SEIZING GROWING OPPORTUNITIES ANNUAL REPORT 2013

Transcription

1 SEIZING GROWING OPPORTUNITIES ANNUAL REPORT 2013 PHILIPPINES SING NGAP APOR ORE INDO DONE SIA

2 BRAZIL EXPANDING BEYOND BOUNDARIES

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4 AT A GLANCE Indofood Agri Resources Ltd (IndoAgri) is a vertically integrated agribusiness group with activities spanning the entire supply chain from research and development, seed breeding, oil palm cultivation and milling; as well as the production and marketing of cooking oil, shortening and margarine. Headquartered in Jakarta, we are among the largest palm oil producers in Indonesia. Our branded cooking oil, shortening and margarine products together garner a leading share in the domestic market. As a diversifi ed agribusiness group, IndoAgri also engages in the cultivation of sugar cane, rubber and other crops. C O N T E N T S 2 Milestones 4 Key Events in Corporate Structure 6 Geographical Presence 10 Chairman s Statement 12 CEO s Statement 14 Business Overview 16 Financial Highlights 17 Operational Highlights 20 Plantation Review 34 Edible Oils & Fats Review 36 Manufacturing Process for Edible Oils and Fats 37 Environment & CSR 44 Board of Directors 48 Corporate Information 49 Corporate Governance 59 Financial Statements 145 Interested Person Transactions 146 Estate Locations 148 Statistics of Shareholdings 150 Notice of Annual General Meeting

5 INDOFOOD AGRI RESOURCES LTD. ANNUAL REPORT 2013 OUR VISION To become a leading integrated agribusiness, and one of the world-class agricultural research and seed breeding companies. OUR MISSION To be a low-cost producer, through high yields and cost-effective and effi cient operations To continuously improve our people, processes and technology Exceed our customers expectations, whilst ensuring the highest standards of quality Recognise our role as responsible and engaged corporate citizens in all our business operations, including sustainable environmental and social practices To continuously increase stakeholders value OUR VALUES CONSISTENT Our success rests on satisfying CUSTOMERS needs INNOVATION is our key to future growth Reliable STAFF is our biggest asset EXCELLENCE is our way of life TEAMWORK makes a winning team INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

6 MILESTONES 2007 Completed a reverse takeover of CityAxis Holdings Limited and changed name to Indofood Agri Resources Ltd. Listed on the main board of the SGX-ST on 14 February and raised about S$420 million proceeds from placement of 338 million new shares. Acquired plantation land bank of 98,491 hectares in South Sumatra and Kalimantan Diversifi ed into sugar business via the subscription of 60% stake in PT Laju Perdana Indah. Acquired plantation land bank of 82,300 hectares in South Sumatra and Central Kalimantan, Indonesia. Acquired a bulking facility at the Dumai port, Indonesia. Acquired a 58.8% effective interest in Lonsum, becoming one of the largest plantation companies in Indonesia with land bank doubling to over 400,000 hectares Acquired plantation land bank of 10,000 hectares in South Sumatra, Indonesia. Incorporated a new subsidiary to own barges, tugboats and operate a shipping logistics business. Achieved the Roundtable on Sustainable Palm Oil (RSPO) certifi cation for the Group s North Sumatra estates and factories. Raised Rp730 billion from 5-year Indonesian Rupiah Bonds and Islamic Lease-based Bonds. 2 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

7 2010 Carried out an internal restructuring to consolidate all joint ventures with the Salim Group (a controlling shareholder of IndoAgri) under a Singapore-incorporated entity, IGER. Divested 8% or 109,521,000 shares in Lonsum for a cash consideration of Rp1.3 trillion, of which, 3.1% was sold to PT SIMP and 4.9% was sold to the public Acquired 26.4% interest in Heliae, a development stage algae technology solutions company for US$15 million. Awarded RSPO certifi cation for an additional 53,000 tonnes of CPO, bringing the Group s total certifi ed CPO output to 248,000 tonnes Listed PT SIMP on the main board of the Indonesia Stock Exchange and raised net proceeds of Rp3.35 trillion from an initial public offering (IPO) of 3,163,260,000 new ordinary shares. Amalgamated with IOFPL, a wholly owned subsidiary, to operate as one company. Awarded RSPO certifi cation for an additional 25,000 tonnes of CPO Acquired a 79.7% interest in PT Mentari Pertiwi Makmur (MPM). Acquired a 50% stake in Companhia Mineira de Açúcar e Álcool Participações (CMAA), the Group s fi rst overseas investment into the sugar, ethanol and co-generation industry in Brazil. Established a S$500 million Euro Medium Term Note Programme. Published the Group s fi rst sustainability report. Formed FP Natural Resources Limited (FPNRL), a joint venture between First Pacifi c Company Limited (70% stake) and IndoAgri (30% stake), to invest 34% in Roxas Holdings Inc. (RHI), the largest integrated sugar business in the Philippines. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

8 KEY EVENTS IN MARCH 2013 IndoAgri acquired a 79.7% stake in MPM for Rp330 billion through its subsidiaries, PT Salim Ivomas Pratama Tbk (PT SIMP) and PT PP London Sumatra Indonesia Tbk (Lonsum). MPM owns the SAL Group, which holds three industrial forest plantation concessions totalling 73,330 hectares in Berau and East Kutai, East Kalimantan. 25 JUNE 2013 IndoAgri acquired a 50% equity stake in CMAA for a cash consideration of BRL143.4 million (approximately US$66.6 million). CMAA is engaged in the cultivation and processing of sugar cane for the production and marketing of sugar and ethanol, as well as co-generation of electric power from sugar cane bagasse in Brazil. 30 SEPTEMBER 2013 IndoAgri established a S$500 million Euro Medium Term Note Programme, improving the fl exibility to raise funds for strategic investments. 1 NOVEMBER 2013 IndoAgri released its fi rst sustainability report, covering the sustainability management and social engagement practices of its oil palm plantations and mills in Indonesia between 1 January 2012 and 31 December DECEMBER 2013 First Pacifi c Company Limited and IndoAgri formed a 70% : 30% joint venture, FPNRL, to invest 34% in RHI, the largest integrated sugar business in the Philippines. The cash consideration for IndoAgri s 30% stake was US$17.4 million. 4 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

9 CORPORATE STRUCTURE 83.8% ISHPL* Public 1.4% 70.4% 28.2% Public 72.6% 20.9% 6.5% Public 30.0% 50.0% 59.5% 40.5% FPNRL 34.0% Note: Based on total number issued shares, excluding the following shares held in treasury: IndoAgri : 30,500,000 SIMP : 126,410,500 Lonsum : 2,900,000 * ISHPL refers to Indofood Singapore Holdings Pte. Ltd. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

10 GEOGRAPHICAL PRESENCE SOUTH AMERICA BRAZIL NORTH AMERICA Legend Oil Palm Tea Sugar Cane Refinery Rubber Sugar Mill Cocoa Copra Mill AFRICA SOUTH AMERICA Brazil IndoAgri has a 50% interest in CMAA, which gives the Group access to 42,517 hectares of planted sugar cane in Brazil. 6 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

11 SOUTH EAST ASIA PHILLIPPINES MALAYSIA MA S SIN INGA GAPORE E SINGAPORE NORTH MALUKU SUMATRA KALIMANTAN SULAWESI JAVA EUROPE ASIA SOUTH EAST ASIA AUSTRALIA Indonesia IndoAgri owns strategically located plantations and production facilities across the Indonesia archipelago. Our estates are largely located in Sumatra and Kalimantan, of which 276,709 hectares are planted. Oil palm is our dominant crop, followed by rubber, sugar cane, cocoa and tea. On the downstream, our refineries are strategically located at major cities in Jakarta, Surabaya, Medan and Bitung. Philippines IndoAgri has a 30% interest in FPNRL, a joint venture between First Pacific Company Limited (FP) and IndoAgri, which holds a 34% shareholding in RHI, the largest integrated sugar business in the Philippines. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

12 OUR PLANTATION OPERATIONS IndoAgri is one of Indonesia s largest plantation companies. Its plantation operations are located in Indonesia, Brazil and the Philippines. 8 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

13 INDONESIA 239,921 HECTARES OF OIL PALM 21,759 HECTARES OF RUBBER 11,645 HECTARES OF SUGAR CANE 3,384 HECTARES OF OTHER CROPS BRAZIL 42,517 HECTARES OF SUGAR CANE INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

