 2100, which is 3 billion more. If you look at 2022 and you look at 2100, 3 billion delta growth in population, all of it is going to happen in Africa. Asia will continue to grow its population until 2050 and then decline. Americas will stay stagnant. Europe will decline and degrow in terms of population growth. So the global pin code is changing. We are also seeing massive urbanization. India is only at about 31% urbanization. China is already at 54% urbanization. South America is urbanizing fast. Africa is urbanizing fast. So when -- if you see the demographics and you see urbanization and you see per capita income growth and population growth, there's going to be more and more growing demand for food, feed and fiber and other agri industrial raw materials. Second is per capita income is growing means that the transition of dietary habits from carbohydrates, cereal-based diet to more protein and fats-based diet is accelerating. And as people move from carbohydrate, cereal-based diet to fat and protein-based diet, there's a multiplier impact on the demand and need for agricultural raw materials. A kg of beef needs 8 kgs of feed grades. A kg of poultry meat only needs 2 kgs of feed grades. So there's a multiplier impact as population. So in 1960, we consumed 45 million tonnes of meat. Last year, we consumed 325 million tonnes of meat. And by 2050, we expect meat consumption to grow to between 450 million and 500 million tonnes. The water intensity, the greenhouse gas, utilization intensity and the feed grains requirement intensity will dramatically change. The third big issue is that we have seen more and more diversion of food and feed raw materials into biofuel use. So as a result of the energy security issues and the energy transition issues more and more in Europe and in the U.S., food and feed raw materials have been converted into fuel use. And that will continue to happen as economies look for an all-in strategy for the energy transition. So it will be wind, and it will be solar, and will be biofuels, that will be nuclear, and it will be hydrogen and all kinds of things, but there will be increased focus on diversifying and achieving this green energy transition that all countries are looking at. Another trend that is relevant is the growing scarcity of resources, particularly land and water. So arable land availability and water availability, 71% of all the world's freshwater resources go into agricultural use. So as we need to almost double food production to meet the growing demands and the dietary changes, we will need significantly more sources of water or dramatically improved water use efficiencies and arable land availability to meet the growing demand. And then finally, we are also seeing sustainable food production and feed production becoming very, very important. So you want to produce more food to meet this growing demand but you want to do it sustainably without destroying the planet. So you want to produce food, which is environmentally sustainable from a climate standpoint, environmentally sustainable from a nature and biodiversity standpoint, but also sustainable in terms of social equity with strong governance in terms of transparent granular traceable supply systems in food and agriculture. And finally, what the Russia-Ukraine war has brought into sharp relief is that if the world balconizes and polarizes and there is continuing growing geopolitical fracturing, then the free flow and the contestability of global output, including food and feed production can get appended. So if you have a coalition -- Western coalition led by the U.S., Canada, Australia, European Union against Eastern coalition led by China, the former Soviet Union, Russia, India, et cetera. Then the U.S.-led Western coalition will have 82% to 85% of the food surplus, and the China-led coalition or Russia-led coalition will have 75% food deficit. If we can fight war over oil, we will fight bigger wars over food security, water security which are absolutely essential for survival. So that is another major trend. So all of these trends makes the food and ag sector investment theme right now very attractive. And in this food price crisis, we saw that 94% of the low-income countries, not 1 or 2 countries. 94% of all the low-income countries have had significant food price inflation. In Lebanon last year, food price inflation was 124%. And while we're all aware of global inflation and rising global inflation, we are not as aware that the food price inflation in several orders, the magnitude of overall inflation. So overall inflation, 9% to 11% that we saw at its peak this year, earlier this year. Food price inflation is in the 20%, 30% and in low-income countries, 70%, 80% food price inflation also because of a strong dollar and weaker domestic currencies, that has been the case. And when in low-income countries, the consumption expenditure on food is 60%, 70% compared to the consultation expenditure on food in advanced economies of between 8% and 15%, you know that when you have food price inflation of 50%, 60%, 25%, et cetera, many more people go to Level C stage of food insecurity, which means they can't sustain their livelihoods or lives without external food assistance. So between pre-COVID and post-COVID, including the impact of COVID and then the war, we've had the people under Level C stage of food insecurity grow from 130 million people pre-COVID to about 270 million people today. So when we are saying that the Olam Agri IPO is an