indofood agri-resources - indoagri ar2013

8/11/2019 Indofood Agri-resources - IndoAgri Ar2013

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SEIZING

GROWINGOPPORTUNITIESANNUAL REPORT 2013

SI G

PHILIPPINES


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EXPANDING

BEYONDBOUNDARIES

R


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2 Milestones

4 Key Events in 2013

5 Corporate Structure

6 Geographical Presence

10 Chairmans Statement

12 CEOs Statement

14 Business Overview

16 Financial Highlights

17 Operational Highlights

20 Plantation Review

34 Edible Oils & Fats Review36 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

C O N T E N T S

AT AGLANCEIndofood 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 diversifiedagribusiness group, IndoAgri also engages

in the cultivation of sugar cane, rubber and

other crops.


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O U R V I S I O N

To become a leading integrated agribusiness, and one of the world-class agriculturalresearch and seed breeding companies.

O U R M I S S I O N

To be a low-cost producer, through high yields and cost-effective and efficient 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 businessoperations, including sustainable environmental and social practices

To continuously increase stakeholders value

O U R V A L U E S

CONSISTENT

Our success rests on satisfying CUSTOMERSneeds

INNOVATIONis our key to future growth

Reliable STAFFis our biggest asset

EXCELLENCEis our way of life

TEAMWORKmakes a winning team

INDOFOOD AGRI

RESOURCES LTD.A N N U A L R E P O R T 2 0 1 3

1INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013


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MILESTONES

2008

Diversified into sugar business via the subscription of 60%stake in PT Laju Perdana Indah.

Acquired plantation land bank of 82,300 hectares inSouth Sumatra and Central Kalimantan, Indonesia.

Acquired a bulking facility at the Dumai port, Indonesia.

2009

Acquired plantation land bank of 10,000 hectares inSouth Sumatra, Indonesia.

Incorporated a new subsidiary to own barges, tugboatsand operate a shipping logistics business.

Achieved the Roundtable on Sustainable Palm Oil (RSPO)certification for the Groups North Sumatra estates and

factories.

Raised Rp730 billion from 5-year Indonesian Rupiah

Bonds and Islamic Lease-based Bonds.

2007

Completed a reverse takeover of CityAxis Holdings Limitedand changed name to Indofood Agri Resources Ltd.

Listed on the main board of the SGX-ST on 14 Februaryand raised about S$420 million proceeds from placement

of 338 million new shares.

Acquired plantation land bank of 98,491 hectares inSouth Sumatra and Kalimantan.

Acquired a 58.8% effective interest in Lonsum, becomingone of the largest plantation companies in Indonesia with

land bank doubling to over 400,000 hectares.

2 INDOFOOD AGRI RESOURCES LTD ANNUAL REPORT 2013


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2012

Acquired 26.4% interest in Heliae, a development stage algae technology solutionscompany for US$15 million.

Awarded RSPO certification for an additional 53,000 tonnes of CPO, bringingthe Groups total certified CPO output to 248,000 tonnes.

2011

Listed PT SIMP on the main boardof the Indonesia Stock Exchange andraised net proceeds of Rp3.35 trillionfrom an initial public offering (IPO) of3,163,260,000 new ordinary shares.

Amalgamated with IOFPL, a whollyowned subsidiary, to operate as

one company.

Awarded RSPO certification for anadditional 25,000 tonnes of CPO.

2013

Acquired a 79.7% interest in PT Mentari Pertiwi Makmur (MPM).

Acquired a 50% stake in Companhia Mineira de Acar e lcool Participaes(CMAA), the Groups first overseas investment into the sugar, ethanol and

co-generation industry in Brazil.

Established a S$500 million Euro Medium Term Note Programme.

Published the Groups first sustainability report.

Formed FP Natural Resources Limited (FPNRL), a joint venture between First

Pacific Company Limited (70% stake) and IndoAgri (30% stake), to invest 34% inRoxas Holdings Inc. (RHI), the largest integrated sugar business in the Philippines.

2010

Carried out an internal restructuring toconsolidate all joint ventures with theSalim Group (a controlling shareholderof IndoAgri) under a Singapore-incorporated

entity, IGER.

Divested 8% or 109,521,000 sharesin Lonsum for a cash considerationof Rp1.3 trillion, of which, 3.1% wassold to PT SIMP and 4.9% was sold to

the public.



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KEY EVENTS IN 2013

8 MARCH 2013

IndoAgri acquired a 79.7% stake in MPM for Rp330 billionthrough its subsidiaries, PT Salim Ivomas Pratama Tbk (PT SIMP)and PT PP London Sumatra Indonesia Tbk (Lonsum). MPM ownsthe SAL Group, which holds three industrial forest plantationconcessions totalling 73,330 hectares in Berau and East Kutai,East Kalimantan.

25 JUNE 2013

IndoAgri acquired a 50% equity stake in CMAA for a cashconsideration of BRL143.4 million (approximately US$66.6 million).CMAA is engaged in the cultivation and processing of sugar canefor the production and marketing of sugar and ethanol, as well asco-generation of electric power from sugar cane bagasse in Brazil.

30 SEPTEMBER 2013

IndoAgri established a S$500 million Euro Medium Term NoteProgramme, improving the flexibility to raise funds for strategicinvestments.

1 NOVEMBER 2013

IndoAgri released its first sustainability report, covering thesustainability management and social engagement practicesof its oil palm plantations and mills in Indonesia between1 January 2012 and 31 December 2012.

13 DECEMBER 2013

First Pacific Company Limited and IndoAgri formed a 70% : 30%joint venture, FPNRL, to invest 34% in RHI, the largest integratedsugar business in the Philippines. The cash consideration forIndoAgris 30% stake was US$17.4 million.



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CORPORATE STRUCTURE

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.

ISHPL* Public

Public

83.8%

70.4%

72.6%

59.5%30.0%

34.0%

50.0%

1.4% 28.2%

6.5%20.9%

Public

40.5%

FPNRL



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NORTH

AMERICA

SOUTHAMERICA

AFRICA

Oil Palm

Sugar Cane

Rubber

Cocoa

Tea

Refinery

Sugar Mill

Copra Mill

BRAZIL

SOUTH AMERICA

GEOGRAPHICALPRESENCE

Brazil

IndoAgri has a 50% interest in CMAA, which gives the Group access to42,517 hectares of planted sugar cane in Brazil.

Legend



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SOUTH EASTASIA

EUROPE

ASIA

AUSTRALIA

SUMATRA

MALAYSIA

NORTHMALUKU

PHILLIPPINES

SINGAPORE

JAVA

KALIMANTAN

SULAWESI

Indonesia

IndoAgri owns strategically located plantations and production facilitiesacross the Indonesia archipelago. Our estates are largely located in Sumatraand Kalimantan, of which 276,709 hectares are planted. Oil palm is ourdominant crop, followed by rubber, sugar cane, cocoa and tea. On thedownstream, 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 inRHI, the largest integrated sugar business in the Philippines.

SUMATRA

ALAYSIA

NORTHMALUKU

PHILLIPPINES

SI G PORE

JAVA

KALIMANTAN

SULAWESI

SOUTH EAST ASIA



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OURPLANTATIONOPERATIONSIndoAgri is one of Indonesias largest plantation

companies. Its plantation operations are located

in Indonesia, Brazil and the Philippines.



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239,921HECTARES OF

OIL PALM

21,759HECTARES OF

RUBBER

11,645HECTARES OF

SUGAR CANE

3,384HECTARES OF

OTHER CROPS

42,517HECTARES OF

SUGAR CANE

INDONESIA

BRAZIL



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Indonesia is one of the fastest growing economies in the G20,with a consistent economic growth rate above 6% annually since

2009. While export earnings have come under the pressure of lowglobal commodity prices, a weakened rupiah and a record currentaccount deficit, the countrys large domestic demand has kept theeconomy buoyant.

The strong economic results have prompted IMF to project theIndonesian economy to expand to US$1.5 trillion by 2015, andanalysts like Goldman Sachs and McKinsey to forecast Indonesiaas a major engine of global growth on track to becoming theworlds seventh-largest economy by 2030.

The Indonesian government is also determined to make the

country the worlds 10th

largest economy by 2025. You can seethe resolve in the series of stimulus programmes undertaken toboost investment, improve productivity, raise living standards andexpedite infrastructure projects.

