Sipef

A1.

SIPEF Operations: SIPEF produces and trades agricultural products in five major segments: palm, rubber, tea, tropical fruits and plants, and insurance. Although SIPEF has operations all around the world, they are primarily focused on East Asia and Africa.

Value Creation: SIPEF’s majority revenue stems from palm oil production. SIPEF plants palm trees and produces palm for consumption by variety of consumer segments. Recently, they have been trying to capture new customer segments in olechemicals, and biomass to not miss on new emerging trends.

Key Success: SIPEF had witnessed substantial growth in past three years with revenue increasing from $145M in 2004 to $209.5% in 2007, almost 50% increase over three years. Profitability also grew from 10.3% in 2005 to 25.2% in 2007, hinting to dramatic improvements in internal company operations.

Key Risks:

1. Because of SIPEF’s international reach and commodities focus, the company had substantial exposure to fluctuations in market prices of its core products, choosing not to employ substantial commodity price hedges.

2. 10 largest customers contributed to 90% of three core product revenues. A loss of a single large customer could dramatically impact SIPEF’s business

3. SIPEF was compelled to use IFRS accounting standards under which they had to record biological assets at fair value. Major fluctuations in fair value can lead to significant unrealized gains and losses, making the earnings reporting volatile on usual basis.

4. 52% of revenue was generated by products produced in Indonesia. A rare natural calamity in Indonesia can potentially devastate SIPEF.

A2. SIPEF’s ROE has improved dramatically from 2006 to 2007 due to significant improvements in Net Profit Margin. However, these effects may be due to adoption of IFRS IAS 41 rule. From the balance sheet, we can notice material changes in the value of biological assets between 2006 and 2007.

Metrics for SIPEF

A3. Ledesma’s has had...