opportunity to unlock shareholder value by tapping into the current global agri industry trends, we are referring to these trends. Secondly, there's now enhanced global focus on food security. Every country wants to serve a food security because they have seen what energy security has done to Europe and to other parts of the world. And therefore, what food security issues could do going forward. And that is why we saw roughly 60 countries as a result of food price inflation, put more barriers, tariff and nontariff barriers, including outright export bans, lifting all import duties and all other kinds of protection to make sure that their own populations can be fed and they can achieve food security in terms of availability of food, in terms of adequacy of that food, in terms of nutritional value, in terms of accessibility of the food. So we can see that wheat is very well supplied balance sheet globally today. But against 14%, 15% of global wheat stocks lying typically in a year in Ukraine last 10-year average is 14% of the world's wheat stocks lie in this bed basket, one of the 6 bed baskets, Ukraine and Russia. This year, 45% of the stocks, global stocks in wheat is lying in Russia and Ukraine. So although enough wheat is available to feed everybody globally, not all of it is freely accessible today because of what we've seen in terms of this disruption. So there's enhanced global focus on food security. And most importantly, Olam Agri, despite all the macroeconomic volatility that we have seen in the last few years, the COVID pandemic and the impact of supply chain disruptions led by the COVID pandemic further exacerbated by the supply chain disruptions led by the Russia-Ukraine conflict and the fracturing of geopolitical balance has had very strong performance. Our last 3-year performance has been very strong, both in terms of profit growth, top line growth, volume growth, market share growth, in terms of capital efficiency and in terms of returns. So therefore, we think it's an appropriate time today for us to consider this, including the fact that we have completed the SALIC franchise which provides us a benchmark. We will seek shareholder approval at EGM that we will convene for this purpose to get shareholder approval for the listing of Olam Agri and the concurrent demerger of Olam Agri from the Olam Group, which will make the Olam Agri a fully stand-alone independent entity, fully spun-off entity and with new shareholders as well. And this, therefore, the listing -- potential listing and proposed listing and the demerger of Olam Agri is an important step in our reorganization plan to unlock value. And we are consistent with the theme of achieving this transformational reorganization sequentially first on IPO and followed by the other IPO. So to give you a quick summary of what the Olam Agri business is all about in terms of scope and scale. Firstly, in 2021, we have just completed 2022, we are in a close period. We'll be announcing our results towards the end of February. For 2021, not 2022, we had revenues of SGD 31.3 billion and we had 41 million tonnes of volumes of the various products that we deal and that we moved. We have presence in about 30 countries. We have over 9,100 employees. We have more than 50 Tier 1 manufacturing facilities. We have selectively integrated upstream and farming. And then in sourcing and origination, in merchandising and trading, in logistics, in risk management and in processing. We have generated very high returns. Our return on invested capital was close to 16%, it's amongst the top decile in the peer group in terms of industry's performance and return on invested capital. Our return on equities are very high. And again, in the top tier of returns in the industry. We generated EBITDA of SGD 930 million last year in 2021. We showed that we had a CAGR, EBITDA CAGR of roughly 43% over the last 4 years. And the operating profit EBIT CAGR of roughly 47% over the last 4 years. The business is divided into two platforms, a Food & Feed platform and the Fibre, Agri-industrials & Ag Services platform. Within the two platforms, we have three subsegments Food & Feed - Origination and Merchandising segment, the Food & Feed value-added processing segment and a Fibre, Agri-industrials & Ag Services segment. And it is then further split into several SBUs. And that is how we have been reporting our results since 2021. And we did that in 2020 -- we'll do that in 2022 as well. So the plan is to list in both Singapore and the Saudi Exchange, which will make it the first Singapore-Saudi dual listing company. And more importantly, it'll be the first non-GCC registered company to list in Saudi. This will be the first foreign listing in Saudi. I've told you about what the opportunity for potential investors is to tap into global agri industry trends, enhance global focus on food security theme and in a growing company with a consistent performance track record. Although a final decision has not been taken in terms of the IPO size and the IPO offer structure and how much is primary and how much is secondary, what liquidity we expect from Singapore and from Saudi Exchange, et cetera, which will be done closer to time. It's sufficient to stay at this stage that it is a meaningful material IPO. It's not a small IPO but exact size and exact split between primary and secondary, no final decision has yet been taken, and we will provide you a progress update as those decisions are personalized. And in conjunction with the