The foresight and efforts paid off. Indonesia improved itsinternational standing and regional influence steadily in recentyears. The increasing political stability, coupled with Indonesiasappeal as the largest economy in South East Asia, wooedinternational investors at a time when most economies hadsuccumbed to the effects of the global economic downturn.

However, as Indonesia expands, it has to address longstanding

challenges at the provincial, national, regional and internationallevels adeptly in order to achieve consensus in issues ranging fromsustainable development to human capital and regional stability.Many of these issues will be a central theme when Indonesiaenters into an important election year in 2014.

The World Bank has assessed that the global economy is at thestart of its upturn with a projected GDP growth of 3.5% globallyand 6.7% in South Asia by 2016. According to McKinsey, theIndonesian agriculture industry possesses the capacity for growth.But to realise its full potential, Indonesia has to improve productivityof the farmers, increase plantation yields, reduce post-harvest

waste, and invest in higher value crops. This could potentiallycatapult Indonesia into becoming a net exporter of agriculturalproducts and grow this industry sector to US$450 billion by 2030.

We are now at an important crossroad. It is crucial for IndoAgri toposition ourselves strategically by constantly adjusting our plansto shifting paradigms and strengthening our diversified portfolio so that we will be ready to take on the new growth opportunities asthe global economy recovers.

SHIFTING PARADIGMS2013 was a demanding year for the palm oil industry as a whole.

One of most significant changes affecting the agriculture industrywas the new agriculture law Permentan No 98-2013 that limitedthe plantation size of 11 commodities, including oil palm, rubber,cocoa and tea. Ownership in oil palm plantations, for instance, isnow restricted to a maximum surface area of 100,000 hectaresper plantation Group.

Whilst the Group has already exceeded this limit, the law is notretroactive. Nevertheless, the Group is already diversified intosugar, rubber, and to a lesser degree, cocoa and tea, and we willcontinue in this direction to expand our diversified agribusiness.

With Indonesias moratorium on new forest concessions stillin force until May 2015, the new policy has effectively put thebrakes on Indonesias palm oil roadmap. It is a common and realindustry concern that the production of 40 million tonnes of palmoil by 2020 and 60 million tonnes by 2040 could not be met byincreasing productivity of existing oil palm plantations alone. AsIndonesia 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 ofIndonesians minimum wage policy. Being a labour intensiveindustry, this policy has a significant and long-term impact on ouroperating costs.

In response to these changes, we have to continue to improveworkforce productivity through training and skills development,look for ways to increase plantation yield, achieve higher efficiencyand lower operating costs.

STRATEGIC INVESTMENTSOver the years, we have progressively expanded our investmentsinto other agriculture products as part of the strategy to diversifyour business portfolio, mitigate cyclical risks and optimise the useof our plantations, resources and expertise.

In 2013, we acquired a 79.7% shareholding in MPM, and throughit, obtained 73,330 hectares of land in East Kalimantan, undera new agroforestry license. We are now experimenting withdifferent types of crop that can be cultivated on that land throughintercropping the practice of planting along the 15m corridors inbetween forestry permitted by the law.

In line with the Groups strategy of expanding its geographicalpresence, in 2013, we invested in two sugar operations througha 50% stake in CMAA in Brazil and a 34% stake in RHI in thePhilippines.

CHAIRMANS STATEMENT

DEAR SHAREHOLDERS,



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The acquisition of CMAA enables us to establish our presence inBrazil, which accounts for over 40% of world sugar exports, and isalso the lowest cost producer. As for RHI, it is the largest integratedsugar business in the Philippines, which is the third largest sugarmarket in Southeast Asia after Thailand and Indonesia.

Through both investments, IndoAgri is now able to develop ameaningful business in sugar milling and refining, and prepareitself for the Asean economic integration in 2015, which isexpected to lower tariffs on imported sugar.

To facilitate future investment activities, we established a S$500million euro medium term note in September 2013 that will allowus to raise capital readily for new investments and initiatives.

SUSTAINABLE OPERATIONSSustainable operations are key to the agriculture industry. As anagricultural organisation, IndoAgri recognised the significanceand impact of its decisions and operations on the economy,environment and local communities.

I am very pleased that we have completed our initial assessmentof the material impact of IndoAgris oil palm plantations and millsoperations in Indonesia on the environment and issued our firstSustainability Report in November 2013. This report providesan important, common platform for us to identify relevant issuesand rally our efforts to build a sustainable business along with ourongoing community development efforts.

As part of our sustainable CPO effort, audit for RSPO certificationwas completed for an additional 30,000 hectares of plantations inRiau in 2013 with official certificates being processed. IndoAgriscertified CPO production is currently at 248,000 tonnes.

PROPOSED DIVIDENDSFor the year ended 31 December 2013, the Board has proposeda first and final tax-exempt dividend of 0.52 Singapore centsper share.

ACKNOWLEDGEMENTSOur enduring growth and profitability did not come by chance.The company has continued to weather the stormy economicclimate only by the great tenacity and exceptional agility ofour cohesive team. I am proud and appreciative of having theprivilege of working alongside an excellent team of dedicated staff,

stalwart Management and judicious Directors. I am also deeplyappreciative of the support from our customers, partners andshareholders, whose confidence in us validates our efforts andmotivates us towards excellence and success!

Edward Lee

Chairman

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.



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CEOS STATEMENT

2013 was a challenging year for the agribusiness sector as awhole. For IndoAgri, it marked our first investments outside of

Indonesia as we achieved some success expanding into the globalsugar industry through a 50% stake in CMAA in Brazil, and a jointventure investment in RHI in the Philippines.

The theme for this years annual report, Seizing GrowingOpportunities, reflects these milestones. We achieved results byleveraging our strengths as a diversified and vertically integratedagribusiness, optimising our expertise in large-scale plantationmanagement, and empowering efforts in sustainability.

OPPORTUNITIES IN CHALLENGESOn the agricultural front, the global economic slowdown is beingfelt downstream of the supply chain with almost all commodityprices in 2013 falling below that of 2012s.

Amongst our key crops, sugar and rubber were the worst hit asglobal demand weakened across the board. Demand for palmoil remained resilient, supported by very competitive CPO pricesversus other competing vegetable oils, as well as diesel prices,triggering additional non-mandated demand in the bio-dieselsector. Price trends for CPO, rubber and sugar can be found onpages 21, 22 and 25 respectively. The lower commodity prices in2013 have had a material impact on our financial results.

Sugar prices in Indonesia were relatively shielded from globalfluctuations by import quotas and policies aimed at protectingthe domestic industry. Given the worlds reliance on Braziliansugar supply, growth in supply, whilst abundant in the last threeseasons, may fail to keep up with rising demands from recovering

economies and higher global populations in the coming years. Bytapping into the efficiency and yield of sugar production in Brazil,we are positioning IndoAgri to capture these opportunities with oursugar investments.

In terms of volume, palm oil production fell in 2013 againstan expected rise, as global climate conditions affected croppatterns across Sumatra. Prolonged rains and flooding disruptedpollination, growth and harvesting on trees that were weakened bydroughts in 2012 and 2011.

Despite pressure from competing oilseeds like soybeans, CPOprices remained resilient amidst a bearish market outlook, withlower production volumes supporting prices, and CPO trading at a

large discount to other competing oils.

In Indonesia, the government has mandated further increases inthe biodiesel blend of gasoils from 7.5% to 10% effective fromJanuary 2014. This translates potentially into significant increasesin domestic demand for palm oil. Given its growing retail marketfor cooking oils and vast population of 245 million, of which anestimated 15% are middle-class, Indonesia looks set to overtakeIndia to become the worlds largest palm oil consumer.

2013 FINANCIAL REVIEWIn line with the broader decline in commodity prices for agriculturecrops, the Group posted total consolidated revenue of Rp13.3trillion in 2013, a 4.1% decline over last years Rp13.8 trillion.

The Groups attributable profit declined 50.6% to Rp0.6 trillionin 2013 due to higher production costs, foreign exchange lossesand higher taxes.

SUSTAINABILITYI am delighted that we have issued our first Sustainability Report (SR)

for the year 2012, which can be found at www.indofoodagri.com.We have prepared the report adhering to the Sustainable ReportingGuidelines version 3.1 of the Global Reporting Initiative (GRI).The GRI Report Services have concluded that the report fulfils therequirements of Application Level C.

As an integrated and diversified agribusiness, we recognisethat the long-term sustainability of our operations is at the coreof what we do. Therefore our SR includes a materiality matrixhighlighting 10 key and material issues impacting our business.Our SR includes forward-looking targets, especially around RSPOcertification of our plantations. We will continue to update ourSR, measure our performance against previously agreed targetsand plans, and report our progress in line with the GRI initiatives.

