Eng - IOI Group

Management’s Discussion and Analysis cont’dGROUP BUSINESS REVIEWSPECIALTY OILS AND FATS MANUFACTURING cont’dLipid NutritionLipid Nutrition is the other business unit of Loders Croklaan, which was started in 1999. This business was developed from the lipidtechnology of the snack ingredients division, by utilising Loders Croklaan’s understanding of the functionality and the nutritionalproperties of components to build a new business to diversify its product range and earning base. Loders Croklaan manufacturesand sells active ingredients for use in the supplements, such as pills and capsules, focusing on three key areas namely conjugatedlinoleic acid marketed under the brandname “Clarinol”, Omega-3 fatty acids marketed under the name “Marinol” and gammalinoleic acid which is marketed under the name “Gammonal”. In addition, Loders Croklaan also produces infant formulae productsmarketed under the name Betapol and lecithins as an ingredient in margarines and spreads. Competitors vary depending onthe product segment and come from a range of sectors including chemical, pharmaceutical, food ingredient, oil processing andspecialty ingredients.OPERATIONS REVIEWThe oleochemicals sub-segment, the business, contributed a total of RM128.4 million to Group operating profit for FY2007, a 67%increase over last financial year results of RM76.7 million. This was achieved through volume growth as well as improvement inmargins. Newly acquired Pan-Century Group contributed to the 4th quarter.The refinery and specialty fats combined EBIT contributions increased from RM51.6 million in FY2006 to RM277.0 million inFY2007. The refinery and specialty fats business contributed higher profits in FY2007 because of higher margins as well asvolume growth, benefiting from increased demand for food processing needs, non “trans fats” applications and higher CBE/CBSdemand.On the whole, the downstream businesses have benefited from an efficient supply chain management, superior price riskmanagement and the value of traceability that we can offer to customers.OUTLOOK & PROSPECTSThe downstream operation is expected to enjoy another good year, with volume growth emanating from increased demand andthe benefit of a full year contribution from newly acquired Pan-Century Group, whilst margins should remain fairly stable despitehigher feed stock prices.49ANNUAL REPORT 2007IOI Corporation Berhad