Olam Agri IPO, Olam Agri asset will be demerged from the group and be a stand-alone spun-off entity. And we will, by way of a distribution in specie of Olam Agri Holdings Private Limited shares. Therefore, the folks who today own OGL, which is a listed company for the Olam Group, will not need to pay for investing in Olam Agri Holdings Private Limited. By way of distribution in specie, their ownership will get transferred to OAHL. And they will continue to retain their shares in the Olam Group, which will entitle them to an underlying interest in the remaining businesses of OFI as well as the remaining business as the Olam Group Limited. Why are we targeting IPO as early as first half '23 and earlier, we had said we'll first go OFI IPO followed by Olam Agri IPO and now we're going to do first Olam Agri IPO, followed by an OFI IPO, we believe that this will allow us to maximize Olam Group's long-term shareholder value over time. And this conclusion we reached after a thorough review of the reorganization plan. The decision also, as I said, takes into account the current global agri business trends, which are very favorable and is becoming a rising investment theme, the rising food security concerns globally. And most importantly, Olam Agri's demonstrated growth and track record of consistent performance. We also are doing this at this point in time because we have completed the SALIC transaction and that will provide us significant additional partnership synergies. If you get a share of the wallet of SALIC's own demand for its strategic commodities, which we expect to, plus potential other investments that we'll make both in Saudi Arabia and the Gulf Cooperation Council broader Middle Eastern region, plus globally because SALIC's mandate to achieve food security is being secured by them through two strategic pathways, domestic investment in food and ag value chains and global investment in the food and ag value chains. So they made significant investments in Canada, in Brazil, in Australia, in Russia, in Ukraine and in other parts in the major food baskets of the world. So their strategy is two-pronged global investments to secure the food security mandate, but also domestic investments to develop the agricultural and food supply chain value chains as well. Why SGX, because we are already a listed company in SGX. We have a very -- we have other peers in the food and ag sector listed in Singapore, not just Wilmar, but many plantation companies and many food companies, feed companies are listed here. And therefore, we believe that the strong potential investor base for food and agri businesses in Singapore. We also have continued long-term support from our major shareholders, including Temasek and others, and therefore, good name recognition for the people who back Olam and Olam Agri. And that is one of the reasons why we want to continue to remain listed in Singapore as one of the venues. And the second is why Saudi Exchange, which I already described to you, the importance of food security in the Gulf region, the Gulf region becoming more import dependent for food, and our role in being able to help KSA and other countries in their food security mandates. We have a very large incremental discrete new investor base, if you list in [indiscernible], as you know, last year, global IPO markets had collapsed, a number of IPOs and size of capital raise and IPOs have become a fraction of what it was in 2021. Despite that, the Saudi exchange raised a lot of money in 2021 and also in 2022. So it was one of the exceptions to global equity markets collapsing as a result of high oil revenues and hyper capita income growth and surplus dollar reserves and everything else, the market has been very strong. And it was a pool of capital that we normally wouldn't access typically. But if you can list in Saudi Arabia as the first foreign company to list there, we can tap into this additional incremental discrete pool of new capital. that we could access. The new strategic partnership with SALIC was extremely important in this decision to contemplate a dual listing in Singapore and Saudi Arabia. And with the establishment in Saudi Arabia, wanting to internationalize its capital markets. It is a stock exchange, which has a market capitalization of roughly $3 trillion. But in that $3 trillion, the giant is, of course, Aramco, which has a market capitalization of between $1.8 trillion and $1.9 trillion. So the balance $1.1 trillion as market cap for Saudi Exchange is even bigger than the Singapore Stock Exchange, where the market cap is about $655 billion. The daily liquidity, the daily trading volume is also quite higher. Valuations are richer at this point in time in the Saudi market compared to most of the markets. So with this, we have decided that the IPO would be more successful if we were able to tap both these pools of liquidity in the Singapore Exchange as well as in the Saudi Exchange. And finally, I mentioned about OFI. There's no change in the plans for OFI listing. We are fully committed, fully prepared and ready to do the OFI listing subject to market conditions. And then we have already told you what will happen to the remaining Olam Group post the successful listing and demerger of Olam Agri and OFI on a sequential basis, what are the component parts of the remaining Olam Group. And therefore, this is really what I have just said so far. I won't repeat all of these points. But with this, we are very happy to open the floor to your questions.