This will provide transparency to our sustainability journey in thiscritical area.

CONTINUED EXPANSIONIn Indonesia, opportunities presented by a growing middle-class andfood and beverage industries underscored our plans to continuewith domestic market expansion. While the government has curbedland ownership by limiting the size of palm, sugar and rubber estatesrespectively to 100,000 hectares, 50,000 hectares and 20,000hectares per plantation Group, we are drawing on R&D efforts toimprove seed breeding techniques, and will continue to implementagronomic best practices to strengthen productivity in Indonesia.

Our commitment towards higher palm oil production was alsoevident from annual new plantings, which had aggregated64,000 hectares over the last five years. Gearing up for higherFFB harvests as plantings reached maturity, we completed one80 MT/hour new oil palm mill in South Sumatra at the end of 2013and one 45 MT/hour mill in East Kalimantan that will be due forcompletion in Q1 2014.

In addition, two 45MT/hour new mills in Kalimantan will bescheduled for completion in 2015. We are also expanding twomills, one in West Kalimantan that was completed in December2013 and the other in South Sumatra due for completion inQ3 2014, in preparation for higher FFB production from ourdeveloping estates.

We are now producing palm kernel oil with the completion of the

new 150MT/day PKO plant in Riau in Q1 2014. In addition, we arealso expanding our refinery capacity by constructing one 330,000MT/year new refinery in Dumai due for completion in 2015. Giventheir logistically advantageous locations, these facilities will supportour growth strategy for the cooking oil and margarine business.

In March 2013, we acquired a majority shareholding in MPMwhich owns SAL Group that engaged in industrial forest plantationsin East Kalimantan. This transaction fits with our agribusinessmodel and diversification strategy into other agriculture crops,such as cocoa, corn and cassava. We are confident that ourefforts to expand and accelerate growth will contribute positivelyto IndoAgris competitiveness in the long term.

BENEFITTING FROM VERTICAL INTEGRATIONDownstream, our edible oils business recorded an exceptionalyear. Across Indonesia, consumer preference for modernmini-marts over traditional markets has boosted the customer

DEAR SHAREHOLDERS,



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base for our branded cooking oils. As a vertically integratedbusiness and producer of branded cooking oil products with aleading market share in Indonesia, this augurs well for IndoAgri.

Although the Edible Oils & Fats (EOF) Division accounted for lessthan 20% of the Groups total EBITDA, the business attainedstrong volume growth in 2013 despite the intense competition.Prestigious brand and consumer awards, conferred annuallysince 2002, attested to our cooking oils as the preferred brandsby Indonesian consumers. To maintain our leading position,we refreshed our brands, invested in product packaging, andintroduced 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, typicallypurchased by the scoop from local vendors. Anticipating thechange, we started producing suitably sized packs for this newmarket opportunity. The 250ml pillow pack is especially popularwith consumers on tight budgets. The market potential is hugegiven that this demographic covers nearly 200 million Indonesians.The EOF Division is augmenting local marketing efforts whilestepping up on export sales.

ENABLING TECHNOLOGIESWe are looking to technologies and mechanisation to improveproductivity in the plantations. The acquisition of CMAA,for instance, has provided useful insights into efficient caneharvesting methods using a combination of specialised machines

and novel best practices. Some of these can be adapted for theIndonesian operations to lower cost and increase productivity inthe field.

We made progress on precision agronomy through GPS surveysand aerial photography to capture critical data on the status of ourpalm trees. These efforts provided information for our estates todevise optimal strategies in crop management, planting densities,yield forecasts and fertiliser usage on a block-by-block basis. Thetechnologies were supported by a SAP platform that was fullyimplemented in 2013. The SAP platform gives us the capabilityto tap into real-time operational and agronomy data for betterplantation management and results, and continues to support ourdrive for precision agriculture.

We continue to look at innovative ways to bring technologies intoour business processes, to reduce manual input and increase datasecurity. This will provide more timely information for management

decision-making. We expect to roll out some of these developmentsin 2014 once we have completed the pilot phase.

DEVELOPING LEADERSHIP AND TALENT

To support our business strategies, we are nurturing our topperformers through a Learning and Development Programme(LDP) designed specifically for IndoAgri by the First PacificLeadership Academy, a corporate university under First PacificCompany Limited, to which Indofood belongs.

The LDP is a long-term capacity building programme seekingto identify and equip change champions with leadershipcompetencies for greater responsibilities. It features interactiveprocesses in learning and application aligned to the First PacificLeadership Model aimed at instilling critical proficiencies forsuccess at the individual, team and organisational levels.

The Basic phase of the programme was initiated in 4Q 2013 for25 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 teameffectiveness to problem solving, decision-making, performancemanagement and strategic planning.

The LDP will be our core management and leadership developmentprogramme aimed at all levels from managers up. This will be acritical part of our future growth strategy to ensure we recruit andtrain the leaders and decision makers who are able to execute ourstrategy, and continue to develop and grow our business.

LOOKING AHEADWith the lingering effects of an economic slowdown, 2014 isanticipated to be another challenging year for commodity prices.

Politically, it is a pivotal year for Indonesia as the country preparesfor its next Presidential Election. Nonetheless, the world economyis showing signs of an upturn, led by sooner-than-expectedrecoveries in the developing countries and especially the US.Our integrated agribusiness strategy is supported by the growth inworld population, which is estimated to reach 9 billion people by2050. This rising global population, together with rising incomelevels, will lead to greater demand for agricultural commodities.

As a Group, we will continue to exploit our strengths in verticalintegration and develop the EOF potential further. We will optimiseour expertise in large-scale plantation management and to improveproductivity through intra-organisational learning and transfer of

technology. We will also look for inorganic growth by investing inoverseas plantations as a means to diversify our crop portfolio,mitigate cyclical risks and seize new growth opportunities,underpinned by the demand growth highlighted above.

APPRECIATIONI would like to record my appreciation to our customers, businesspartners and employees whose steadfast support underscores ourcontinued confidence. I also thank our Board of Directors for theirleadership and commitment.

Mr Mark WakefordChief Executive Officer



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IndoAgri is a diversified and vertically integrated agribusinessgroup. As at 31 December 2013, our planted acreage covers276,709 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 meetproduction capacities, the Group owns and operates 21 palm oilmills, four crumb rubber processing facilities, three sheet rubberprocessing facilities, two sugar mills/refineries, one cocoa mill, onetea mill and five CPO refineries through its Plantation and EdibleOils & Fats Divisions.

Expanding its sugar investments and geographical footprintbeyond Indonesia, IndoAgri acquired shareholdings in CMAAin Brazil, and in RHI in the Philippines through its associatecompany, FPNRL in 2013.

The Plantation Division is IndoAgris dominant business unit,contributing over 85% to the Groups EBITDA.

FINANCIAL HIGHLIGHTS

In line with the broader decline in commodity prices for agriculturecrops, the Group posted total consolidated revenue of Rp13.3trillion, a 4.1% decline over last years Rp13.8 trillion. The salesperformance was adversely affected by lower average prices ofkey plantation crops (i.e. palm products and rubber) and loweredible oils sales.

2013 gross profit declined by 23.5% from Rp4.2 trillion in 2012

to Rp3.2 trillion due primarily to lower average selling pricesfor plantation crops. This was further affected by rising wagesand newly matured plantations; contributing to higher unitproduction costs.

The Group reported lower profit from operations of Rp1.7 trillion in2013, a 38.0% decline over last year due mainly to lower gross profitand foreign exchange losses. This was partly offset by a maidenprofit of Rp64 billion from the Groups joint venture in Brazil, CMAA.

2013 net profit after tax (NPAT) of Rp0.9 trillion fell 49.8% over2012 primarily due to lower profits from operations, as well as

lower financial income and higher effective corporate tax arisingfrom irrecoverable deferred tax losses and higher non-taxdeductible expenses. The Groups attributable profit declined50.6% to Rp0.6 trillion in 2013 in line with this.

OPERATIONAL HIGHLIGHTS

Plantation Division: Oil Palm

As at 31 December 2013, the Groups oil palms occupied 87%

or 239,921 hectares of total planted area. Of this, new plantingsaccounted for 9,791 hectares, compared to 13,383 hectares in 2012.

