Singaporean Firm, Olam International, to Inject FDI of N 7.8 Billion for Rice Production

Olam International Limited (“Olam” or “the Company”), a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, today announced  that it would invest N 7.8 Billion (US$ 49.2 million) to set up a 6,000 hectare greenfield, fully integrated, mechanised and irrigated paddy farming and rice milling facility in Nigeria.

The farm and the milling facility would be set up in Nasarawa State, one of the main rice growing belts in Nigeria.

The farming operations would be carried out over 6,000 hectares in a phased manner between FY 2013 and FY 2016. The farm at its peak is expected to yield 10 metric tonnes (MT) per hectare (over two annual crop cycles) thus providing 60,000 MT of paddy annually to the rice processing facility. The paddy would then get converted into 36,000 MT of milled rice and distributed through Olam’s existing network of distributors and dealers across Nigeria.

Nigeria consumes about 5.5 million MT of rice annually of which about 3.6 million MT is produced locally through subsistence farming operations and the balance 1.9 million MT is imported.

Local production of paddy and its subsequent processing into rice is a fundamentally attractive industry given

(a) the large size of the rice market in Nigeria,

(b) the high incidence of duties and costs of importing rice and

(c) favourable government policies to enhance local production and enhance food security.

Olam is currently a market leader in the import and distribution of rice in Nigeria. The Company is also one of the largest rice traders globally.

Olam’s President for the Rice business Rajeev Raina said, “Globally, land under rice cultivation has remained stagnant around 150 million hectares over the last 30 years. With the growth in population not being accompanied by an increase in the area under cultivation, we have seen a lot of pressure in respect of global rice supplies with growing countries either banning exports altogether or increasing the support prices to farmers thereby increasing the selling price of milled rice in the international market. Our investment into rice farming and processing in selective destination markets, while helping the importing countries in their import substitution efforts, would also help us to selectively get integrated in the value chain by participating in attractive and higher margin profit pools upstream in rice farming.”

The investment will be funded by a combination of internal accruals and borrowings. The farming operations will commence in the last quarter of FY2012 and deliver an IRR of 28%.