14 CHAIRMAN S STATEMENT DEAR SHAREHOLDERS, Indonesia is one of the fastest growing economies in the G20, with a consistent economic growth rate above 6% annually since While export earnings have come under the pressure of low global commodity prices, a weakened rupiah and a record current account defi cit, the country s large domestic demand has kept the economy buoyant. The strong economic results have prompted IMF to project the Indonesian economy to expand to US$1.5 trillion by 2015, and analysts like Goldman Sachs and McKinsey to forecast Indonesia as a major engine of global growth on track to becoming the world s seventh-largest economy by The Indonesian government is also determined to make the country the world s 10 th largest economy by You can see the resolve in the series of stimulus programmes undertaken to boost investment, improve productivity, raise living standards and expedite infrastructure projects. The foresight and efforts paid off. Indonesia improved its international standing and regional infl uence steadily in recent years. The increasing political stability, coupled with Indonesia s appeal as the largest economy in South East Asia, wooed international investors at a time when most economies had succumbed to the effects of the global economic downturn. However, as Indonesia expands, it has to address longstanding challenges at the provincial, national, regional and international levels adeptly in order to achieve consensus in issues ranging from sustainable development to human capital and regional stability. Many of these issues will be a central theme when Indonesia enters into an important election year in The World Bank has assessed that the global economy is at the start of its upturn with a projected GDP growth of 3.5% globally and 6.7% in South Asia by According to McKinsey, the Indonesian agriculture industry possesses the capacity for growth. But to realise its full potential, Indonesia has to improve productivity of the farmers, increase plantation yields, reduce post-harvest waste, and invest in higher value crops. This could potentially catapult Indonesia into becoming a net exporter of agricultural products and grow this industry sector to US$450 billion by We are now at an important crossroad. It is crucial for IndoAgri to position ourselves strategically by constantly adjusting our plans to shifting paradigms and strengthening our diversifi ed portfolio so that we will be ready to take on the new growth opportunities as the global economy recovers. SHIFTING PARADIGMS 2013 was a demanding year for the palm oil industry as a whole. One of most signifi cant changes affecting the agriculture industry was the new agriculture law Permentan No that limited the plantation size of 11 commodities, including oil palm, rubber, cocoa and tea. Ownership in oil palm plantations, for instance, is now restricted to a maximum surface area of 100,000 hectares per plantation Group. Whilst the Group has already exceeded this limit, the law is not retroactive. Nevertheless, the Group is already diversifi ed into sugar, rubber, and to a lesser degree, cocoa and tea, and we will continue in this direction to expand our diversifi ed agribusiness. With Indonesia s moratorium on new forest concessions still in force until May 2015, the new policy has effectively put the brakes on Indonesia s palm oil roadmap. It is a common and real industry concern that the production of 40 million tonnes of palm oil by 2020 and 60 million tonnes by 2040 could not be met by increasing productivity of existing oil palm plantations alone. As Indonesia accounts for 50% of current world palm oil production, these events will have an impact on future growth. The manpower costs are rapidly on the rise as a result of Indonesian s minimum wage policy. Being a labour intensive industry, this policy has a signifi cant and long-term impact on our operating costs. In response to these changes, we have to continue to improve workforce productivity through training and skills development, look for ways to increase plantation yield, achieve higher effi ciency and lower operating costs. STRATEGIC INVESTMENTS Over the years, we have progressively expanded our investments into other agriculture products as part of the strategy to diversify our business portfolio, mitigate cyclical risks and optimise the use of our plantations, resources and expertise. In 2013, we acquired a 79.7% shareholding in MPM, and through it, obtained 73,330 hectares of land in East Kalimantan, under a new agroforestry license. We are now experimenting with different types of crop that can be cultivated on that land through intercropping the practice of planting along the 15m corridors in between forestry permitted by the law. In line with the Group s strategy of expanding its geographical presence, in 2013, we invested in two sugar operations through a 50% stake in CMAA in Brazil and a 34% stake in RHI in the Philippines. 10 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

15 Over the years, we have progressively expanded our investments into other agriculture products as part of the strategy to diversify our business portfolio, mitigate cyclical risks and optimise the use of our plantations, resources and expertise. The acquisition of CMAA enables us to establish our presence in Brazil, which accounts for over 40% of world sugar exports, and is also the lowest cost producer. As for RHI, it is the largest integrated sugar business in the Philippines, which is the third largest sugar market in Southeast Asia after Thailand and Indonesia. Through both investments, IndoAgri is now able to develop a meaningful business in sugar milling and refi ning, and prepare itself for the Asean economic integration in 2015, which is expected to lower tariffs on imported sugar. To facilitate future investment activities, we established a S$500 million euro medium term note in September 2013 that will allow us to raise capital readily for new investments and initiatives. SUSTAINABLE OPERATIONS Sustainable operations are key to the agriculture industry. As an agricultural organisation, IndoAgri recognised the signifi cance and impact of its decisions and operations on the economy, environment and local communities. I am very pleased that we have completed our initial assessment of the material impact of IndoAgri s oil palm plantations and mills operations in Indonesia on the environment and issued our fi rst Sustainability Report in November This report provides an important, common platform for us to identify relevant issues and rally our efforts to build a sustainable business along with our ongoing community development efforts. PROPOSED DIVIDENDS For the year ended 31 December 2013, the Board has proposed a fi rst and fi nal tax-exempt dividend of 0.52 Singapore cents per share. ACKNOWLEDGEMENTS Our enduring growth and profi tability did not come by chance. The company has continued to weather the stormy economic climate only by the great tenacity and exceptional agility of our cohesive team. I am proud and appreciative of having the privilege of working alongside an excellent team of dedicated staff, stalwart Management and judicious Directors. I am also deeply appreciative of the support from our customers, partners and shareholders, whose confi dence in us validates our efforts and motivates us towards excellence and success! Edward Lee Chairman As part of our sustainable CPO effort, audit for RSPO certifi cation was completed for an additional 30,000 hectares of plantations in Riau in 2013 with offi cial certifi cates being processed. IndoAgri s certifi ed CPO production is currently at 248,000 tonnes. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

16 CEO S STATEMENT DEAR SHAREHOLDERS, 2013 was a challenging year for the agribusiness sector as a whole. For IndoAgri, it marked our fi rst investments outside of Indonesia as we achieved some success expanding into the global sugar industry through a 50% stake in CMAA in Brazil, and a joint venture investment in RHI in the Philippines. The theme for this year s annual report, Seizing Growing Opportunities, refl ects these milestones. We achieved results by leveraging our strengths as a diversifi ed and vertically integrated agribusiness, optimising our expertise in large-scale plantation management, and empowering efforts in sustainability. OPPORTUNITIES IN CHALLENGES On the agricultural front, the global economic slowdown is being felt downstream of the supply chain with almost all commodity prices in 2013 falling below that of 2012 s. Amongst our key crops, sugar and rubber were the worst hit as global demand weakened across the board. Demand for palm oil remained resilient, supported by very competitive CPO prices versus other competing vegetable oils, as well as diesel prices, triggering additional non-mandated demand in the bio-diesel sector. Price trends for CPO, rubber and sugar can be found on pages 21, 22 and 25 respectively. The lower commodity prices in 2013 have had a material impact on our fi nancial results. Sugar prices in Indonesia were relatively shielded from global fl uctuations by import quotas and policies aimed at protecting the domestic industry. Given the world s reliance on Brazilian sugar supply, growth in supply, whilst abundant in the last three seasons, may fail to keep up with rising demands from recovering economies and higher global populations in the coming years. By tapping into the effi ciency and yield of sugar production in Brazil, we are positioning IndoAgri to capture these opportunities with our sugar investments. In terms of volume, palm oil production fell in 2013 against an expected rise, as global climate conditions affected crop patterns across Sumatra. Prolonged rains and fl ooding disrupted pollination, growth and harvesting on trees that were weakened by droughts in 2012 and Despite pressure from competing oilseeds like soybeans, CPO prices remained resilient amidst a bearish market outlook, with lower production volumes supporting prices, and CPO trading at a large discount to other competing oils. In Indonesia, the government has mandated further increases in the biodiesel blend of gasoils from 7.5% to 10% effective from January This translates potentially into signifi cant increases in domestic demand for palm oil. Given its growing retail market for cooking oils and vast population of 245 million, of which an estimated 15% are middle-class, Indonesia looks set to overtake India to become the world s largest palm oil consumer FINANCIAL REVIEW In line with the broader decline in commodity prices for agriculture crops, the Group posted total consolidated revenue of Rp13.3 trillion in 2013, a 4.1% decline over last year s Rp13.8 trillion. The Group s attributable profi t declined 50.6% to Rp0.6 trillion in 2013 due to higher production costs, foreign exchange losses and higher taxes. SUSTAINABILITY I am delighted that we have issued our first Sustainability Report (SR) for the year 2012, which can be found at We have prepared the report adhering to the Sustainable Reporting Guidelines version 3.1 of the Global Reporting Initiative (GRI). The GRI Report Services have concluded that the report fulfils the requirements of Application Level C. As an integrated and diversifi ed agribusiness, we recognise that the long-term sustainability of our operations is at the core of what we do. Therefore our SR includes a materiality matrix highlighting 10 key and material issues impacting our business. Our SR includes forward-looking targets, especially around RSPO certifi cation of our plantations. We will continue to update our SR, measure our performance against previously agreed targets and plans, and report our progress in line with the GRI initiatives. This will provide transparency to our sustainability journey in this critical area. CONTINUED EXPANSION In Indonesia, opportunities presented by a growing middle-class and food and beverage industries underscored our plans to continue with domestic market expansion. While the government has curbed land ownership by limiting the size of palm, sugar and rubber estates respectively to 100,000 hectares, 50,000 hectares and 20,000 hectares per plantation Group, we are drawing on R&D efforts to improve seed breeding techniques, and will continue to implement agronomic best practices to strengthen productivity in Indonesia. Our commitment towards higher palm oil production was also evident from annual new plantings, which had aggregated 64,000 hectares over the last fi ve years. Gearing up for higher FFB harvests as plantings reached maturity, we completed one 80 MT/hour new oil palm mill in South Sumatra at the end of 2013 and one 45 MT/hour mill in East Kalimantan that will be due for completion in Q In addition, two 45MT/hour new mills in Kalimantan will be scheduled for completion in We are also expanding two mills, one in West Kalimantan that was completed in December 2013 and the other in South Sumatra due for completion in Q3 2014, in preparation for higher FFB production from our developing estates. We are now producing palm kernel oil with the completion of the new 150MT/day PKO plant in Riau in Q In addition, we are also expanding our refi nery capacity by constructing one 330,000 MT/year new refi nery in Dumai due for completion in Given their logistically advantageous locations, these facilities will support our growth strategy for the cooking oil and margarine business. In March 2013, we acquired a majority shareholding in MPM which owns SAL Group that engaged in industrial forest plantations in East Kalimantan. This transaction fi ts with our agribusiness model and diversifi cation strategy into other agriculture crops, such as cocoa, corn and cassava. We are confi dent that our efforts to expand and accelerate growth will contribute positively to IndoAgri s competitiveness in the long term. BENEFITTING FROM VERTICAL INTEGRATION Downstream, our edible oils business recorded an exceptional year. Across Indonesia, consumer preference for modern mini-marts over traditional markets has boosted the customer 12 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

