Eng - IOI Group

Management’s Discussion and Analysis cont’dGROUP FINANCIAL REVIEWFINANCIAL HIGHLIGHTS & INSIGHTS cont’d• The Group generated an Operating Cash Flow of RM1,317.5 million for FY2007 against RM803.3 million for the previous financialyear. Free Cash Flow increased from RM482.2 million to RM1,164.2 million reflecting the pick up in business performance.• Working Capital requirement for FY2007 increased by RM420.8 million, notably, to fund increases in inventories and tradereceivables by RM339.2 million and RM256.1 million respectively. Expressed in number of days sales, these items remain consistentwith past year but absolute amounts have increased in line with increase in volume of business, higher palm oil prices and theinclusion of working capital of newly acquired Pan-Century Group.• For FY2007, the Group spent a total of RM185.3 million (FY2006 - RM326.1 million) for Capital Expenditure (“Capex”). Thenotable decrease mainly attributable to the Capex on the Group’s new refinery in Rotterdam, which was completed in October 2005and included in FY2006 Capex. Cash outlay on acquisitions in FY2007 was however much higher at RM673.4 million (FY2006– RM437.8 million).• The Group’s Shareholders’ Equity as at 30 June 2007 stood at RM7.74 billion, an increase of RM1.71 billion or 28% over theprevious financial year. The increase was mainly due to net earnings for the financial year of RM1.48 billion and issue of new sharesarose from the exchange of Exchangeable Bonds which totalled RM582.4 million. However, the increase was off-set with a net ofshare buy-back totalled RM105.1million and dividend payment in respect of FY2007 and FY2006 totalled RM481.1 million.• The Group’s Net Interest Cover was 14.8 times but after adjusting differences between accounting and cash interest payment, thenet interest cover was 20.1 times for FY2007.• From an economic profit perspective, the Group achieved an economic profit [i.e. a surplus of Net Operating Profit After Tax(“NOPAT”) over its Weighted Average Cost of Capital (“WACC”)] of RM842.7 million for FY2007, up 151% from FY2006’sRM335.7 million. The significant increase is attributable to a higher NOPAT of RM1,756.2 million (FY2006 - RM1,086.6million). The WACC for FY2007 increased marginally over last financial year at 8.10% (FY2006 - 7.67%).• The higher WACC for the financial year just ended was due principally to a higher cost of equity as a result of higher share pricesvolatility and hence a higher beta co-efficient applied in the computation of cost of equity.21ANNUAL REPORT 2007IOI Corporation Berhad