Thank you for your attention. Thank you, Sunny, for the presentation. We would like to open the floor to questions. Can you wait for the microphone to be brought to you?

[indiscernible]. I have a few questions. Firstly, so the Saudi listing is still potential. You are still considering, if so, what you have to see to really go ahead? Or it's just a matter of time that we will know that this will go ahead after all? Another thing is, if you are going ahead, will you be raising fund both in SGX and Saudi or is it primary listing only in SGX and just sort of quotation in Saudi? Lastly, sorry, about OFI, what does it take for you to decide whether to go ahead or not? Your Russian dairy business, which some, I guess, Western investors are taking issue of? Is this something that you have to solve in a way?

Sure. So let me start with your first question on the decision to list in Saudi, when will that crystallize. So it is a function of being able to get all the regulatory approvals in Saudi Arabia. So no foreign company is listed in the Kingdom of Saudi Arabia, except in December, we had the Middle Eastern company, Americana that listed in Dubai and the Saudi exchange. But that was a Middle Eastern company. So far, no foreign company, which is outside of a GCC registered company has listed in Saudi Arabia. So the regulatory framework for foreign listings, while the government is keen on is in the process of being crystallized and announced. Therefore, achieving dual listing in Saudi Arabia in the 6-month time frame, there is some potential risk that all the regulatory framework, the connectivity between the Saudi Exchange and the Singapore Exchange might all not be set up in time for us to achieve the concurrent dual listing. So therefore, everything from the rationale for why you want to list in Saudi, which I mentioned in terms of the three or four reasons means that our default case is to list in both those markets. But if you want to list in this time frame, we are not sure that all the regulatory readiness and approvals and the connectivity between the exchanges, et cetera, can all be established within this period. So instead of doing a concurrent dual listing, we could do a sequential listing, if there is any delay in that regard. But the decision to list in both markets is very clear to us. So that decision we have taken. Now it is really about whether we can get all the regulatory authorities and everybody fully aligned to work towards the time frame that we have in mind. Our indication is that there is keenness to see this because if they want a first foreign company listed in Saudi Arabia, I think this is a great way to start a company that is owned by Temasek, by SALIC, by Mitsubishi, et cetera, they would be quite happy to start with a good exemplar and a good company that will be successful to then persuade other international companies and global businesses to consider listing in Saudi Arabia. So that's on your first question. The second question was with regard to.

At least once in both exchanges.