17 decision-making. We expect to roll out some of these developments in 2014 once we have completed the pilot phase. DEVELOPING LEADERSHIP AND TALENT To support our business strategies, we are nurturing our top performers through a Learning and Development Programme (LDP) designed specifi cally for IndoAgri by the First Pacifi c Leadership Academy, a corporate university under First Pacifi c Company Limited, to which Indofood belongs. The LDP is a long-term capacity building programme seeking to identify and equip change champions with leadership competencies for greater responsibilities. It features interactive processes in learning and application aligned to the First Pacifi c Leadership Model aimed at instilling critical proficiencies for success at the individual, team and organisational levels. base for our branded cooking oils. As a vertically integrated business and producer of branded cooking oil products with a leading market share in Indonesia, this augurs well for IndoAgri. Although the Edible Oils & Fats (EOF) Division accounted for less than 20% of the Group s total EBITDA, the business attained strong volume growth in 2013 despite the intense competition. Prestigious brand and consumer awards, conferred annually since 2002, attested to our cooking oils as the preferred brands by Indonesian consumers. To maintain our leading position, we refreshed our brands, invested in product packaging, and introduced new product lines to grow market shares. By 2015, hygiene requirements and new legislations on food safety will put an end to the sale of unsealed cooking oils, typically purchased by the scoop from local vendors. Anticipating the change, we started producing suitably sized packs for this new market opportunity. The 250ml pillow pack is especially popular with consumers on tight budgets. The market potential is huge given that this demographic covers nearly 200 million Indonesians. The EOF Division is augmenting local marketing efforts while stepping up on export sales. ENABLING TECHNOLOGIES We are looking to technologies and mechanisation to improve productivity in the plantations. The acquisition of CMAA, for instance, has provided useful insights into effi cient cane harvesting methods using a combination of specialised machines and novel best practices. Some of these can be adapted for the Indonesian operations to lower cost and increase productivity in the fi eld. We made progress on precision agronomy through GPS surveys and aerial photography to capture critical data on the status of our palm trees. These efforts provided information for our estates to devise optimal strategies in crop management, planting densities, yield forecasts and fertiliser usage on a block-by-block basis. The technologies were supported by a SAP platform that was fully implemented in The SAP platform gives us the capability to tap into real-time operational and agronomy data for better plantation management and results, and continues to support our drive for precision agriculture. We continue to look at innovative ways to bring technologies into our business processes, to reduce manual input and increase data security. This will provide more timely information for management The Basic phase of the programme was initiated in 4Q 2013 for 25 managers and 23 supervisors. Over the next nine months, they will progress into the Management and Leadership phases, undertaking 10 modules with subjects ranging from team effectiveness to problem solving, decision-making, performance management and strategic planning. The LDP will be our core management and leadership development programme aimed at all levels from managers up. This will be a critical part of our future growth strategy to ensure we recruit and train the leaders and decision makers who are able to execute our strategy, and continue to develop and grow our business. LOOKING AHEAD With the lingering effects of an economic slowdown, 2014 is anticipated to be another challenging year for commodity prices. Politically, it is a pivotal year for Indonesia as the country prepares for its next Presidential Election. Nonetheless, the world economy is showing signs of an upturn, led by sooner-than-expected recoveries in the developing countries and especially the US. Our integrated agribusiness strategy is supported by the growth in world population, which is estimated to reach 9 billion people by This rising global population, together with rising income levels, will lead to greater demand for agricultural commodities. As a Group, we will continue to exploit our strengths in vertical integration and develop the EOF potential further. We will optimise our expertise in large-scale plantation management and to improve productivity through intra-organisational learning and transfer of technology. We will also look for inorganic growth by investing in overseas plantations as a means to diversify our crop portfolio, mitigate cyclical risks and seize new growth opportunities, underpinned by the demand growth highlighted above. APPRECIATION I would like to record my appreciation to our customers, business partners and employees whose steadfast support underscores our continued confi dence. I also thank our Board of Directors for their leadership and commitment. Mr Mark Wakeford Chief Executive Offi cer INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

18 BUSINESS OVERVIEW IndoAgri is a diversifi ed and vertically integrated agribusiness group. As at 31 December 2013, our planted acreage covers 276,709 hectares, including 239,921 hectares of oil palm, 21,759 hectares of rubber, 11,645 hectares of sugar cane and 3,384 hectares of other crops in estates across Indonesia. To meet production capacities, the Group owns and operates 21 palm oil mills, four crumb rubber processing facilities, three sheet rubber processing facilities, two sugar mills/refi neries, one cocoa mill, one tea mill and fi ve CPO refi neries through its Plantation and Edible Oils & Fats Divisions. Expanding its sugar investments and geographical footprint beyond Indonesia, IndoAgri acquired shareholdings in CMAA in Brazil, and in RHI in the Philippines through its associate company, FPNRL in The Plantation Division is IndoAgri s dominant business unit, contributing over 85% to the Group s EBITDA. FINANCIAL HIGHLIGHTS In line with the broader decline in commodity prices for agriculture crops, the Group posted total consolidated revenue of Rp13.3 trillion, a 4.1% decline over last year s Rp13.8 trillion. The sales performance was adversely affected by lower average prices of key plantation crops (i.e. palm products and rubber) and lower edible oils sales gross profi t declined by 23.5% from Rp4.2 trillion in 2012 to Rp3.2 trillion due primarily to lower average selling prices for plantation crops. This was further affected by rising wages and newly matured plantations; contributing to higher unit production costs. The Group reported lower profit from operations of Rp1.7 trillion in 2013, a 38.0% decline over last year due mainly to lower gross profit and foreign exchange losses. This was partly offset by a maiden profit of Rp64 billion from the Group s joint venture in Brazil, CMAA net profi t after tax (NPAT) of Rp0.9 trillion fell 49.8% over 2012 primarily due to lower profits from operations, as well as lower fi nancial income and higher effective corporate tax arising from irrecoverable deferred tax losses and higher non-tax deductible expenses. The Group s attributable profi t declined 50.6% to Rp0.6 trillion in 2013 in line with this. OPERATIONAL HIGHLIGHTS Plantation Division: Oil Palm As at 31 December 2013, the Group s oil palms occupied 87% or 239,921 hectares of total planted area. Of this, new plantings accounted for 9,791 hectares, compared to 13,383 hectares in Total FFB production of 3,761,000 tonnes in 2013 represented a 8% decrease over last year s 4,107,000 tonnes, while CPO production fell 8% from 880,000 tonnes to 810,000 tonnes in 2013 on lower palm production in Sumatra and lower purchases of external FFB. The Group s certifi ed CPO production of 248,000 tonnes was roughly 31% of its total CPO output in 2013, demonstrating the continued commitment to sustainable agriculture. Plantation Division: Sugar The Group s sugar cane estate in South Sumatra harvested approximately 758,000 tonnes of sugar cane from 11,645 hectares this year. We continue to work towards a targeted planted area of 18,000 hectares of sugar cane. In Central Java, the Group has tolling arrangements with local farmers, who supply the sugar cane sources for our 4,000 TCD sugar mill. The Group retains a portion of the sugar and molasses produced as a milling fee, while the balance of the sales proceeds is returned to the farmer. In 2013, we processed 438,000 tonnes of sugar cane. Through a 50% interest in the CMAA Group acquired in June 2013, the Group now has access to 42,517 hectares of planted sugar cane and a total annual cane crushing capacity of 3.0 million tonnes in Brazil. We also expanded into the Philippines in December 2013 through a 30% investment in FPNRL, which holds 34% stake in RHI, the largest integrated sugar business in the Philippines. Altogether, IndoAgri processed 3.8 million tonnes of sugar cane in Plantation Division: Rubber As at 31 December 2013, our nucleus rubber estates occupy approximately 21,759 hectares. The Division s rubber production was fl at at 18,500 tonnes this year due to stagnant land expansion and some replanting activities. Edible Oils & Fats Division In 2013, the Edible Oils & Fats Division processed approximately 869,000 tonnes of CPO (including 59% from our own plantations). It manages fi ve refi neries with a total annual CPO processing capacity of 1.4 million tonnes. The Division also produced and sold small amounts of byproducts derived from oil palm refining, such as refi ned, bleached and deodorised (RBD) palm stearin and palm fatty acid distillate. 14 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

19 Revenue (RP trillion) Profit from Operations (RP trillion) (Restated) 2013 Net Profit to Equity Holders (RP trillion) NAV per share (RP) ,000 10,000 8,000 6,000 4,000 2,000 6,567 7,605 8,825 9,500 9, (Restated) (Restated) (Restated) 2013 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

20 FINANCIAL HIGHLIGHTS 2011 Actual (Restated) In Rupiah billion 2012 Actual (Restated) 2013 Actual 2011 Actual (Restated) In SGD million* 2012 Actual (Restated) 2013 Actual Net Sales 12,605 13,845 13,280 1,501 1,649 1,582 Gross Profi t 4,601 4,187 3, Gain/(Loss) Arising from Changes in Fair Values of Biological Assets Operating Income 3,777 2,731 1, Net Profi t 2,641 1, Net Profi t to Equity Holders 1,490 1, EPS (in Rupiah)/(in SGD cents) 1, Current Assets 9,437 8,318 6, Fixed Assets 18,860 21,047 23,674 1,959 2,186 2,459 Other Assets 4,910 5,446 7, Total Assets 33,207 34,811 37,705 3,449 3,616 3,916 Current Liabilities 4,792 4,609 6, Non-Current Liabilities 7,203 7,684 8, Total Liabilities 11,995 12,393 14,872 1,246 1,287 1,545 Shareholders' Equity 12,698 13,626 13,996 1,319 1,415 1,454 Total Equity 21,212 22,518 22,833 2,203 2,339 2,372 Net Working Capital 4,645 3, In Percentage (%) Sales Growth 32.9% 9.8% (4.1%) Gross Profi t Margin 36.5% 30.2% 24.1% Operating Profi t Margin 30.0% 19.7% 12.7% Net Profi t Margin 21.0% 13.3% 6.9% Net Profi t to Equity Holders Margin 11.8% 7.6% 3.9% Return on Assets % 7.8% 4.5% Return on Equity % 7.8% 3.7% Current Ratio (times) Net Debt to Equity Ratio (times) Total Debt to Total Assets Ratio (times) Profi t from operations divided by total assets 2 Net profi t to equity holders divided by shareholders equity 3 Net debt divided by total equity * For ease of reference, 2011 to 2013 Income Statement and Balance Sheet items are converted at exchange rates of Rp8,397/S$1 and Rp9,628/S$1, respectively. 16 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