Total FFB production of 3,761,000 tonnes in 2013 representeda 8% decrease over last years 4,107,000 tonnes, while CPOproduction fell 8% from 880,000 tonnes to 810,000 tonnes in2013 on lower palm production in Sumatra and lower purchasesof external FFB.

The Groups certified CPO production of 248,000 tonnes wasroughly 31% of its total CPO output in 2013, demonstrating thecontinued commitment to sustainable agriculture.

Plantation Division: Sugar

The Groups sugar cane estate in South Sumatra harvestedapproximately 758,000 tonnes of sugar cane from 11,645hectares this year. We continue to work towards a targeted plantedarea of 18,000 hectares of sugar cane.

In Central Java, the Group has tolling arrangements with localfarmers, who supply the sugar cane sources for our 4,000 TCDsugar mill. The Group retains a portion of the sugar and molassesproduced as a milling fee, while the balance of the sales proceedsis returned to the farmer. In 2013, we processed 438,000 tonnesof 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 caneand a total annual cane crushing capacity of 3.0 million tonnes inBrazil. We also expanded into the Philippines in December 2013through a 30% investment in FPNRL, which holds 34% stake inRHI, the largest integrated sugar business in the Philippines.

Altogether, IndoAgri processed 3.8 million tonnes of sugar canein 2013.

Plantation Division: Rubber

As at 31 December 2013, our nucleus rubber estates occupyapproximately 21,759 hectares. The Divisions rubber productionwas flat at 18,500 tonnes this year due to stagnant land expansionand some replanting activities.

Edible Oils & Fats Division

In 2013, the Edible Oils & Fats Division processed approximately869,000 tonnes of CPO (including 59% from our own plantations).It manages five refineries with a total annual CPO processingcapacity of 1.4 million tonnes.

The Division also produced and sold small amounts of by-

products derived from oil palm refining, such as refined, bleachedand deodorised (RBD) palm stearin and palm fatty acid distillate.

BUSINESS OVERVIEW



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Revenue

(RP trillion)

2009 2010 2011 2012 2013

9.0 9.5

12.613.8 13.3

12.0

8.0

10.0

6.0

4.0

2.0

0

16.014.0

Profit from Operations

(RP trillion)

2009 2010 2011 2012(Restated)

2013

3.33.0

3.8

2.7

1.7

3.0

2.0

2.5

1.5

1.0

0.5

0

4.03.5

NAV per share

(RP)

2009 2010 2011(Restated)

2012(Restated)

2013

6,5677,605

8,825 9,5009,876

8,000

10,000

6,000

4,000

2,0000

12,000

Net Profit to Equity Holders

(RP trillion)

2009 2010 2011 2012(Restated)

2013

1.51.4

1.5

1.1

0.6

1.5

1.0

0.5

0

2.0



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FINANCIAL HIGHLIGHTS

In Rupiah billion In SGD million*

2011 Actual

(Restated)

2012 Actual

(Restated)

2013 Actual 2011 Actual

(Restated)

2012 Actual

(Restated)

2013 Actual

Net Sales 12,605 13,845 13,280 1,501 1,649 1,582Gross Profit 4,601 4,187 3,204 548 499 381

Gain/(Loss) Arising from Changes inFair Values of Biological Assets 425 56 62 51 7 7

Operating Income 3,777 2,731 1,692 450 325 202

Net Profit 2,641 1,835 921 314 219 110

Net Profit to Equity Holders 1,490 1,058 523 177 126 62

EPS (in Rupiah)/(in SGD cents) 1,031 736 366 12.3 8.8 4.4

Current Assets 9,437 8,318 6,938 980 864 721

Fixed Assets 18,860 21,047 23,674 1,959 2,186 2,459

Other Assets 4,910 5,446 7,093 510 566 737

Total Assets 33,207 34,811 37,705 3,449 3,616 3,916

Current Liabilities 4,792 4,609 6,504 498 479 676

Non-Current Liabilities 7,203 7,684 8,367 748 798 869

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 3,709 434 482 385 45

In Percentage(%)

Sales Growth 32.9% 9.8% (4.1%)Gross Profit Margin 36.5% 30.2% 24.1%

Operating Profit Margin 30.0% 19.7% 12.7%

Net Profit Margin 21.0% 13.3% 6.9%

Net Profit to Equity Holders Margin 11.8% 7.6% 3.9%

Return on Assets1 11.4% 7.8% 4.5%

Return on Equity2 11.7% 7.8% 3.7%

Current Ratio (times) 2.0 1.8 1.1

Net Debt to Equity Ratio (times)3 0.03 0.08 0.22

Total Debt to Total Assets Ratio (times) 0.22 0.19 0.23

1 Profit from operations divided by total assets2 Net profit to equity holders divided by shareholders equity3 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.



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OPERATIONAL HIGHLIGHTS

In Hectares(unless otherwise stated) 2011 Actual 2012 Actual 2013 Actual

Planted Area-Nucleus

Oil Palm Mature Immature

216,837158,16358,674

230,919176,10554,814

239,921177,09962,822

Rubber Mature Immature

22,18517,7454,440

21,80217,5074,295

21,75916,9964,763

Sugar Mature Immature

12,25511,302

953

12,33312,255

78

11,64511,396

249

Others Mature Immature

3,7123,364

348

3,6713,227

444

3,3842,868

516

Plasma 85,719 87,009 90,214

Age Maturity of Oil Palm Trees

Immature 58,674 54,814 62,822

46 years 35,750 42,803 22,005

720 years 73,150 80,412 99,710

Above 20 years 49,263 52,890 55,384

Total 216,837 230,919 239,921

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 28,478East 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 254,989 268,725 276,709

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) 838 880 810

Palm Kernel 195 207 187

Rubber 19 18 18Sugar1 21 70 78

Sales Volume(000 Tonnes)

Crude Palm Oil (CPO)2 829 829 864

Palm Kernel 193 202 190

Rubber 17 17 16

Sugar 29 62 76

Oil Palm Seeds (million) 23 25 18

Cooking oil, Margarine, Shortening & CNO 772 808 790

1 Comprised of sugar production in South Sumatra factory, share of sugar produced in Central Java and refinery raw sugar.2 Sales to external and internal parties

The below information is related to business operations in Indonesia. For sugar outside Indonesia, please refer to page 29 of this annual report.



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OURINTEGRATEDBUSINESSMODELIndoAgri is a diversified and vertically integrated

agribusiness group poised to capture the value

and benefits spanning the entire supply chain.



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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 Grouphas 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, and11,645 hectares of sugar cane. We also manage approximately86,215 hectares of oil palm estate and 3,999 hectares of rubberestate under the government's plasma programme.

The Divisions 21 palm oil mills across Sumatra and Kalimantanhave a combined FFB processing capacity of 5.2 million tonnesper annum. We also operate four crumb rubber processing

facilities, three sheet rubber processing facilities, two sugar millsand refineries, a cocoa factory and a tea factory.

Supporting efforts to enhance estate quality and output, theDivision operates two advanced research and developmentcentres, SumBio and PT SAIN, based in Bah Lias, North Sumatraand Pekanbaru, Riau respectively. In 2013, these centresproduced a combined output of 26.5 million premium seeds,aided by their sophisticated in-house seed breeding programmesand cultivation techniques.

In achieving sustainable low-cost production, the PlantationDivision maximises yields and reduces operational costs through

the following agronomy and crop protection best practices:

Performing block-by-block analyses to provide specificrecommendations on crop management and planting densities,fertiliser and herbicide usage, as well as predictions on yields andoil extraction rates.

Optimising crop management and harvesting practices tomaximise production and collection of FFB.

Leveraging biological methods to improve pest and palm treedisease control.

Improving mechanisation to increase efficiency and reduce costs. Utilising organic fertilisers and all by-products while reducing

reliance on inorganic fertilisers.

2013 REVIEW

The global economic slowdown affecting major markets like Chinaand Europe, coupled with slower biodiesel demand in Europehave put sustained pressure on commodity prices. CPO prices(CIF Rotterdam) averaged US$857 per tonne in 2013, significantlylower than 2012s US$1,006.

Plantation Divisions total revenue grew 1% to Rp8.5 trillion in2013 over the previous year. Likewise, EBITDA margin came inlower, in line with lower average selling prices of CPO and PK of

2% and 4% respectively, as well as higher production costs.

PLANTATION REVIEWPALM & RUBBER



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Taking a step towards diversification, 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 threeindustrial forest plantation concessions totalling 73,330 hectaresin Berau and East Kutai, East Kalimantan.