Yes. It will be a dual primary listing on both exchanges. So we will raise capital in both the exchanges, whether the liquidity will be 50-50, whatever the size of the IPO is or 60-40, that we will know closer to time based on the demand that we see in both these markets. But we expect both these markets to have enough liquidity and depth to allow us to do a successful listing. So we will be making offers in both markets, not just in one market. Unlike the OFI IPO where public offer was only in the London market. And the Singapore market, we were not making an offer. It was only a secondary concurrent listing. Whereas in the case of Olam Agri IPO, it is a dual primary listing in both markets concurrently. So that was the second question. Your third question was OFI, and in OFI, you wanted to know what will determine an IPO for OFI. So we believe that the long-term interest OFI still remains with the primary listing in London and a concurrent secondary listing in Singapore. Therefore, what happens in the London market is very critical for a successful OFI listing. We have seen the London market this year suffer a few headwinds like all of North America, Europe, all of Europe, listings in the London Stock Exchange this year were a fraction of what it was in the prior year. So the IPO markets are more or less frozen. Then we had a lot of political uncertainty in the U.K., which also contributed to the fact that U.K. this year was a very, very difficult market to do a successful IPO. Since we are in no hurry to raise capital at OFI, the OFI business does not need immediate capital. We will only do an IPO when market conditions are right. And when we can get the kind of valuations that we believe OFI deserves to be at. So that is why I repeated in saying that we are fully committed to the OFI IPO in London with a secondary listing in Singapore. We are fully prepared and ready and we will push the button as and when market conditions allow us to do it. The OFI IPO is also a very large IPO, even by the London standards. We haven't seen such a large IPO in many, many years. So we need reasonable market conditions. We don't need absolutely fantastic, great market conditions. That will help, obviously, for the IPO. But even under reasonable market conditions, we could have a successful listing but we are not desperate to do a listing in a very weak market, which is not in the best interest of OFI. Related to the question you asked us about the concern European investors, in particular, have about our continued investments in Russia in the dairy farming business. So we have kept that in mind when we transferred the dairy farming business to the remaining Olam Group. We continue to remain in Russia in the dairy farming business consistent with our purpose of our purpose is to transform food, feed and fiber, reimage global agriculture with a view to achieving a sustainable food and ag system and ensure food security for all. So we are the third largest dairy farm in Russia. The common man in Russia depends on what we produce for their protein requirements. So we believe it is consistent with our purpose, principles and values to be in that business and remain in that business. We also have a duty of care to our herd population. We have more than 20,000 cows in Russia. We can't abandon them and leave them to their fate. It is not a sustainable thing to do. We also have a duty of care to our suppliers and growers. We have a duty of care to our customers and exercising our duty of care and consistent with our purpose, we will continue in that business. But because OFI is going to be a European listed company with potentially a large investor base in Europe. We have decided and transferred the dairy business out of OFI and that is already done. So that is not anything that is going to delay or change the IPO prospects. All our shareholders, whether it is Temasek or SALIC or Mitsubishi, are very sustainably focused companies and intrinsic to Olam's strategy, we will only conduct our business as long as it could be done in an environmentally sustainable socially responsible and with clean transparence in governance as well. So for that reason, we will continue, but not as part of OFI, it will be part of the remaining Olam Group.

[indiscernible]. Olam has about SGD 90 billion of debt, which is about 3x the market cap. Given kind of interest rates have risen sharply, I just wonder if you could provide a bit more information about how you plan to cut that debt burden?

Yes, so you're right. Already in 2022, second half, we have seen rapid rises in interest rates. The Fed has raised interest rates or the Fed reserve rates from -- by about 400 basis points already. And we expect that they will have a few more rate increases until the terminal rate of between 5% and 5.25%. So we think there will be potentially 325 basis point rate hikes until May of 2023. And then they will potentially pause depending on the trajectory of inflation, trajectory of unemployment and trajectory of global growth. This, I think, is a base case. This is a consensus view. There could be positive upside surprise, which is a low probability event that inflation falls faster than we all expect today, and the labor market continues to remain healthy without any wage price inflation and growth, we achieved a soft-ish landing, some recession, but mild, shallow, not deep, but that's a lower probability. That's the base case. The outlier case is that we have a hard recession and a deep recession, things will change. I think we'll see interest rates coming down much faster. But there's a tail even and there's lower probability. So I think the upside event of -- is also a low probably event that we'll have no recession, we'll have a soft landing and all of that stuff. So we have to be prepared for all of this. So coming back to the specific question of rising interest rates. So we have seen both investment-grade debt going up by 330 basis points during the course of the year. We have seen high yield rates going up by almost 400 basis points for the course of the year. And we have seen weighted average cost of capital for all companies increased dramatically, the sharpest increase in 43 years because cost of equity, equity risk premiums are going up, cost of debt has also gone up. So weighted average cost of capital has gone up, which is the reason why the S&P 500, although they delivered consensus expected earnings of $224 a share, that was what was forecast at the beginning of the year in 2022. They ended 2022, delivering that $224 EPS. But valuations came down from 21x PE to 17x PE because for the same dollar of income, the present value because of a higher WACC cost and higher discounting rate is much lower. So earnings are there, but it's not -- next year, we believe earnings will be under pressure. One of the reasons, not all companies will be able to pass on the rising interest cost or the rising inflation in other raw materials and other service areas. In the food and ag sector, for us, for example, I cannot disclose our '22 results, but we will see a substantial growth in interest costs between 2021 and 2022. We will see a further growth in interest cost between 2022 and 2023. But much of our interest costs we pass through. We can't pass through all of it, particularly our investment in fixed assets, but our investment in working capital assets, which is the chunk of our balance sheet. We can pass through because agricultural commodity markets normally typically offer carry, which means your -- you have provided a compensation for carrying in terms of your storage cost, your insurance costs and your interest costs. And when we announce our results, et cetera, you will see that, that is demonstrated that we are able to pass through much of the interest cost increase, although the interest cost increase between '21 and '22 has been substantial, and we expect that there's going to be another three Fed hike rates until first half of this year, you will expect further increases in interest costs next year. But I would say much of that interest cost increases, we'll pass through, not all of it, but a substantial majority of that. Another cost that rose for us this year was fuel costs because we have Olam OFI and Olam Agri and all of us put together, we have more than 200 manufacturing facilities. So diesel costs went up dramatically and it didn't go up, in Europe, it went up tenfold. So typically, we sell forward 6 months, 9 months, 12 months, sometimes 18 months forward. So if you had assumed a certain diesel cost and sold forward your contracts, then during the tenure of those contracts, as you execute those contracts, you cannot change prices. Of course, we have now revised all our prices to factor in these increased costs. But for last year, that would be an impact for us. But typically, these costs if you are selling spot, you can recover these costs, unless, of course, demand collapses. Demand will collapse in many sectors but less so in food and feed because whether it's a recession or a boom period, you got to eat. And you only got so much stomach capacity. When boom times, you can't eat more because you can't afford -- I mean you can't digest more. So food demand is very recession-resistant compared to industrial demand, which can be very recession sensitive, which is why food and agribusiness companies in '21, '22, et cetera, continue to do extremely well whether it is ADM, Bunge, Cargill, Dreyfus, Wilmar, Glencore, Viterra, Ourselves all did very well because people have to eat. And with COVID-led supply disruptions and the war led supply disruptions, it became even more acute scenario in terms of supply-demand disequilibrium.