21 OPERATIONAL HIGHLIGHTS The below information is related to business operations in Indonesia. For sugar outside Indonesia, please refer to page 29 of this annual report. In Hectares (unless otherwise stated) 2011 Actual 2012 Actual 2013 Actual Planted Area-Nucleus Oil Palm Mature Immature Rubber Mature Immature Sugar Mature Immature Others Mature Immature 216, ,163 58,674 22,185 17,745 4,440 12,255 11, ,712 3, , ,105 54,814 21,802 17,507 4,295 12,333 12, ,671 3, , ,099 62,822 21,759 16,996 4,763 11,645 11, ,384 2, Plasma 85,719 87,009 90,214 Age Maturity of Oil Palm Trees Immature 58,674 54,814 62, years 35,750 42,803 22, years 73,150 80,412 99,710 Above 20 years 49,263 52,890 55,384 Total 216, , ,921 Distribution of Planted Areas-Nucleus Riau 56,379 57,025 57,025 North Sumatra 39,333 39,360 39,326 South Sumatra 82,720 87,160 89,819 West Kalimantan 27,250 28,493 28,478 East Kalimantan 36,744 42,026 46,433 Central Kalimantan 4,022 6,128 7,410 Java 2,870 2,864 2,864 Sulawesi 5,671 5,669 5,354 Total 254, , ,709 Production Volume ( 000 Tonnes) Nucleus Fresh Fruit Bunch (FFB) 2,797 2,973 2,895 Processed Fresh Fruit Bunch 3,786 4,054 3,670 Crude Palm Oil (CPO) Palm Kernel Rubber Sugar Sales Volume ( 000 Tonnes) Crude Palm Oil (CPO) Palm Kernel Rubber Sugar Oil Palm Seeds ( million) Cooking oil, Margarine, Shortening & CNO Comprised of sugar production in South Sumatra factory, share of sugar produced in Central Java and refi nery raw sugar. 2 Sales to external and internal parties INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

22 OUR INTEGRATED BUSINESS MODEL IndoAgri is a diversified and vertically integrated agribusiness group poised to capture the value and benefits spanning the entire supply chain. 18 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

23 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

24 PLANTATION REVIEW PALM & RUBBER The Plantation Division manages and cultivates IndoAgri's oil palm, sugar cane, rubber and other estates, and derives its revenue primarily from the sale of crude palm oil (CPO), palm kernel (PK) and related by-products. As at 31 December 2013, the Group has a total planted acreage of 276,709 hectares in Indonesia, comprising 239,921 hectares of oil palm, which occupied 87% of total planted area, followed by 21,759 hectares of rubber, and 11,645 hectares of sugar cane. We also manage approximately 86,215 hectares of oil palm estate and 3,999 hectares of rubber estate under the government's plasma programme. The Division s 21 palm oil mills across Sumatra and Kalimantan have a combined FFB processing capacity of 5.2 million tonnes per annum. We also operate four crumb rubber processing facilities, three sheet rubber processing facilities, two sugar mills and refi neries, a cocoa factory and a tea factory. Supporting efforts to enhance estate quality and output, the Division operates two advanced research and development centres, SumBio and PT SAIN, based in Bah Lias, North Sumatra and Pekanbaru, Riau respectively. In 2013, these centres produced a combined output of 26.5 million premium seeds, aided by their sophisticated in-house seed breeding programmes and cultivation techniques. In achieving sustainable low-cost production, the Plantation Division maximises yields and reduces operational costs through the following agronomy and crop protection best practices: Performing block-by-block analyses to provide specific recommendations on crop management and planting densities, fertiliser and herbicide usage, as well as predictions on yields and oil extraction rates. Optimising crop management and harvesting practices to maximise production and collection of FFB. Leveraging biological methods to improve pest and palm tree disease control. Improving mechanisation to increase efficiency and reduce costs. Utilising organic fertilisers and all by-products while reducing reliance on inorganic fertilisers REVIEW The global economic slowdown affecting major markets like China and Europe, coupled with slower biodiesel demand in Europe have put sustained pressure on commodity prices. CPO prices (CIF Rotterdam) averaged US$857 per tonne in 2013, signifi cantly lower than 2012 s US$1,006. Plantation Division s total revenue grew 1% to Rp8.5 trillion in 2013 over the previous year. Likewise, EBITDA margin came in lower, in line with lower average selling prices of CPO and PK of 2% and 4% respectively, as well as higher production costs. 20 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

25 CPO vs Soy Oil Price US$ / tonne 1,800 1,600 1,400 1,200 1, Jan 06 Jun 06 Nov 06 Apr 07 Sep 07 Feb 08 Jul 08 Dec 08 May 09 Oct 09 Mar 10 Aug 10 Jan 11 Jun 11 Nov 11 Apr 12 Sep 12 Feb 13 Jul 13 Dec ,921 Ha 150,076 Ha 89,845 Ha 10% 23% 31% 42% Soy Oil Premium Over CPO CPO (CIF Rotterdam) Oil Palm Plantation Age Profile 28% Soy Oil (CIF Rotterdam) 64% Taking a step towards diversifi cation, the Group acquired a 79.7% interest in MPM for Rp330 billion through its subsidiaries, PT SIMP and Lonsum. MPM owns the SAL Group, which holds three industrial forest plantation concessions totalling 73,330 hectares in Berau and East Kutai, East Kalimantan. Palm As at 31 December 2013, the Division s South Sumatra and Kalimantan estates achieved 9,791 hectares of nucleus oil palm new plantings, compared to 13,383 hectares in Mature estates covered 177,099 hectares versus 176,105 hectares in 2012, while immature estates which will boost CPO production and volume growth when they become productive in the next few years, occupied 62,823 hectares or 26% of total planted palm area. The average age of our oil palms is about 12 years. With lower nucleus production and plasma purchases, FFB production decreased by 8% from last year s 4,107,000 tonnes to 3,761,000 tonnes in Correspondingly, CPO production declined by 8% from 880,000 tonnes in 2012 to 810,000 tonnes in Oil extraction rates increased slightly to 22.1% versus 21.7% in 2012, while internal CPO sales to the Edible Oils & Fats Division reduced by 7% to 510,000 tonnes from 548,000 tonnes in 2012 as the purchase of external CPO from Kalimantan estates lowered transportation costs. 9% 26% 9% 32% 9% 17% In total, IndoAgri s certifi ed CPO production of 248,000 tonnes (roughly 31% of 2013 s total CPO output) is comparable to 2012 a refl ection of the continued commitment towards sustainable agriculture. Group SIMP Lonsum > Immature > 4-6 years > 7-20 years > 20 years INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

26 PLANTATION REVIEW PALM & RUBBER (Cont d) FFB Production (Nuclues) 000 mt CPO Production 000 mt 3,000 2,500 2,613 2,564 2,797 2,973 2,895 1, , , , Rubber The Division s rubber estates are spread across North and South Sumatra, East Kalimantan and Sulawesi. As at end 2013, nucleus rubber estates occupied 21,759 hectares, of which 22% are immature. The average age of our rubber trees is about 14 years. With higher production in Thailand and Indonesia as well as weaker demand from major rubber consuming countries particularly China, US and Europe, rubber prices (RSS3 SICOM) fell by over 20% since beginning of last year and averaged US$2,795 per tonne in 2013 compared to US$3,384 a year ago. The declining prices have also affected rubber sales and earnings at Lonsum, the subsidiary owning most of our rubber estates. Sheet rubber, crumb rubber and cup lump remain the Division s key rubber products. Notwithstanding, growth in rubber production for 2013 was flat at 18,500 tonnes due to holdbacks on land expansion and some replanting activities. Rubber Prices US$ / tonne 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan 06 Jun 06 Nov 06 Apr 07 Sep 07 Feb 08 Jul 08 Dec 08 May 09 Oct 09 Mar 10 Aug 10 Jan 11 Jun 11 Nov 11 Apr 12 Sep 12 Feb 13 Jul 13 Dec 13 During the year, the Group sold 84% of its rubber in export markets including Singapore, the United Kingdom and the United States. The rest were sold domestically. RSS3 (Sheet) TSR20 (Block Form) 22 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

27 2014 OUTLOOK Palm Looking at consumption growth trends in emerging economies like India and China, the outlook for the palm oil industry is expected to remain positive. With its growing population base, Indonesia has become one of the largest consumers of palm oil together with China and India. We also expect the higher biodiesel blending mandate of 10%, announced by Indonesia's government in September 2013, to sustain domestic demand growth for palm oil products. In terms of CPO production growth, we are well supported by younger estates that have not reached peak maturity, and this represents nearly 35% of our total oil palm planted area. We will continue to expand our oil palm acreage by achieving 10,000 to 15,000 hectares of new plantings annually to sustain production outputs. Anticipating higher FFB production from immature plantings, we are progressively increasing capacities by constructing new palm oil mills. These include an 80MT/hour facility in South Sumatra in end December 2013 and a 45MT/hour facility in East Kalimantan scheduled for Q1 2014, and two 45MT/hour mills in Kalimantan scheduled for In 2013, we expanded an existing mill in West Kalimantan from 40 MT/hour to 80 MT/hour, while another mill in South Sumatra is being upgraded from 40 MT/hour to 60 MT/hour by Q We are also constructing a PKO plant in Riau with a capacity of 150 MT/day scheduled for Q The additional capacities, coupled with their logistically advantageous locations, are in line with the growth strategy for our cooking oil and margarine business. Looking ahead, the Plantation Division aims to improve yields per hectare and optimise labour costs through innovative agronomy. This will entail conscientious efforts, such as the introduction of SAP platform to all plantations in 2013 that have allowed the Division to tap into real-time operational and agronomy data for better plantation management and results. We will also develop comprehensive and robust management systems to realise the genetic potential of our premium seed material for different breeding environments. The Group continues to be guided by the Principles and Criteria of the Roundtable of Sustainable Palm Oil (RSPO) in furthering sustainable agriculture, as demonstrated by its North Sumatra and Riau estates that achieved RSPO certifi cation for sustainable palm oil. Rubber The long-term outlook for rubber remains upbeat, supported by healthy demand from tyre-makers, automotive industries and rubber goods manufacturers in developing markets. China in particular, will continue to contribute to this demand, given its large population and status as the world's largest natural rubber consumer. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