Palm

As at 31 December 2013, the Divisions South Sumatra andKalimantan estates achieved 9,791 hectares of nucleus oil palmnew plantings, compared to 13,383 hectares in 2012. Matureestates covered 177,099 hectares versus 176,105 hectares in2012, while immature estates which will boost CPO productionand volume growth when they become productive in the next fewyears, 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, FFBproduction decreased by 8% from last years 4,107,000 tonnesto 3,761,000 tonnes in 2013. Correspondingly, CPO productiondeclined by 8% from 880,000 tonnes in 2012 to 810,000 tonnesin 2013. Oil extraction rates increased slightly to 22.1% versus21.7% in 2012, while internal CPO sales to the Edible Oils & FatsDivision reduced by 7% to 510,000 tonnes from 548,000 tonnesin 2012 as the purchase of external CPO from Kalimantan estateslowered transportation costs.

In total, IndoAgris certified CPO production of 248,000 tonnes

(roughly 31% of 2013s total CPO output) is comparable to 2012 a reflection of the continued commitment towards sustainableagriculture.

239,921 Ha 150,076 Ha 89,845 Ha

23%

42%

9%

26% 32%

17%

9%

9%

28% 64%

10%

31%

Group SIMP Lonsum

> 20 years> 7-20 years> 4-6 years> Immature

Oil Palm Plantation Age Profile

Soy Oil Premium Over CPO

CPO (CIF Rotterdam)

Soy Oil (CIF Rotterdam)

CPO vs Soy Oil Price

US$ / tonne

1,8001,600

1,400

1,200

1,000

800

600

400

200

0

Jan

06

Jun

06

Nov

06

Apr

07

Sep

07

Fe

b08

Ju

l08

Dec

08

May

09

Oc

t09

Mar

10

Aug

10

Jan

11

Jun

11

Nov

11

Apr

12

Sep

12

Fe

b13

Ju

l13

Dec

13



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PLANTATION REVIEWPALM & RUBBER(Contd)

Rubber

The Divisions rubber estates are spread across North and SouthSumatra, East Kalimantan and Sulawesi. As at end 2013, nucleusrubber estates occupied 21,759 hectares, of which 22% areimmature. The average age of our rubber trees is about 14 years.

With higher production in Thailand and Indonesia as well as weakerdemand from major rubber consuming countries particularly

China, US and Europe, rubber prices (RSS3 SICOM) fell by over20% since beginning of last year and averaged US$2,795 pertonne in 2013 compared to US$3,384 a year ago. The decliningprices 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 Divisions keyrubber products. Notwithstanding, growth in rubber production for2013 was flat at 18,500 tonnes due to holdbacks on land expansionand some replanting activities.

During the year, the Group sold 84% of its rubber in exportmarkets including Singapore, the United Kingdom and the United

States. The rest were sold domestically.

FFB Production (Nuclues)

000 mt

2,613 2,564

2,7972,973

2,8953,000

2,500

2,000

1,500

1,000

500

2009 2010 2011 2012 2013

CPO Production

000 mt

763 740

838

880

810

1,000

800

600

400

200

0

2009 2010 2011 2012 2013

RSS3 (Sheet) TSR20 (Block Form)

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

Fe

b08

Ju

l08

Dec

08

May

09

Oc

t09

Mar

10

Aug

10

Jan

11

Jun

11

Nov

11

Apr

12

Sep

12

Fe

b13

Ju

l13

Dec

13



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PalmLooking at consumption growth trends in emerging economies likeIndia and China, the outlook for the palm oil industry is expectedto remain positive. With its growing population base, Indonesia hasbecome one of the largest consumers of palm oil together with Chinaand India. We also expect the higher biodiesel blending mandate of10%, 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 youngerestates that have not reached peak maturity, and this representsnearly 35% of our total oil palm planted area. We will continue to

expand our oil palm acreage by achieving 10,000 to 15,000 hectaresof new plantings annually to sustain production outputs.

Anticipating higher FFB production from immature plantings, weare progressively increasing capacities by constructing new palmoil mills. These include an 80MT/hour facility in South Sumatra inend December 2013 and a 45MT/hour facility in East Kalimantanscheduled for Q1 2014, and two 45MT/hour mills in Kalimantanscheduled for 2015.

In 2013, we expanded an existing mill in West Kalimantan from40 MT/hour to 80 MT/hour, while another mill in South Sumatrais being upgraded from 40 MT/hour to 60 MT/hour by Q3 2014.

We are also constructing a PKO plant in Riau with a capacity of150 MT/day scheduled for Q1 2014. The additional capacities,coupled with their logistically advantageous locations, are in linewith the growth strategy for our cooking oil and margarine business.

Looking ahead, the Plantation Division aims to improve yields perhectare and optimise labour costs through innovative agronomy.This will entail conscientious efforts, such as the introductionof SAP platform to all plantations in 2013 that have allowed theDivision to tap into real-time operational and agronomy data forbetter plantation management and results. We will also developcomprehensive and robust management systems to realise the

genetic potential of our premium seed material for differentbreeding environments.

The Group continues to be guided by the Principles and Criteriaof the Roundtable of Sustainable Palm Oil (RSPO) in furtheringsustainable agriculture, as demonstrated by its North Sumatraand Riau estates that achieved RSPO certification for sustainablepalm oil.

Rubber

The long-term outlook for rubber remains upbeat, supported byhealthy demand from tyre-makers, automotive industries and rubbergoods manufacturers in developing markets. China in particular, willcontinue to contribute to this demand, given its large populationand status as the world's largest natural rubber consumer.

2014 OUTLOOK



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OVERVIEW

In 2008, the Division diversified into sugar cane cultivation andproduction in Indonesia as a key strategy for business expansion.In Indonesia, our sugar investments are strengthened by domesticshortfalls, coupled with positive drivers such as population growth,a flourishing food and beverage sector, and the expansion ofsugar-based industries such as ethanol processing which utilisesmolasses as a basic raw material.

Indonesia remains a net importer of sugar. Sugar prices in Indonesiaare relatively shielded from global fluctuations by policies aimedat protecting the local industry, and particularly the smallholderfarmers. Currently, the domestic sugar price in Indonesia is above

the international market due to restrictions on import quotaswhen domestic prices fall below Rp8,100 per kg, a government-mandated floor price that was introduced in May 2013.

The Group's sugar operations in Brazil and the Philippines arecovered in the next section.

2013 REVIEW

For the year in review, revenue contributions from the sale of sugarand molasses rose 13% to Rp706 billion compared to Rp625 billionin 2012. We expect this to improve with estate expansions and newplantings, and when both our sugar mills and refineries in SouthSumatra and Central Java are operating at full capacities.

PLANTATION REVIEWSUGAR: INDONESIA

In South Sumatra, our 8,000 TCD sugar mill and refinery inKomering has an annual processing capacity of 1.44 million

tonnes. We harvested 758,000 tonnes of sugar cane from ourown estates in 2013 compared to 588,000 tonnes in 2012,producing 53,200 tonnes of sugar. The acreage for plantedsugar cane in South Sumatra was 11,645 hectares in 2013compared to 12,333 hectares in 2012. In addition, this sugarrefinery also produced 15,700 tonnes of sugar from imported rawsugar. Our sugar are bagged into 50kg packs and sold mainly tothe domestic market.

In Central Java, our newly upgraded 4,000 TCD sugar mill andrefinery 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 from5,600 hectares belonging to over 700 local farmers and a smallarea of our own estates. Total sugar production was 28,000 tonnesin 2013, compared to 31,000 tonnes in 2012.

We have a win-win strategy with the local smallholders in CentralJava by way of supply contracts an arrangement where we offeragricultural advice and credit for seed cane, planting costs andfertiliser purchases with repayment being deducted from theirsales proceeds. As such, the Group's share of the sugar producedwas 9,400 tonnes in 2013 compared to 11,500 tonnes in 2012.



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2014 OUTLOOK

In Indonesia, the sugar industry continues to be relatively robustdue to strong domestic demand. While sugar imports continue tobe the mainstay, intervention efforts from the government, aimed atincreasing the production capacity of sugar factories, enhancing theproductivity and yield of sugar cane and encouraging the expansionof sugar cane plantations, have been positive for industry players.

In the year ahead, we expect to step-up our sugar cane plantingprogramme and production at our 8,000 TCD sugar factory inSouth Sumatra to optimise our facilities and achieve the verticalintegration required for full-scale operations and growth.