It is [Kurian from DH] I'm just wondering when you say that -- I mean I understand the OFI is ready the company is ready, Olam is ready for the listing. But given that you say that is on a sequential basis, I'm just wondering, does that mean that the OFI listing is not going to happen within the first half of the year? And can you clarify when -- probably like a clearer time line view?

If you can tell me how markets will change, I will give you a precise date of when we will do the OFI listening. As we stand today and look at the current markets, we believe that an Olam Agri listing is more imminent and more possible, even under current market conditions for all the reasons that I explained. The OFI -- and we don't want to do a concurrent listing of Olam Agri and OFI, although they are now different business propositions with different equity stories, there will be some investors in OFI. So when you do an IPO, the large investors, institutional investors will invest in most IPOs. So whether it is an Olam Agri IPO, a OFI IPO, Olam Group IPO, any sector, any region, the global institutional investors will invest in all of us. We don't want to make them and force them to make a choice whether if they have $100 to invest, should they invest $50 in OFI, $50 in Olam Agri and all of that stuff. So we want some clear distance and time between the two IPOs and not try and do both the IPOs at the same time. So while OFI is a repeat is fully committed to the IPO and is fully ready and fully prepared. If market conditions change tomorrow, we can do an IPO tomorrow itself. But given that we want to do a sequential IPO, which is what we have maintained ever since we announced this transformation plan in 2020, we believe that given that there is better conditions to do an Olam Agri IPO today, we will do that first. We are not desperate for any one of the two IPOs. We don't need to raise capital in any one of the two companies immediately that we need to do an IPO irrespective of market conditions. So I can't give you a precise date when the OFI IPO will happen. I can only tell you that we won't do a concurrent IPO. We will do a sequential IPO for the reasons that I explained. And depending on when market conditions improve, we will come back to you and give you a progress update on when the OFI IPO will be done. Management team would like to do it because we don't want to be distracted with being in an IPO process for longer than necessary because IPO is not the ultimate end game for us. It's not the culmination of all that we are trying to do. IPO is just a starting point. We have a long life left after the IPO, which is what we have to be prepared and ready for. So that's the answer to your question.

Michael Brennan from BBVA. Nice to see you. Congratulations on the SALIC sale. Everyone in this community is very happy for you. Perhaps as a follow-on from the FT question in terms of debt, I'd like to get more of a view from you on the use of proceeds of the various fundings. So for example, the SALIC funding, what are your immediate plans for it, if any?

So I mentioned earlier -- sorry, did you finish your question or you had something else?

Yes. And similarly, with the IPO funding.