28 PLANTATION REVIEW SUGAR: INDONESIA OVERVIEW In 2008, the Division diversifi ed into sugar cane cultivation and production in Indonesia as a key strategy for business expansion. In Indonesia, our sugar investments are strengthened by domestic shortfalls, coupled with positive drivers such as population growth, a fl ourishing food and beverage sector, and the expansion of sugar-based industries such as ethanol processing which utilises molasses as a basic raw material. Indonesia remains a net importer of sugar. Sugar prices in Indonesia are relatively shielded from global fluctuations by policies aimed at protecting the local industry, and particularly the smallholder farmers. Currently, the domestic sugar price in Indonesia is above the international market due to restrictions on import quotas when domestic prices fall below Rp8,100 per kg, a governmentmandated floor price that was introduced in May The Group's sugar operations in Brazil and the Philippines are covered in the next section REVIEW For the year in review, revenue contributions from the sale of sugar and molasses rose 13% to Rp706 billion compared to Rp625 billion in We expect this to improve with estate expansions and new plantings, and when both our sugar mills and refineries in South Sumatra and Central Java are operating at full capacities. In South Sumatra, our 8,000 TCD sugar mill and refi nery in Komering has an annual processing capacity of 1.44 million tonnes. We harvested 758,000 tonnes of sugar cane from our own estates in 2013 compared to 588,000 tonnes in 2012, producing 53,200 tonnes of sugar. The acreage for planted sugar cane in South Sumatra was 11,645 hectares in 2013 compared to 12,333 hectares in In addition, this sugar refi nery also produced 15,700 tonnes of sugar from imported raw sugar. Our sugar are bagged into 50kg packs and sold mainly to the domestic market. In Central Java, our newly upgraded 4,000 TCD sugar mill and refi nery has an annual processing capacity of 720,000 tonnes. In 2013, we processed 438,000 tonnes of sugar cane (versus 420,000 tonnes in 2012). We harvested the sugar cane from 5,600 hectares belonging to over 700 local farmers and a small area of our own estates. Total sugar production was 28,000 tonnes in 2013, compared to 31,000 tonnes in We have a win-win strategy with the local smallholders in Central Java by way of supply contracts an arrangement where we offer agricultural advice and credit for seed cane, planting costs and fertiliser purchases with repayment being deducted from their sales proceeds. As such, the Group's share of the sugar produced was 9,400 tonnes in 2013 compared to 11,500 tonnes in INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

29 2014 OUTLOOK In Indonesia, the sugar industry continues to be relatively robust due to strong domestic demand. While sugar imports continue to be the mainstay, intervention efforts from the government, aimed at increasing the production capacity of sugar factories, enhancing the productivity and yield of sugar cane and encouraging the expansion of sugar cane plantations, have been positive for industry players. In the year ahead, we expect to step-up our sugar cane planting programme and production at our 8,000 TCD sugar factory in South Sumatra to optimise our facilities and achieve the vertical integration required for full-scale operations and growth. We are also researching into the breeding of new generation seed cane varieties to improve yields. Complemented by our largescale plantation management experience, we will progressively streamline operations for higher outputs and profi tability. Sugar Prices US$ / tonne Jan 06 Jun 06 Nov 06 Apr 07 Sep 07 Feb 08 Jul 08 Dec 08 May 09 Oct 09 Mar 10 Aug 10 Jan 11 Jun 11 Nov 11 Apr 12 Sep 12 Feb 13 Jul 13 Dec 13 CSCE No.11 (Raw Sugar) LIFFE No.5 (White Sugar) MANUFACTURING PROCESS FOR SUGAR CANE HANDLING & MILLING BAGASSE BOILER FILTER CAKE JUICE CLARIFICATION & EVAPORATION SUGAR BOILING & CURING FINAL MOLASSES SUGAR DRYING & HANDLING FINISHED SUGAR PRODUCT END CUSTOMERS INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

30 26 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

31 PLANTATION REVIEW SUGAR: OUTSIDE INDONESIA EXPANDING INTO BRAZIL Brazil is a leader in the global sugar and ethanol industry due to its unique advantages such as high productivity levels, favourable climate and the abundance of suitable land for future expansion. Over the last 10 to 15 years, Brazil s global sugar production and exports have been steadily increasing, making the country the world s largest sugar producer and exporter today with a 40% to 50% share of the global sugar export market, as well as the lowest cost producer due to its ideal growing conditions. In the long run, production growth in Brazil is likely to be key growth in the overall world sugar supply. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

32 PLANTATION REVIEW SUGAR: OUTSIDE INDONESIA (Cont d) World Sugar Production 2012/13 TOTAL million tonnes 23% Brazil 15% India 9% EU 8% China 6% Thailand 4% US 4% Mexico 3% Russia 3% Pakistan 2% Australia 23% Others However, recent declines in global sugar prices had been driven by physical sugar surpluses around the world. While Brazilian sugar production has increased strongly due to its advantages, aggregate growth in production for the rest of the world was slow especially amidst volatilities and cyclical factors such as weather, pests and diseases. Global consumption in the season October 2012 to September 2013 grew at 2.7% this year from increased demand due to lower prices. This translates to a global growth of 4.4 million tonnes. Asia has been the dominant region of sugar consumption growth since 1985, and is projected to maintain a dominant share of the global sugar import market with its growing population, rising incomes and greater urbanisation. ACQUIRING A 50% STAKE IN CMAA IndoAgri announced the decision to expand into Brazil s sugar and ethanol industry, and to acquire a 50% stake in CMAA for a cash consideration of BRL143.4 million (approximately US$66.6 million), on 28 January By offering access to 42,517 hectares of planted sugar cane in Brazil, the acquisition has enabled IndoAgri to extend its geographical presence into the sugar and ethanol industry in Brazil, while strengthening its diversifi ed plantation business model. Established in 2006, CMAA is principally engaged in the cultivation and processing of sugar cane for the production and marketing of ethanol and sugar, as well as co-generation of electric power from sugar cane bagasse. It operates one modern, state-of-the-art sugar mill in Vale do Tijuco, Brazil, with a total crushing capacity of 3 million tonnes per year, expanding to 3.8 million tonnes in early To structure the acquisition, the Group incorporated a wholly owned subsidiary in Singapore, IFAR Brazil, which has in turn incorporated a wholly owned subsidiary in Brazil, known as IndoAgri Brazil. The acquisition of CMAA was completed on 25 June 2013, following which it has become a 50%-owned joint venture entity under the Group. 28 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

33 Operational Highlights Unit 2011/ 2012/ YTD Dec13 12 Mths 12 Mths 9 Mths Planted Area Ha 24,907 37,909 42,517 Harvested Area Ha 19,647 22,546 31,627 Crushing 000 MT 1,662 2,218 3,026 Production Volume: VHP 000 MT Ethanol 000 M Energy 000 Mwh Sales Volume: VHP 000 MT Ethanol 000 M Energy 000 Mwh EXPANDING INTO PHILIPPINES With 24.0 million tonnes of sugar cane production in 2012, the Philippines sugar industry is the third largest in Southeast Asia after Thailand (96.5 million tonnes) and Indonesia (26.3 million tonnes). Around 80-85% of this production is used domestically. The remaining 15-20% is exported, primarily to the United States, which allocates a sugar quota for the Philippines, and to Japan. The Philippines exports about 500,000 MT of raw sugar per year. The Philippines currently implements an 18% tariff on all sugar imports. From 2015, this tariff will decline to 5%. The tariff has allowed domestic producers to sell sugar at a price that is 30-40% more competitive than the wholesale price of imported sugar from Thailand. When the tariff drops to 5%, Filipino sugar producers will no longer have this advantage. ACQUIRING A STAKE IN RHI In December 2013, we further expanded our international footprint following the investment of a 30% interest in FPNRL for a cash consideration of US$17.4 million. FPNRL in turn has a 34% interest in RHI, the largest integrated sugar business in the Philippines. As the biggest sugar miller in the Philippines, RHI has a processing capacity of 38,500 TCD, and supplies nearly one-fifth of the country s total sugar production. It is also the third biggest sugar refiner in the Philippines with a capacity of 18,000 Lkg/day at its Batangas refinery (one Lkg is a unit of measurement equivalent to one 50-kg bag of sugar). The company has three sugar mills, one in Batangas and two in Negros Occidental. It also has an ethanol plant in Negros Occidental with a production capacity of 100,000 litres/day REVIEW In 2013, international sugar prices sustained pressure from a sizeable global sugar production surplus in 2012/13 and the global economic slowdown. Sugar prices on the London International Financial Futures and Options Exchange (LIFFE) averaged at US$385 per tonne in 2013, down from US$588 per tonne in As at 31 December 2013, CMAA has a cane planted area of 42,517 hectares, of which 49% is company-owned while 51% belong to third parties. In 2013, CMAA processed 3 million tonnes of harvested sugar cane, producing 187,000 tonnes of sugar, 137,000 tonnes of ethanol and 196,000 M 3 of electricity. Our 50% share of profi ts from CMAA for the period of July to December amounted to Rp64billion (approximately US$5 million) The Group s share of the contributions from RHI will be accounted for from January OUTLOOK As a Group, IndoAgri intends to tap into the technology, know-how and knowledge that it has gained from its investment in CMAA, and to apply the advanced methodologies and operational improvements across its plantations in Indonesia. The Group will also continue to evaluate potential acquisitions or joint ventures in a bid to expand its operations in the international market. Moving forward, we expect that the direction for global sugar prices will be strongly influenced by production levels in Brazil and India, together with the Brazilian government policies on ethanol. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

34 PLANTATION REVIEW R&D OVERVIEW Research and development (R&D) is a critical aspect of our plantation operations. Through innovative R&D, we aim to reduce production constraints, increase yield potentials and crop resilience, while improving management practices. In many ways, our success and competitiveness as a low-cost producer have been borne out of R&D. As a key enabler, R&D enhances our goals for environmental sustainability and maximises our profi ts in the long run. The Group s R&D Activities Are Centred On Five Key Areas: Plant breeding: The development of top quality seed and planting materials through traditional and advanced breeding methods, a diverse germ-plasm base and biotechnology, supported by fi eld trials that test progenies across a range of planting environments. 30 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