We are also researching into the breeding of new generation seedcane varieties to improve yields. Complemented by our large-scale plantation management experience, we will progressivelystreamline operations for higher outputs and profitability.

MANUFACTURING PROCESSFOR SUGAR

CANE HANDLING& MILLING

JUICE CLARIFICATION& EVAPORATION

FILTER CAKE

SUGAR BOILING

& CURING

SUGAR DRYING& HANDLING

FINISHED SUGARPRODUCT END CUSTOMERS

BAGASSE

BOILER

FINAL MOLASSES

R D

Sugar Prices

US$ / tonne

CSCE No.11 (Raw Sugar) LIFFE No.5 (White Sugar)

900

800

700

600

500

400

300

200

100

0

Jan

06

Jun

06

Nov

06

Apr

07

Sep

07

Fe

b08

Ju

l08

Dec

08

May

09

Oc

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10

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10

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11

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11

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EXPANDING INTO BRAZIL

Brazil is a leader in the global sugar and ethanol industry due toits unique advantages such as high productivity levels, favourableclimate and the abundance of suitable land for future expansion.Over the last 10 to 15 years, Brazils global sugar production andexports have been steadily increasing, making the country theworlds largest sugar producer and exporter today with a 40% to50% share of the global sugar export market, as well as the lowestcost producer due to its ideal growing conditions. In the long run,production growth in Brazil is likely to be key growth in the overallworld sugar supply.

PLANTATION REVIEW

SUGAR: OUTSIDE INDONESIA



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However, recent declines in global sugar prices had been drivenby physical sugar surpluses around the world. While Braziliansugar production has increased strongly due to its advantages,aggregate growth in production for the rest of the world was slowespecially amidst volatilities and cyclical factors such as weather,

pests and diseases.

Global consumption in the season October 2012 to September2013 grew at 2.7% this year from increased demand due to lowerprices. This translates to a global growth of 4.4 million tonnes. Asiahas been the dominant region of sugar consumption growth since1985, and is projected to maintain a dominant share of the globalsugar import market with its growing population, rising incomesand greater urbanisation.

ACQUIRING A 50% STAKE IN CMAA

IndoAgri announced the decision to expand into Brazils sugar andethanol industry, and to acquire a 50% stake in CMAA for a cashconsideration of BRL143.4 million (approximately US$66.6 million),on 28 January 2013.

By offering access to 42,517 hectares of planted sugar canein Brazil, the acquisition has enabled IndoAgri to extend itsgeographical presence into the sugar and ethanol industry in Brazil,while strengthening its diversified plantation business model.

Established in 2006, CMAA is principally engaged in the cultivationand processing of sugar cane for the production and marketing ofethanol and sugar, as well as co-generation of electric power fromsugar cane bagasse. It operates one modern, state-of-the-art sugarmill in Vale do Tijuco, Brazil, with a total crushing capacity of 3 milliontonnes per year, expanding to 3.8 million tonnes in early 2014.

To structure the acquisition, the Group incorporated a wholly

owned subsidiary in Singapore, IFAR Brazil, which has in turnincorporated a wholly owned subsidiary in Brazil, known asIndoAgri Brazil. The acquisition of CMAA was completed on25 June 2013, following which it has become a 50%-owned jointventure entity under the Group.

World Sugar Production 2012/13

23% Brazil

15% India

9% EU

8% China

6% Thailand

4% US4% Mexico

3% Russia

3% Pakistan

2% Australia

23% Others

PLANTATION REVIEWSUGAR: OUTSIDE INDONESIA (Contd)

TOTAL

182.7milliontonnes



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2013 REVIEW

In 2013, international sugar prices sustainedpressure from a sizeable global sugar production

surplus in 2012/13 and the global economicslowdown. Sugar prices on the London InternationalFinancial Futures and Options Exchange (LIFFE)averaged at US$385 per tonne in 2013, down fromUS$588 per tonne in 2012.

As at 31 December 2013, CMAA has a caneplanted area of 42,517 hectares, of which 49% iscompany-owned while 51% belong to third parties.In 2013, CMAA processed 3 million tonnes ofharvested sugar cane, producing 187,000 tonnesof sugar, 137,000 tonnes of ethanol and 196,000

M

3

of electricity.

Our 50% share of profits from CMAA for the periodof July to December amounted to Rp64billion(approximately US$5 million)

The Groups share of the contributions from RHIwill be accounted for from January 2014.

2014 OUTLOOK

As a Group, IndoAgri intends to tap into thetechnology, know-how and knowledge that it has

gained from its investment in CMAA, and to applythe advanced methodologies and operationalimprovements across its plantations in Indonesia.The Group will also continue to evaluate potentialacquisitions or joint ventures in a bid to expand itsoperations in the international market.

Moving forward, we expect that the direction forglobal sugar prices will be strongly influenced byproduction levels in Brazil and India, together withthe Brazilian government policies on ethanol.

EXPANDING INTO PHILIPPINES

With 24.0 million tonnes of sugar cane production in 2012, thePhilippines sugar industry is the third largest in Southeast Asia afterThailand (96.5 million tonnes) and Indonesia (26.3 million tonnes).

Around 80-85% of this production is used domestically. Theremaining 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 sugarimports. From 2015, this tariff will decline to 5%. The tariff hasallowed domestic producers to sell sugar at a price that is 30-40%more competitive than the wholesale price of imported sugar fromThailand. When the tariff drops to 5%, Filipino sugar producerswill no longer have this advantage.

ACQUIRING A STAKE IN RHI

In December 2013, we further expanded our internationalfootprint following the investment of a 30% interest in FPNRL fora cash consideration of US$17.4 million. FPNRL in turn has a34% interest in RHI, the largest integrated sugar business in thePhilippines.

As the biggest sugar miller in the Philippines, RHI has a processingcapacity of 38,500 TCD, and supplies nearly one-fifth of the countrystotal sugar production. It is also the third biggest sugar refiner inthe Philippines with a capacity of 18,000 Lkg/day at its Batangasrefinery (one Lkg is a unit of measurement equivalent to one 50-kgbag of sugar). The company has three sugar mills, one in Batangas

and two in Negros Occidental. It also has an ethanol plant in NegrosOccidental with a production capacity of 100,000 litres/day.

Unit 2011/

2012

2012/

2013

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 77 152 187Ethanol 000 M3 93 96 137Energy 000 Mwh 72 123 196

Sales Volume:

VHP 000 MT 77 151 156Ethanol 000 M3 93 91 110Energy 000 Mwh 72 123 196

Operational Highlights



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OVERVIEW

Research and development (R&D) is a critical aspect of ourplantation operations. Through innovative R&D, we aim toreduce production constraints, increase yield potentials and cropresilience, while improving management practices. In many ways,our success and competitiveness as a low-cost producer havebeen borne out of R&D. As a key enabler, R&D enhances ourgoals for environmental sustainability and maximises our profitsin the long run.

The Groups R&D Activities Are Centred On Five Key Areas:

Plant breeding: The development of top quality seed andplanting materials through traditional and advanced breedingmethods, a diverse germ-plasm base and biotechnology,supported by field trials that test progenies across a range ofplanting environments.

PLANTATION REVIEWR&D



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Soils: The detailing of soil survey maps that support site-specific, agronomic block management.

Agronomy:The evolvement of site-specific soil managementand crop cultivation techniques that provide our estates withoptimal recommendations on crop management and plantingdensities, and block-by-block fertiliser and herbicide usage.

Crop protection: The implementation of integrated pestmanagement with strong emphasis on biological pest control

systems to monitor, prevent and eradicate pests and diseasesthat lead to crop losses.

Field data capture, management and analysis: Thedeployment of GPS ground surveys and remote sensingtechnologies that enable timely and detailed 2D and 3Dtopographic maps; as well as Geographic Information System(GIS) tools that provide analysis and support for managementdecision making and optimum plantation management. Anintegrated software system provides visibility of data acrosssubsidiaries, refineries and plantations on a daily basis.

Modern laboratories, comprehensive facilities and a strong R&Dheritage have equipped IndoAgri to perform extensive researchin plant breeding, tissue culture, soil science, soil and waterconservation, plant nutrition and biological crop protection,entomology, and pathology. The aim is to continuously improve theproductivity of seed breeding and cultivation using methodologicalframeworks for farming operations, ensuring best practices inplantation management.

