KAKAO KONEK NOV 2012 DAVAO, PHILIPPINES

Daniel Liew Armajaro Asia

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

OVERVIEW OF THE ARMAJARO GROUP

Armajaro is a progressive and successful commodities and financial services business, headquartered in London. Founded in 1998, Armajaro has three main business activities : Commodities coffee, cocoa, sugar and cotton origination, trading and distribution Asset management commodities and other alternative asset investment management Structured products arranging and dealing in bespoke financial instruments Over 1,000 people work for Armajaro and its various subsidiaries and associated companies around the world
2

OVERVIEW OF THE ARMAJARO GROUP

Armajaro is a leading supplier of cocoa beans and cocoa products to international chocolate manufacturing industry The Group as a whole turnover about 10% of annual world volume Armajaro has wholly-owned sourcing operations in the worlds key cocoa producing origins including Ivory Coast, Ghana, Indonesia and Nigeria Armajaros associate company, Theobroma produces, trades and distribute semi-finished cocoa products to the confectionery industry Armajaro is also a leading supplier of green Robusta coffee to the worlds major coffee manufacturers and roasters Armajaro Trading Limited is headquartered in London with regional marketing, sales and procurement management offices in Kuala Lumpur, New York, Singapore and etc Armajaro cocoa operations in Asia are based in Malaysia, Singapore, Vietnam and Indonesia. We also sourced cocoa through our agents in PNG, Solomon Islands and Vanuatu
3

INTRODUCTION TO THE ARMAJARO GROUP

Agents
United Kingdom Netherlands
Theobroma

Germany
Warehouse

India
Coffee

China
Coffee

Thailand
Sugar

Offices Agents

Cocoa

Coffee

Sugar

Vietnam
Cocoa Coffee Sugar

USA
Cocoa Coffee Sugar

Malaysia / Singapore
Cocoa Coffee
Sugar

Costa Rica
Coffee

Indonesia
Cocoa Coffee

Colombia
Coffee

Ecuador
Cocoa

Papua New Guinea

Cocoa

Agents

Peru
Coffee

New Zealand
Sugar

Brazil
Coffee Sugar

Sierra Leone
Cocoa

Liberia
Cocoa

Ivory Coast
Cocoa

Ghana
Cocoa

Nigeria
Cocoa

Cameroon Burundi
Cotton
Cocoa

Uganda
Coffee

Tanzania
Coffee

Kenya
Coffee

Coffee

Cotton

Coffee

Agent

Agents

ARMAJARO CENTRES SULAWESI, SUMATRA, JAVA, IRIAN JAYA

SIGLI

MEDAN

PALU

JAYAPURA

LAMPUNG JAKARTA SURABAYA MAKASSAR

KOLAKA

PORT OPERATION

INTERIOR CENTRE

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

ARMAJARO CENTRES - SULAWESI

LAMBUNU KOTA RAYA

TINOMBO PARIGI DONGGALA PALOLO

TOLAI

PASANGKAYU GIMPU

PALU

POSO BUNTA TENTENA / TOMATA

MASAMBA

POLMAN PORT OPERATION KOLAKA MAKASSAR SP 5 INTERIOR CENTRE

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

ARMAJARO CENTRES - SUMATRA

MEDAN

KUTACANE

SIGLI

LHOKSEUMAWE

SRI BAWONO

PORT OPERATION INTERIOR CENTRE PADANG CERMIN

LAMPUNG

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

Current Cocoa Activities in Indonesia organizational structure

Established network in Indonesia from farm level to export

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

Central Sulawesi Capacity : 4.500 mt

Southeast Sulawesi Capacity : 1.500 mt South Sulawesi Capacity : 6.000 mt

Aceh Capacity : 650 mt

Medan Capacity : 3.000 mt

Lampung Capacity : 2.500 mt

Strategic Partner

South Sulawesi - Masamba

South Sulawesi - Masamba

West Sulawesi - Polman

Central Sulawesi - Poso

Central Sulawesi - KotaRaya

SouthEast Sulawesi SP5

Development and Sustainability (D&S)

Is a dedicated team specializing in Development and Sustainability across cocoa commodity operations in Indonesia Owning the relationship from farm to brand value creation Help empowering farmers to improve yields and working conditions

Nanggroe Aceh Darussalam

D&S Activities Areas 2012

East Kalimantan Riau Island Central Sulawesi West Kalimantan Bangka Belitung Central Kalimantan West Sulawesi North Sulawesi

North Sumatera

Gorontalo

North Maluku

West Irian Jaya

West Sumatera

Papua Bengkulu Jakarta Lampung Banten West Java East Java Jokjakarta NTB Central Java Bali

South Kalimantan
South Sulawesi

South East Sulawesi

Maluku

NTT

UTZ Certified Farmers

The first UTZ Certified Indonesian cocoa beans

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

Demand stable with upward trend Chocolate is relatively inexpensive less affected by periodic economic downturns No similar substitutes unlike coffee vs. tea In longer term, we should see increase consumption due to : Population growth more people to consume cocoa products Usage diversifications into non-edible products cosmetics, spa etc

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

Change in consumer taste in non traditional chocolate consuming countries China and India ICCO 2009 data annual per capita chocolate consumption Germany 11.34kg United Kingdom 10.94kg Denmark 7.39kg USA 5.09kg Japan 2.15kg China 0.10kg India 0.10kg Just additional 100grams of annual consumption from both China and India would increase world bean demand by 230,000mt

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

Supply more erratic in short term and slowly declining Wild weather pattern prolonged draught and flood Ageing trees in main producing countries Ivory Coast, Indonesia Difficulty in combating cocoa disease CPB, VSD in adequate farmers training financial constraints, attitude Competition from other crops - oil palm

PROJECTION OF SUPPLY AND DEMAND

Production - violent swings in production cycle especially 2011/12 season favorable weather conditions in Ivory Coast world top producer at 1.3 million mt also marred by deadly civil war which disrupted cocoa trades, domestically and internationally Demand steadily increased despite economic uncertainties since 2008

EMERGING AND POTENTIAL ORIGIN COUNTRIES

Philippines annual production 6,000mt Large population 94 million potential for work force and market Large coconut acreage 2,000,000 hectare ?? potential for inter-crop with coconut Already experienced in cocoa

EMERGING AND POTENTIAL ORIGIN COUNTRIES

Vietnam annual production - 3,000mt Large population 88 million potential for work force and market Availability of agricultural land cocoa acreage only 22,000 hectare room for more Good connectivity with international ports due to coffee and industrial items exports cheap freight

EMERGING AND POTENTIAL ORIGIN COUNTRIES

South Pacific Islands Papua New Guinea already an established origin 50,000mt Solomon Islands 7,000mt Vanuatu 1,500mt Known for bean quality Located off major international sea traffic logistically difficult and expensive Combined population of these 3 countries only 7.8 million too small

CURRENT ISSUES IN COCOA

Competition from other crop like oil palm for work force, land and government support Ageing trees low yield but replanting would mean loss of income for farmers need alternative income in the interim period Industrialization lack of interests by the younger generation in agri-business example Malaysia !

CURRENT ISSUES IN COCOA

Competition from other cocoa origin price sensitive grinders would look for best value for money would learn about and try cocoa from other origins Ecuador, West African threat to traditional Asian origin like Indonesia Increased political / environmental scrutiny accusation of child labour, deforestation etc

CURRENT ISSUES IN COCOA

Heavy concentration of supply Ivory Coast and Ghana account for more than 60% of annual world supply need to diversify opportunity for other origins Hot money funds injection by central banks spill over into commodities market more volatile swings in market driving up food prices what should we do ?
24