35 Soils: The detailing of soil survey maps that support sitespecifi c, agronomic block management. Agronomy: The evolvement of site-specifi c soil management and crop cultivation techniques that provide our estates with optimal recommendations on crop management and planting densities, and block-by-block fertiliser and herbicide usage. Crop protection: The implementation of integrated pest management with strong emphasis on biological pest control systems to monitor, prevent and eradicate pests and diseases that lead to crop losses. Field data capture, management and analysis: The deployment of GPS ground surveys and remote sensing technologies that enable timely and detailed 2D and 3D topographic maps; as well as Geographic Information System (GIS) tools that provide analysis and support for management decision making and optimum plantation management. An integrated software system provides visibility of data across subsidiaries, refi neries and plantations on a daily basis. Modern laboratories, comprehensive facilities and a strong R&D heritage have equipped IndoAgri to perform extensive research in plant breeding, tissue culture, soil science, soil and water conservation, plant nutrition and biological crop protection, entomology, and pathology. The aim is to continuously improve the productivity of seed breeding and cultivation using methodological frameworks for farming operations, ensuring best practices in plantation management. The Group has two advanced agricultural R&D centres: Sumatra Bioscience (SumBio) in Bah Lias, North Sumatra, and PT SAIN in Pekanbaru, Riau. SumBio is an established name and a soughtafter producer of premier oil palm seeds in Indonesia. Annually, SumBio has a production capacity of 25 million superior and high-yielding oil palm seeds. PT SAIN became a certifi ed seed producer in 2011, and currently produces up to 8 million seeds per year. In terms of product development, we have an extensive R&D facility dedicated to improving our range of cooking oils, margarine and shortening products. For example, we leverage R&D to develop specifi c formulations of edible oils catered to the requirements of our industrial customers and retail consumers. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

36 PLANTATION REVIEW R&D (Cont d) Our R&D Activities For Sustainability Cover: Fertilisers recommendations: Site-specifi c formulations are prepared annually for each block on the basis of yield targets and yield statistics, annual foliar analysis, soil characteristics, established yield response curves from relevant fertiliser trials and predicted nutrients release from soils and plant residues, to maintain optimum palm nutrition and plantation sustainability. Organic fertilisers: We optimise the use of mill effl uent and by-products as organic fertilisers. In Riau, empty fruit bunches (EFB) are utilised as soil mulch, while palm oil mill effl uent (POME) are used in land application. This has reduced our need for inorganic fertilisers by 14% annually. We are also moving towards the co-composting of EFB and POME, which has the potential to replace up to 30% of inorganic fertiliser use per year. Integrated pest management: Biological control agents have helped us achieve effective pest and disease control. Barn owls have been an effective rat-control measure in our Riau estates, which has had a zero-rodenticide practice since Around 10,000 new birds are bred annually at 2,500 nest boxes distributed throughout the Riau estates. We have introduced the use of barn owls to our South Sumatra estates where around 1,800 new birds were bred in This in turn will reduce rodenticide use across all plantations. 32 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

37 2013 REVIEW Increased high-yield seed sales: The Group produced 26.5 million high-yielding oil palm seeds in 2013, a decrease over the 28.6 million seeds produced in Part of the high-yielding seed material were for the Group s new planting of 9,791 hectare and replanting of 365 hectares during the year, which required approximately 200 oil palm seeds per hectare of land. Most of our high-quality seeds are sold to external parties, generating additional revenue and profi tability for the Group. In 2013, sales of oil palm seeds fell by 27% from 24.7 million to 18.1 million seeds, as a result of the slowdown in new plantings. Pest and disease control: In 2013, efforts to promote the use of natural predators and biological agents were intensified so as to reduce the use of pesticides and our chemical footprint. To control major leaf-eating caterpillars, we cultivated entomopathogenic agents of viral origin that were sprayed across all estates. In addition we continue to rear natural predators, such as barn owls, which are released to critical areas as proven measures against pest and rodent attacks. On-time responsiveness: With the aid of aerial photography, satellite technology and Geographic Information System (GIS) tools, we were able to monitor plantation blocks and harness timely and accurate information on the health condition of our crops and land/ water drainage characteristics in the estates. This has improved resource and manpower deployment, and allowed us to prevent rather than react to potential agronomic issues. Improved processing: We leveraged R&D to enhance and develop new products catering to different customer needs. For example, a speciality fats simulation laboratory has enabled the Edible Oils & Fats Division to improve the quality and consistency of its products, and to develop specialty fat products for use in cakes, bread, confectioneries and other bakery products. We are also investing in new technology to develop new packaging materials and designs to reduce costs OUTLOOK With greater affl uence, higher populations and a growing dependency on palm oil and palm oil products, the demand for premium, high-yielding seeds is likely to remain robust supported by new plantings in Our seed breeding team will continuously conduct trials aimed at identifying next generation of proven parental genotypes. In the year ahead, we will further intensify the use of biocontrol methods against major pests, streamline existing work processes and strive towards higher mechanisation in order to drive productivity. Supported by 3D maps, GPS technology and aerial photography, we expect to further delineate the topographic landforms of our estates in South Sumatra in relation to productivity and soil and water management. As we reap the results of best practices in plantation management, we expect to improve yields and yield forecasts using statistical methods, and enhance the monitoring of leaf production rates. At the same time, an integrated, software system will offer greater visibility of the fi eld data across all subsidiaries, refi neries and plantations on a daily basis; while an Enterprise Resource Planning system equips us with professional tools for managing our diverse operations. We will be developing further the use of unmanned aerial vehicles for acquiring topographical visuals, as well as near infrared (NIR) and IR photography of crop biomass and conditions. The objective is to monitor and improve plant health status, and to make estimates of leaf area for forecasting yields. Detailed soil fertility mapping will help characterise physicochemical properties across different breeding environments, enabling sitespecific fertility management to produce the maximum economic crop response. Other R&D enhancements in 2014 will involve disease management as well as precision agronomy through improved strategies for crop management, planting densities, fertiliser and herbicide usage. We are confident that these initiatives will underscore higher and more profitable yields per hectare, reduce production costs and maintain a balance nutrient programme for sustainable growth. For our Edible Oils & Fats Division, continued investment in R&D will ensure that our products meet evolving customer requirements. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

38 EDIBLE OILS & FATS REVIEW OVERVIEW The Edible Oils & Fats (EOF) Division manufactures and markets IndoAgri's downstream products, which include cooking oils, margarine, shortening, crude coconut oil (CNO) and other byproducts derived from oil palm refi ning, fractionation and crushed copra. The Group owns and operates fi ve refi neries, with total processing capacity of 1.4 million tonnes of CPO per year. These refi neries are located strategically in major Indonesian cities and/ or near deep-water ports, which are logistically advantageous for transportation. Our Bimoli, Bimoli Spesial, Delima, and Happy range of cooking oils are leading brands in the Indonesian market. Our consumer margarine and shortening are marketed under the Palmia and Amanda brands, while our industrial margarine and shortening are branded under Palmia, Simas, Amanda, Malinda and Delima. According to market research, our products continue to dominate Indonesia's consumer market for branded cooking oils and margarine. In 2013, our branded products accounted for over half of the Division's revenue, while sales to industrial customers and thirdparty brands accounted for the balance. Our industrial pack cooking oil is mainly sold, on an unbranded basis, to the Indofood Group and other industrial food manufacturers, while our industrial pack margarine and shortening are promoted under our own brands to confectioneries, bakeries and other food manufacturers. Supported by IndoAgri's vertically integrated agribusiness model, the EOF Division is able to minimise on third-party purchases by obtaining CPO raw materials from internal sources. Approximately 59% and 65% of the CPO used in the production of cooking oil, margarine and shortening were produced by the Plantation Division in 2013 and 2012 respectively. We also leverage the distribution channels of our parent company to supplement our market penetration efforts. Together, our products are sold through direct channels as well as local and national distributors serving approximately 326,000 retail outlets across Indonesia. We have achieved platinum level for the Indonesia Best Brand Award from 2002 to 2013, and Diamond level for the Indonesia Customer Satisfaction Award from 2000 to REVIEW In 2013, the EOF Division reported total revenue of Rp8.6 trillion, a 9.8% decline over The softer sales refl ected the combined effects of lower sales volume of bulk oil and coprabased products. The Division processed approximately 869,000 tonnes of CPO (including 59% from our own plantations) in 2013, a 6% decrease over The sales volume for edible oil products (which comprise cooking oil, margarine and crude coconut oil) in 2013 declined 2% yearon-year due to lower coconut oil and bulk oil sales, nonetheless this division registered strong volume growth in underlying branded products. In terms of sales contribution, this Division accounted for 65% and 69% of the Group's external sales in 2013 and 2012 respectively. In 2013, 90% of our revenue was derived in Indonesia, while the balance was derived from exports to 50 countries, including the United States, China, Netherland, Singapore, Italy, Nigeria, Spain, East Timor, the Philippines and South Korea. The Group strengthened the brand identity of its products and brand loyalty amongst its customers through the rejuvenation of product packaging and quality in Among others, the Group re-launched its core brands, Bimoli and Bimoli Spesial, by introducing new bottle and pouch-packaging designs, and the range of industrial and consumer margarine under the Palmia brand. 34 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

39 Responding to market demands from novice users of branded cooking oil Bimol introduced 250ml and 500ml refi ll packs. These new products are sold in both traditional and modern markets, including mini-marts and discount stores OUTLOOK In 2014, we expect to further utilise our downstream production by enhancing the Division's output and specialty fats production capability to meet rising demands. We plan to further enhance the tank storage and margarine production capacity by constructing new CPO storage tanks and a 200 MT/day margarine plant at Tanjung Priok in In addition, we are also expanding our refi nery capacity by constructing one 330,000 MT/year new refi nery in Dumai due for completion in The Group relies on focused advertising and promotional activities to raise awareness and improve its brand image. As such, we plan to improve our market penetration, product distribution and aftersales services in order to increase product visibility. In addition, we will focus strategically on high-end outlets to take advantage of their rapid growth in Indonesia. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

40 MANUFACTURING PROCESS FOR EDIBLE OILS AND FATS FRESH FRUIT BUNCHES MILLING EMPTY FRUIT BUNCHES AND LIQUID CRUDE PALM OIL PALM KERNEL REFINING PALM KERNEL MEAL CRUSHING RBD PALM OIL PALM FATTY ACID DISTILLATE CRUDE PALM KERNEL OIL FRACTIONATING & FILTRATION RBD PALM STEARIN LAURIC OIL RBD PALM OLEIN PACKAGING MARGARINE PLANT COOKING OIL BLENDING FLAVOURING & VITAMINS BLENDING MIXING TANK WATER & SALT MIXING TANK NITROGEN GAS CHILLING CHILLING PACKAGING PACKAGING SHORTENING MARGARINE 36 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