The Group has two advanced agricultural R&D centres: SumatraBioscience (SumBio) in Bah Lias, North Sumatra, and PT SAIN inPekanbaru, Riau. SumBio is an established name and a sought-after producer of premier oil palm seeds in Indonesia. Annually,

SumBio has a production capacity of 25 million superior andhigh-yielding oil palm seeds. PT SAIN became a certified seedproducer in 2011, and currently produces up to 8 million seedsper year.

In terms of product development, we have an extensive R&D facilitydedicated to improving our range of cooking oils, margarine andshortening products. For example, we leverage R&D to developspecific formulations of edible oils catered to the requirements ofour industrial customers and retail consumers.



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Our R&D Activities For Sustainability Cover:

Fertilisers recommendations: Site-specific formulations areprepared annually for each block on the basis of yield targetsand yield statistics, annual foliar analysis, soil characteristics,established yield response curves from relevant fertilisertrials and predicted nutrients release from soils and plantresidues, to maintain optimum palm nutrition and plantationsustainability.

Organic fertilisers:We optimise the use of mill effluent andby-products as organic fertilisers. In Riau, empty fruit bunches(EFB) are utilised as soil mulch, while palm oil mill effluent(POME) are used in land application. This has reduced our

need for inorganic fertilisers by 14% annually. We are also

PLANTATION REVIEWR&D(Contd)

moving towards the co-composting of EFB and POME, whichhas the potential to replace up to 30% of inorganic fertiliseruse per year.

Integrated pest management:Biological control agents havehelped us achieve effective pest and disease control. Barnowls have been an effective rat-control measure in our Riauestates, which has had a zero-rodenticide practice since2001. Around 10,000 new birds are bred annually at 2,500nest boxes distributed throughout the Riau estates. We haveintroduced the use of barn owls to our South Sumatra estateswhere around 1,800 new birds were bred in 2013. This in

turn will reduce rodenticide use across all plantations.



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2013 REVIEW

Increased high-yield seed sales: The Group produced 26.5million high-yielding oil palm seeds in 2013, a decrease over the28.6 million seeds produced in 2012. Part of the high-yieldingseed material were for the Groups new planting of 9,791 hectareand replanting of 365 hectares during the year, which requiredapproximately 200 oil palm seeds per hectare of land. Most ofour high-quality seeds are sold to external parties, generatingadditional revenue and profitability for the Group. In 2013, salesof oil palm seeds fell by 27% from 24.7 million to 18.1 millionseeds, 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 toreduce the use of pesticides and our chemical footprint. To controlmajor leaf-eating caterpillars, we cultivated entomopathogenicagents of viral origin that were sprayed across all estates. In additionwe continue to rear natural predators, such as barn owls, whichare released to critical areas as proven measures against pest androdent 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 andaccurate information on the health condition of our crops and land/water drainage characteristics in the estates. This has improvedresource and manpower deployment, and allowed us to preventrather than react to potential agronomic issues.

Improved processing:We leveraged R&D to enhance and developnew products catering to different customer needs. For example,a speciality fats simulation laboratory has enabled the EdibleOils & Fats Division to improve the quality and consistency of itsproducts, and to develop specialty fat products for use in cakes,bread, confectioneries and other bakery products. We are alsoinvesting in new technology to develop new packaging materialsand designs to reduce costs.

2014 OUTLOOK

With greater affluence, higher populations and a growingdependency on palm oil and palm oil products, the demandfor premium, high-yielding seeds is likely to remain robustsupported by new plantings in 2014. Our seed breeding team willcontinuously conduct trials aimed at identifying next generation ofproven parental genotypes.

In the year ahead, we will further intensify the use of bio-control methods against major pests, streamline existing workprocesses and strive towards higher mechanisation in order todrive productivity. Supported by 3D maps, GPS technology andaerial photography, we expect to further delineate the topographic

landforms of our estates in South Sumatra in relation to productivityand soil and water management.

As we reap the results of best practices in plantation management,we expect to improve yields and yield forecasts using statisticalmethods, and enhance the monitoring of leaf production rates.At the same time, an integrated, software system will offergreater visibility of the field data across all subsidiaries, refineriesand plantations on a daily basis; while an Enterprise ResourcePlanning system equips us with professional tools for managingour diverse operations.

We will be developing further the use of unmanned aerial vehiclesfor acquiring topographical visuals, as well as near infrared(NIR) and IR photography of crop biomass and conditions. Theobjective is to monitor and improve plant health status, and tomake estimates of leaf area for forecasting yields.

Detailed soil fertility mapping will help characterise physicochemicalproperties across different breeding environments, enabling site-specific fertility management to produce the maximum economiccrop response.

Other R&D enhancements in 2014 will involve disease managementas well as precision agronomy through improved strategies for crop

management, planting densities, fertiliser and herbicide usage. Weare confident that these initiatives will underscore higher and moreprofitable yields per hectare, reduce production costs and maintaina balance nutrient programme for sustainable growth. For our EdibleOils & Fats Division, continued investment in R&D will ensure that ourproducts meet evolving customer requirements.



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EDIBLE OILS & FATS REVIEW

OVERVIEW

The Edible Oils & Fats (EOF) Division manufactures and marketsIndoAgri's downstream products, which include cooking oils,margarine, shortening, crude coconut oil (CNO) and other by-products derived from oil palm refining, fractionation and crushedcopra. The Group owns and operates five refineries, with totalprocessing capacity of 1.4 million tonnes of CPO per year. Theserefineries 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 cookingoils are leading brands in the Indonesian market. Our consumermargarine and shortening are marketed under the Palmia andAmanda brands, while our industrial margarine and shorteningare branded under Palmia, Simas, Amanda, Malinda andDelima. According to market research, our products continue todominate Indonesia's consumer market for branded cooking oilsand margarine.

In 2013, our branded products accounted for over half of theDivision's revenue, while sales to industrial customers and third-party brands accounted for the balance. Our industrial pack cookingoil is mainly sold, on an unbranded basis, to the Indofood Groupand other industrial food manufacturers, while our industrial packmargarine and shortening are promoted under our own brands toconfectioneries, bakeries and other food manufacturers.

Supported by IndoAgri's vertically integrated agribusiness model,the EOF Division is able to minimise on third-party purchases byobtaining CPO raw materials from internal sources. Approximately59% and 65% of the CPO used in the production of cookingoil, margarine and shortening were produced by the PlantationDivision in 2013 and 2012 respectively.

We also leverage the distribution channels of our parent companyto supplement our market penetration efforts. Together, ourproducts are sold through direct channels as well as local andnational distributors serving approximately 326,000 retail outletsacross Indonesia.

We have achieved platinum level for the Indonesia Best BrandAward from 2002 to 2013, and Diamond level for the IndonesiaCustomer Satisfaction Award from 2000 to 2013.

2013 REVIEW

In 2013, the EOF Division reported total revenue of Rp8.6trillion, a 9.8% decline over 2012. The softer sales reflected thecombined effects of lower sales volume of bulk oil and copra-based products. The Division processed approximately 869,000tonnes of CPO (including 59% from our own plantations) in 2013,a 6% decrease over 2012.

The sales volume for edible oil products (which comprise cookingoil, margarine and crude coconut oil) in 2013 declined 2% year-on-year due to lower coconut oil and bulk oil sales, nonethelessthis division registered strong volume growth in underlyingbranded products.

In terms of sales contribution, this Division accounted for 65% and69% of the Group's external sales in 2013 and 2012 respectively.In 2013, 90% of our revenue was derived in Indonesia, while thebalance was derived from exports to 50 countries, including theUnited States, China, Netherland, Singapore, Italy, Nigeria, Spain,East Timor, the Philippines and South Korea.

The Group strengthened the brand identity of its products andbrand loyalty amongst its customers through the rejuvenationof product packaging and quality in 2013. Among others, the

Group re-launched its core brands, Bimoli and Bimoli Spesial,by introducing new bottle and pouch-packaging designs, andthe range of industrial and consumer margarine under thePalmiabrand.



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Responding to market demands from novice users of brandedcooking oil Bimoliintroduced 250ml and 500ml refill packs. Thesenew products are sold in both traditional and modern markets,including mini-marts and discount stores.

2014 OUTLOOK

In 2014, we expect to further utilise our downstream productionby enhancing the Division's output and specialty fats productioncapability to meet rising demands. We plan to further enhance the

tank storage and margarine production capacity by constructingnew CPO storage tanks and a 200 MT/day margarine plant atTanjung Priok in 2014. In addition, we are also expanding ourrefinery capacity by constructing one 330,000 MT/year newrefinery in Dumai due for completion in 2015.