41 ENVIRONMENT & CSR At IndoAgri, sustainability entails integrating community and environmental priorities into our day-to-day operations. We do so by creating shared value for our company and communities, and by advancing socio-economic conditions while embedding eco-friendly practices into all facets of the organisation. We also believe that ensuring a sustainable source of palm oil is integral to the long-term success of the company. Sustainable agriculture, responsible products, sustainable communities and safe workplace are at the core of our plantations & mill and refi nery divisions. Since 2009, we have received certifi cations for our palm oil plantations from the Roundtable of Sustainable Palm Oil (RSPO). Over time, all our other crops will be certifi ed against their respective industry standards. In November 2013, the fi rst sustainability report was published to provide greater transparency on how the Group conducts its agribusiness alongside local communities and stakeholders. Based on the principle of materiality, the scope of the report covered IndoAgri s oil palm plantations and milling operations in Indonesia in 2012, and fulfi ls the requirements of the Global Reporting Initiative (GRI) s Guidelines version 3.1 at Application Level C. Download our fi rst sustainability report at INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

42 ENVIRONMENT & CSR (Cont d) The materiality issues identifi ed in our fi rst sustainability report are listed below. We will be reviewing and expanding this table in future reports. Materiality Issues Progress 2012/2013 Carbon footprint, including no peat planting and deforestation Environmental footprint, including biodiversity Occupational Health and Safety Smallholders Land rights Governance and transparency Yield maximisation Human rights We developed policies to reduce our carbon footprint: Zero burn policy since No planting on peat land. We developed policies to reduce our environmental footprint: Implementation of integrated pest management system (policy). Waste reduction by recycling the by-products, Palm Oil Mill Effl uent (POME) and Empty Fruit Bunches (EFB), as fuel and fertiliser. Assignment of 1,398 ha of High Conservation (HCV) areas in 54,769 ha of RSPO-certifi ed estates. We implemented SMK3 (a government regulation) and an accidents and fatalities monitoring and evaluation system in all our operations. Disclosure in future reports. We are developing programmes for smallholders, including RSPO certifi cation for plasma smallholders. We implemented a grievance mechanism. We introduced a whistle-blowing mechanism, restructured our sustainability teams and are reviewing policies for public disclosure on the RSPO website. We monitored nutrition management per 30-hectare block, and own two out of the 10 seed breeding facilities in Indonesia. We have an employee policy that covers no child labour while supporting diversity in the company. CORPORATE SUSTAINABILITY POLICY Our corporate sustainability practices can be classifi ed under four broad areas: environmental management; labour and occupational health and safety practices; social and community development; and product responsibility. These practices are guided by IndoAgri s corporate sustainability policy, which sets out clear objectives for a symbiotic relationship between the Group s internal and external stakeholders, as well as the environment. Environmental Management Compliance with the principles and criteria of the Roundtable for Sustainable Palm Oil (RSPO) covers a large part of our key materiality issues and the risks identifi ed by our Enterprise Risk Management (ERM) system. RSPO and ISPO certification: We are committed to having all our estates RSPO-certifi ed by 2019 as part of our strategy to become sustainable leaders in the industry. In 2013, as part of our effort for sustainable CPO production, an audit for RSPO certifi cation was completed for an additional 30,000 hectares of plantations in Riau, with offi cial certifi cates being processed. IndoAgri s certifi ed CPO production is currently at 248,000 tonnes. The Indonesia Sustainable Palm Oil (ISPO) is an effort led by the Ministry of Agriculture to raise awareness of the importance of sustainable palm oil production. In September 2013, we were awarded the ISPO certifi cation for three of our estates and one palm oil mill in North Sumatra. We are committed to achieve ISPO certifi cation for all our oil palm plantations and palm oil mills. Biodiversity and conservation: As plantation owners, we are mindful of the impact of our operations on biodiversity and conservation. Since 2008, we have been working with experts to identify and monitor HCV areas on our estates, and engage with employees regularly to inform and guide them on the restrictions in HCV areas. Working with organisations such as the Sumatra Orang-Utan Society, we support the conservation of wildlife and are restoring and enriching the natural habitats of Orang-Utans in North Sumatra with benefi cial tree species. Reduction of chemical footprint: We intensifi ed biological pest control measures in 2013 by stepping up the breeding of barn owls as effective substitutes for rodenticides. We are committed to phase out the use of paraquat by exploring alternative herbicides, and are taking advantage of the high potassium content found in by-products like Empty Fruit Bunches (EFB) and Palm Oil Mill Effl uent (POME) to replace the use of inorganic fertilisers. Management of waste, emissions and effluents: The Group has in place an integrated waste management programme to ensure the proper recycling of effl uents and disposal of hazardous waste resulting from our operations. We also monitor and manage emission levels from our boilers and generators in efforts to lower our carbon footprint. 38 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

43 Labour and Occupational Health and Safety Practices At the heart of IndoAgri s operations are its employees. We seek to offer meaningful employment whereby employees are engaged, empowered, and proud to be a part of the Group. As responsible employers, we provide regular opportunities for personal and professional growth, and maintain open lines of communication for issues resolution, strengthening cooperation, and exchange of ideas and expertise. The Group provides direct and indirect employment opportunities for local residents and the plasma community through a wide range of jobs each year. As at 31 December 2013, the Group has a workforce of 41,405 deployed in administrative, operational and supervisory roles, as well as in middle and senior management positions. Our Employee Profile Position Total Senior management 358 Management 941 Supervisors 2,097 Administrative and operation staff 38,009 Total 41,405 Compensation and benefits: Our reward policies are market competitive and all employees receive at least the minimum salaries mandated by local authorities. Other employment benefi ts include free housing (including electricity and water supply) for permanent estate staff, meal allowances, as well as facilities for sports and recreation, while managerial staff are entitled to allowances for car, telephone and clothing. Employees are also enrolled in the old age security programme under Jamsostek. The company and employees contribute 3.7% and 2% of the basic salary per month to this pension plan respectively. For retiring employees, the Group offers a severance package and other benefi ts set out by Jamsostek. Free education: Education, including transportation to schools located outside our plantations, is provided free to all children of estate employees. The Group employed 953 teachers in 2013, deployed in the kindergartens and primary schools found across its estates. So far, we have built 66 primary schools, 9 junior high schools, and 10 senior high schools. Training and development: The Group has differentiated learning programmes designed to sharpen the competencies of its people. We operate four training facilities supporting capability development, particularly in agronomy, agriculture and engineering. We also invest in the training of professional skills suited to specifi c roles and job requirements. Talent and leadership management: We are focused on leadership development as well as formal processes for succession planning in order to prepare and identify talented employees for higher roles and responsibilities. In 2013, a Learning and Development Programme (LDP) was formalised in collaboration with the First Pacifi c Leadership Academy, a corporate university under First Pacifi c Company Limited, which owns Indofood. A pioneer batch of 25 managers and 23 supervisors have embarked on the LDP, which features 10 modules with subjects ranging from decisionmaking to performance management and strategic planning. Strong labour relations: The Group enjoys a strong industrial relationship with the Indonesian Labour Union, which represents the interests of our employees. As employers, our success is demonstrated by the fact that there has never been any major work stoppage or labour disputes within the Group. Occupational Health and Safety (OHS): IndoAgri is committed to providing a safe and healthy working environment. All of our working facilities are equipped with an OHS management system (SMK3) that meets with local regulations. Through the implementation of SMK3, we aim to achieve a zero accident rate in the workplace. Professional security guards are hired on the plantations to protect our employees and assets. Free healthcare: Medical services are provided freely to all employees and their dependents living on our estates, most of which feature an aid post and a central clinic. For the treatment of more serious ailments, the Group has a formal arrangement with 43 hospitals located near its estates. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

44 ENVIRONMENT & CSR (Cont d) Social and Community Development IndoAgri engages with local communities to enhance literacy rates, sharpen skills and competitiveness, while improving the health and wellbeing of everyone in the community. Our focused efforts over the past year include the following: Building human capital: During the year, our educational sponsorships have included the building of local schools and learning facilities, funding for teacher-training and educational programmes, contribution of learning aids and teaching tools, local scholarship awards, and vocational internship opportunities. We collaborated with the Solidarity of United Indonesia Cabinet Wives (SIKIB - Solidaritas Isteri Kabinet Indonesia Bersatu) to introduce Rumah Pintars or smart houses, which support the education of young children through books, computers, audiovideo resources, play and crafts. Outreach to the community: Besides contributing to the public health infrastructure by building medical clinics and emergency care units for surrounding communities, the Group has a special programme for pregnant mothers, providing free immunisations, vitamins, diagnostic, medical and dental services in order to minimise infant mortality rates. This in line with United Nation Millennium Development Goals programme, which aims to reduce child mortality and promote the health of pregnant women. In 2013, we supported 206 posyandus, or monthly clinics that provide free health checks and nutrition supplement to the women and children on our estates. Improving transportation networks and access for local communities, we built and repaired roads and bridges in Sumatra and Kalimantan, fi nanced the construction of places of workshop, and released land rights to the government for the construction of the Medan-Kualanamu Airport toll road. We contribute facilities for sports and recreation. We also organise and sponsor local tournaments, musical and cultural performances to encourage community bonding and team spirit. Strengthening economic value: We continue to support plasma farmers by providing agronomic advice along with production management, administration and fi nancial assistance. Our community empowerment programme also supports microentrepreneurship. For example, we donate kitchen appliances to the participants of Pojok Selera, an Indofood initiative that provides extra income to housewives by turning their baking skills into an enterprise. We also have a programme in the village district of Kuantan Serial Selunak to help local fish farmers achieve sustainable fish farming and improve their livelihoods. 40 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

45 Protecting the environment: The discussion on protecting the environment is covered in the Environmental Management section. Solidarity for humanity: The Group supports various relief programmes for people affected by natural disasters. Product Responsibility Food safety: Food safety in Indonesia is strictly regulated. As most of our agricultural products consist of intermediate goods that require further processing, the Group complies with all government stipulations on quality and safety, and adopts rigorous quality laboratory testing procedures to ensure that our products are safe for consumption. All our refi neries have achieved ISO 9001 certifi cation. IndoAgri has never been subjected to any legal sanctions related to product safety and feasibility issues. Packaging and waste reduction: Exercising accountability in waste management, we are institutionalising Extended Producer Responsibility (EPR) by gradually enforcing the use of new packaging materials that are biodegradable, reusable or recyclable. Since 2009, Indofood has been a member of the Coalition for Sustainable Packaging, which champions reductions in plastic wastes in Indonesia. We also introduced a new pouch packaging for our edible oils and fats in 2012 to minimise landfill space. Ethical marketing: We abide by an ethical practice to present information on our food products based on their quality, characteristics, brand and fair value. As part of fair competition, we do not spread negative information related to our competitors. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