The Group relies on focused advertising and promotional activitiesto raise awareness and improve its brand image. As such, we planto improve our market penetration, product distribution and after-sales services in order to increase product visibility. In addition,we will focus strategically on high-end outlets to take advantage oftheir rapid growth in Indonesia.



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PALM KERNEL MEAL

PALM KERNEL

PALM FATTY ACIDDISTILLATE

CRUSHING

CRUDE PALMKERNEL OIL

RBD PALM OLEIN

BLENDING

MIXING TANK

CHILLING

PACKAGINGLAURIC OIL

CRUDE PALM OIL

REFINING

RBD PALM OIL

FRACTIONATING &FILTRATION

RBD PALM STEARIN

BLENDING

MIXING TANK

CHILLING

PACKAGING PACKAGING

EMPTY FRUITBUNCHES AND LIQUIDMILLING

MARGARINE PLANT

SHORTENING MARGARINE

FLAVOURING

& VITAMINS

WATER & SALT

NITROGEN GAS

COOKING OIL

FRESH FRUIT BUNCHES

MANUFACTURING PROCESSFOR EDIBLE OILS AND FATS



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At IndoAgri, sustainability entails integrating community andenvironmental priorities into our day-to-day operations. We doso 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 alsobelieve that ensuring a sustainable source of palm oil is integral tothe long-term success of the company.

Sustainable agriculture, responsible products, sustainablecommunities and safe workplace are at the core of our plantations& mill and refinery divisions. Since 2009, we have receivedcertifications for our palm oil plantations from the Roundtable ofSustainable Palm Oil (RSPO). Over time, all our other crops will becertified against their respective industry standards.

In November 2013, the first sustainability report was publishedto provide greater transparency on how the Group conducts itsagribusiness alongside local communities and stakeholders.Based on the principle of materiality, the scope of the report

covered IndoAgris oil palm plantations and milling operationsin Indonesia in 2012, and fulfils the requirements of the GlobalReporting Initiative (GRI)s Guidelines version 3.1 at ApplicationLevel C.

Download our first sustainability report at www.indofoodagri.com.

ENVIRONMENT & CSR



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The materiality issues identified in our first sustainability report are listed below. We will be reviewing and expanding this table infuture reports.

Materiality Issues Progress 2012/2013

Carbon footprint, including no peat planting anddeforestation

We developed policies to reduce our carbon footprint: Zero burn policy since 2007. No planting on peat land.

Environmental footprint, including biodiversity 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 Effluent

(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-certified estates.Occupational Health and Safety We implemented SMK3 (a government regulation) and an accidents and

fatalities monitoring and evaluation system in all our operations. Disclosurein future reports.

Smallholders We are developing programmes for smallholders, including RSPOcertification for plasma smallholders.

Land rights We implemented a grievance mechanism.

Governance and transparency We introduced a whistle-blowing mechanism, restructured our sustainabilityteams and are reviewing policies for public disclosure on the RSPO website.

Yield maximisation We monitored nutrition management per 30-hectare block, and own twoout of the 10 seed breeding facilities in Indonesia.

Human rights We have an employee policy that covers no child labour while supportingdiversity in the company.

ENVIRONMENT & CSR(Contd)

CORPORATE SUSTAINABILITY POLICY

Our corporate sustainability practices can be classified underfour broad areas: environmental management; labour andoccupational health and safety practices; social and communitydevelopment; and product responsibility. These practices areguided by IndoAgris corporate sustainability policy, which sets outclear objectives for a symbiotic relationship between the Groupsinternal and external stakeholders, as well as the environment.

Environmental Management

Compliance with the principles and criteria of the Roundtablefor Sustainable Palm Oil (RSPO) covers a large part of our keymateriality issues and the risks identified by our Enterprise Risk

Management (ERM) system.

RSPO and ISPO certification:We are committed to having all ourestates RSPO-certified by 2019 as part of our strategy to becomesustainable leaders in the industry. In 2013, as part of our effortfor sustainable CPO production, an audit for RSPO certificationwas completed for an additional 30,000 hectares of plantations inRiau, with official certificates being processed. IndoAgris certifiedCPO production is currently at 248,000 tonnes.

The Indonesia Sustainable Palm Oil (ISPO) is an effort led by theMinistry of Agriculture to raise awareness of the importance of

sustainable palm oil production. In September 2013, we wereawarded the ISPO certification for three of our estates and onepalm oil mill in North Sumatra. We are committed to achieve ISPOcertification for all our oil palm plantations and palm oil mills.

Biodiversity and conservation: As plantation owners, we aremindful of the impact of our operations on biodiversity andconservation. Since 2008, we have been working with experts toidentify and monitor HCV areas on our estates, and engage withemployees regularly to inform and guide them on the restrictionsin HCV areas. Working with organisations such as the SumatraOrang-Utan Society, we support the conservation of wildlife andare restoring and enriching the natural habitats of Orang-Utans inNorth Sumatra with beneficial tree species.

Reduction of chemical footprint:We intensified biological pestcontrol measures in 2013 by stepping up the breeding of barnowls as effective substitutes for rodenticides. We are committed tophase out the use of paraquat by exploring alternative herbicides,

and are taking advantage of the high potassium content found inby-products like Empty Fruit Bunches (EFB) and Palm Oil MillEffluent (POME) to replace the use of inorganic fertilisers.

Management of waste, emissions and effluents:The Group hasin place an integrated waste management programme to ensurethe proper recycling of effluents and disposal of hazardous wasteresulting from our operations. We also monitor and manageemission levels from our boilers and generators in efforts to lowerour carbon footprint.



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Labour and Occupational Health and Safety Practices

At the heart of IndoAgris operations are its employees. We seekto 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 andprofessional growth, and maintain open lines of communicationfor issues resolution, strengthening cooperation, and exchange ofideas and expertise.

The Group provides direct and indirect employment opportunities forlocal residents and the plasma community through a wide range ofjobs each year. As at 31 December 2013, the Group has a workforceof 41,405 deployed in administrative, operational and supervisoryroles, as well as in middle and senior management positions.

Our Employee Profile

Compensation and benefits: Our reward policies are marketcompetitive and all employees receive at least the minimum

salaries mandated by local authorities. Other employment benefitsinclude free housing (including electricity and water supply) forpermanent estate staff, meal allowances, as well as facilitiesfor sports and recreation, while managerial staff are entitled toallowances for car, telephone and clothing.

Employees are also enrolled in the old age security programmeunder Jamsostek. The company and employees contribute3.7% and 2% of the basic salary per month to this pension planrespectively. For retiring employees, the Group offers a severancepackage and other benefits set out by Jamsostek.

Free healthcare: Medical services are provided freely to allemployees and their dependents living on our estates, most ofwhich feature an aid post and a central clinic. For the treatment ofmore serious ailments, the Group has a formal arrangement with43 hospitals located near its estates.

Free education: Education, including transportation to schoolslocated outside our plantations, is provided free to all children ofestate 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 highschools, and 10 senior high schools.

Training and development: The Group has differentiatedlearning programmes designed to sharpen the competenciesof its people. We operate four training facilities supportingcapability development, particularly in agronomy, agriculture andengineering. We also invest in the training of professional skillssuited to specific roles and job requirements.

Talent and leadership management:We are focused on leadershipdevelopment as well as formal processes for succession planning

in order to prepare and identify talented employees for higherroles and responsibilities. In 2013, a Learning and DevelopmentProgramme (LDP) was formalised in collaboration with the FirstPacific Leadership Academy, a corporate university under FirstPacific Company Limited, which owns Indofood. A pioneer batchof 25 managers and 23 supervisors have embarked on the LDP,which features 10 modules with subjects ranging from decision-making to performance management and strategic planning.

Strong labour relations: The Group enjoys a strong industrialrelationship with the Indonesian Labour Union, which representsthe interests of our employees. As employers, our success isdemonstrated 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 committedto providing a safe and healthy working environment. All ofour working facilities are equipped with an OHS managementsystem (SMK3) that meets with local regulations. Through theimplementation of SMK3, we aim to achieve a zero accident ratein the workplace. Professional security guards are hired on theplantations to protect our employees and assets.

Position Total

Senior management 358

Management 941

Supervisors 2,097

Administrative and operation staff 38,009

Total 41,405



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ENVIRONMENT & CSR(Contd)

Social and Community Development

IndoAgri engages with local communities to enhance lite

indofood agri-resources - indoagri ar2013

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