46 OUR MANAGEMENT The Board and Management are committed to continuously enhance the standard of corporate governance principles and processes in managing the business, so as to improve the performance, accountability and transparency of the Company. 42 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

47 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

48 BOARD OF DIRECTORS MR LEE KWONG FOO EDWARD Chairman and Lead Independent Director Mr Lee spent 36 years in the Singapore Administrative Service (Foreign Service Branch), during which he served as Singapore s High Commissioner in Brunei Darussalem (1984 to 1990), Ambassador to the Philippines (1990 to 1993) and Ambassador to Indonesia (1994 to 2006). Mr Lee was awarded the Public Administration Medal (Silver) in 1996, the Long Service Medal in 1997, the Public Administration Medal (Gold) in 1998 and the Meritorious Service Medal in 2006 by the Singapore Government. In 1993, the Philippines Government bestowed on him the Order of Sikatuna, Rank of Datu (Grand Cross). In 2007, the Indonesian Government awarded him the highest civilian honour, the Bintang Jasa Utama (First Class). He is a member of the National University of Singapore s President s Advancement Advisory Council. Mr Lee holds a Masters of Arts from Cornell University. 44 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

49 MR LIM HOCK SAN Vice Chairman and Independent Director Mr Lim is presently the President and CEO of United Industrial Corporation Limited and Singapore Land Limited. He is also the Non-Executive Chairman and Independent Director of Gallant Venture Ltd. Mr Lim started his career in 1966 with the then Inland Revenue Department of Singapore. He became an Accountant at Mobil Oil Malaya Sdn Bhd in 1967 before joining the Port of Singapore Authority in 1968, where he served in various management positions. From 1975 to 1992, he was with the Civil Aviation Authority of Singapore and was promoted to the position of the Director-General. He has a Bachelor of Accountancy degree from the then University of Singapore, a Master of Science (Management) degree from the Massachusetts Institute of Technology and attended the Advanced Management Program at Harvard Business School. He is a Fellow of The Chartered Institute of Management Accountants (UK) and a Fellow and past President of the Institute of Certifi ed Public Accountants of Singapore. He is also a recipient of the Singapore Government Meritorious Service Medal, the Public Administration Medal (Gold) and the Public Service Medal. MR MARK WAKEFORD Chief Executive Officer and Executive Director Mr Wakeford is currently the President Director of PT SIMP and PT Lajuperdana Indah, and Director of Lonsum. He started his career with Kingston Smith & Co, a firm of Chartered Accountants in London, England. Mr Wakeford has been in the plantation industry since 1993, working with plantation companies in Indonesia, Papua New Guinea, Soloman Islands and Thailand. He started his plantation career as the Finance Director of Lonsum in 1993, based in Indonesia, before moving to Pacific Rim Plantations Limited (PROPL) as the CFO from 1995 to 1999, based in Papua New Guinea. In 1999, Mr Wakeford became CEO and Executive Director of PROPL. PROPL was sold to Cargill in 2005, and Mr Wakeford spent one year with Cargill, prior to joining the Company in January He became CEO of the Company in August 2007 and is concurrently a member of Rabobank s Asia Food and Agribusiness Advisory Board. Mr Wakeford trained and qualified as a Chartered Accountant in London, England. He also attended the Senior Executive Programme at the London Business School. MR MOLEONOTO TJANG Executive Director and Head Of Finance and Corporate Services Mr Tjang is currently a Director of PT Indofood Sukses Makmur Tbk and is concurrently a Commissioner of PT Indofood CBP Sukses Makmur Tbk, Vice President Director of PT SIMP and Director of Lonsum. He started his career in 1984 with Drs. Hans Kartikahadi & Co., a public accounting fi rm in Jakarta. Before joining the Plantations Division of the Indofood Group as CFO in 2001, he had held various management positions in the Salim Plantations Group since He was awarded a Bachelor of Accountancy degree from the University of Tarumanegara, a Bachelor s degree in Management from the University of Indonesia and a Master of Science degree in Administration & Business Policy from the University of Indonesia. He is also a registered accountant in Indonesia. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

50 BOARD OF DIRECTORS (Cont d) MR SUAIMI SURIADY Executive Director and Head Of Edible Oils & Fats Division Mr Suriady is currently a Director of PT Indofood CBP Sukses Makmur Tbk, where he heads the Snack Food Division. He concurrently serves as President Director of PT Indofood Fritolay Makmur, Director of PT SIMP and Commissioner of PT Nestle Indofood Citarasa Indonesia. He began his career with an automotive battery distributor, PT Menara Alam Teknik of Astra Group and moved on to join consumer goods manufacturer, Konica Film and Paper, in He was awarded a Master of Business Administration from De Montfort University in the United Kingdom. MR SONNY LIANTO Executive Director Mr Sonny Lianto started his career in 1994 at Prasetio Utomo & Co, a member fi rm of the then Arthur Andersen & Co and left in He joined PT Mulia Industrindo Tbk as Chief of System & Procedures in 1997 and PT Admadjaja Korpora, the holding company of Danamon Group as Junior Assistant Vice President Finance & Accounting from 1997 to He joined PT Indofood Sukses Makmur Tbk as Management Accounting Manager at the Corporate Controller Division from 1999 to 2006 and was promoted to General Manager Corporate Controller Division in He was appointed a Director of Lonsum in 2009 prior to his current appointment as the Vice President Director of Lonsum from May MR TJHIE TJE FIE Non-Executive Director Mr Tjhie is currently a Director of PT Indofood Sukses Makmur Tbk and PT Indofood CBP Sukses Makmur Tbk. He is also the President Director of PT Indofood Asahi Sukses Beverage, Vice President Director of PT Asahi Indofood Beverage Makmur, Vice President Commissioner of PT Tirta Sukses Perkasa and PT Tirta Makmur Perkasa, President Commissioner of PT Indofood Fritolay Makmur, President Commissioner of PT SIMP, and Director of Lonsum. He previously served as a Director of PT Indomiwon Citra Inti and as Senior Executive of PT Kitadin Coal Mining. Mr Tjhie was awarded a Bachelor s degree in Accounting from the Perbanas Banking Institute. 46 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013

51 MR AXTON SALIM Non-Executive Director MR GOH KIAN CHEE Independent Director MR HENDRA SUSANTO Independent Director Mr Axton Salim is currently a Director of PT Indofood Sukses Makmur Tbk. He is also a Director of PT Indofood CBP Sukses Makmur Tbk, where he heads the Dairy Division, as well as Commissioner of PT SIMP, Lonsum and PT Nestlé Indofood Citarasa Indonesia, Vice President Director of PT Indolakto, Director of Pacsari Pte. Ltd. and PT Indofood Asahi Sukses Beverage, and President Commissioner of PT Tirta Sukses Perkasa. He was awarded a Bachelor of Science in Business Administration from the University of Colorado, USA. Mr Goh is presently a Consultant in National University of Singapore, Centre For The Arts (NUS). He is also an Independent Director of AsiaMedic Limited and China Minzhong Food Corporation Limited. Mr Goh started his career in 1979 as an audit trainee with Goldblatt & Co (UK). He joined American International Assurance Pte Ltd in 1981 as an Accounting Supervisor. In 1982, he became a Regional Internal Auditor in Mobil Oil Singapore Pte Ltd and rose to the position of Regional Credit and Insurance Manager in In 1990, he was seconded to Mobil Petrochemicals International Ltd where he served as Regional Accounting Manager and later, as the Controller of the Asia Pacific region till Before his present role in NUS, Mr Goh was the Regional Vice President & Controller as well as an Executive Director of John Hancock International Pte Ltd. Mr Goh has a Bachelor of Arts (Hons) degree in Accounting and Economics from Middlesex University (London, United Kingdom). Mr Susanto is an Independent Commissioner in PT SIMP and began his career with the Standard Chartered Bank as an Account Relationship Manager of the Corporate Banking division in He joined PT BNP Lippo Leasing in 1993 as the Head of the Corporate Marketing division. In 1996, he joined PT ING Indonesia Bank as Vice President in the Project and Structured Finance division and was subsequently promoted to Director in the Wholesale Banking division of the bank. Mr Susanto also acted as the Chief Representative of ING Bank N.V. in Indonesia until Mr Susanto has a Bachelor of Computer Science degree and a Master of Commerce degree from the University of New South Wales, Australia. INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT

52 CORPORATE INFORMATION DIRECTORS Chairman and Lead Independent Director Lee Kwong Foo Edward Vice Chairman and Independent Director Lim Hock San Chief Executive Officer and Executive Director Mark Wakeford Executive Director and Head of Finance and Corporate Services Moleonoto Tjang Executive Director and Head of Edible Oils & Fats Division Suaimi Suriady Executive Director Sonny Lianto Non-Executive Director Tjhie Tje Fie Non-Executive Director Axton Salim Independent Director Goh Kian Chee EXECUTIVE COMMITTEE Mark Wakeford (Chairman) Tjhie Tje Fie Moleonoto Tjang Suaimi Suriady Sonny Lianto AUDIT AND RISK MANAGEMENT COMMITTEE Goh Kian Chee (Chairman) Lim Hock San Hendra Susanto NOMINATING COMMITTEE Lee Kwong Foo Edward (Chairman) Tjhie Tje Fie Lim Hock San Hendra Susanto REMUNERATION COMMITTEE Lim Hock San (Chairman) Tjhie Tje Fie Goh Kian Chee REGISTRAR Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffl es Place Singapore Land Tower #32-01, Singapore REGISTERED OFFICE 8 Eu Tong Sen Street #16-96/97 The Central Singapore COMPANY SECRETARIES Lee Siew Jee, Jennifer Mak Mei Yook AUDITORS Ernst & Young LLP One Raffl es Quay North Tower, Level 18 Singapore AUDIT PARTNER Gajendran Vyapuri (Appointed 27 April 2012) Independent Director Hendra Susanto 48 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013