Delfi Limited

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Extracted from Annual Report 2010

Dear fellow shareholders,

During 2010 Petra Foods recorded the highest revenues and the highest earnings in the history of the company. Compared to 2009, revenues grew by 25.8% to US$1.6 billion, earnings grew by 80.6% to US$44.5 million, and at the same time EBITDA grew by 61.3% to US$108.4 million. These successful results have been made possible by the record earnings and strong growth in both Divisions.

Record earnings; strong growth

Both Divisions achieved record earnings and growth during 2010. Compared to 2009 our Branded Consumer Division increased sales revenues by US$67.1 million or 22.4% and Cocoa Ingredients Division by US$254.5 million or 26.9%. EBITDA increased by US$15.1 million (38.5%) in Branded Consumer and by US$26.1 million (93.5%) in Cocoa Ingredients. A significant factor in the EBITDA improvement in Cocoa Ingredients is the substantial improvements in the operations in Europe which turned EBITDA positive during 2010.

Success in 2010

The successes of 2010 reflect the positioning of each of our Divisions during the recent years of growth. The scale and size of the Branded Consumer Division offers opportunities to improve profitability, and our distribution networks and expertise can be leveraged to the advantage of our Own Brands and of the Agency brands which we increasingly include in our distribution mix.

The Branded Consumer business is focused on the ASEAN region and here we have achieved significant growth momentum. The Indonesian market is the largest market within the ASEAN region, and in Indonesia our Own Brands have developed scale and a commanding position in the chocolate confectionery market, while our distribution of Agency brands further strengthens our already strong position.

Outside Indonesia our business continues to grow significantly, and throughout the ASEAN region we see tremendous growth opportunities. We expect the momentum we have built up will be sustained in the year to come because the appetite for chocolate confectionery continues to increase within the region, while the opportunities for consumption (rising disposable incomes, our powerful and attractive brands, and our carefully priced products that appeal to the mass market) have grown over recent years.

Cocoa Ingredients success during 2010 reflects a number of factors. During the year overall sales volumes increased by over 17,000 mt (7.3%) as we continue to take every opportunity to maximize the use of the capacity we have installed. The completion of the investment programme in Europe has given the Division a truly Global reach and scale, allowing us to better serve our customers everywhere that we find them and to continue to grow our presence in all of our markets. And we take every opportunity to raise our EBITDA yield through a higher customized content in our product mix. Additionally, our Global reach enables us to concentrate on improving the service we give our customers through improvements and innovations in the Cocoa Value Chain.

Sustaining the Cocoa Value Chain

Managing the Cocoa Value Chain has always been key to our success as we concentrate on providing the best service and the best products to our customers. At the beginning of the chain lie the cocoa farmers in the countries of origin. We focus our procurement efforts in various origin countries as a way to improve quality, and an example of these efforts is the PACTS Joint Venture that we formed during 2010.

PACTS is a joint venture in the Ivory Coast, and it operates at the very first link in the Cocoa Value Chain. Sustainability of the supply of cocoa is a critical link in the Cocoa Value Chain and PACTS is intended to ensure this by creating a win-win situation for the cocoa farmers and for our customers. PACTS helps cocoa farmers to improve the quality of the cocoa that they produce through the use of scientific and controlled methods of production and fermentation of cocoa beans. Raising the quality of their harvest allows the farmers to gain more income for themselves, their families and their community. And improvements in the quality of the cocoa help processors such as Petra Foods to provide better products to our customers.

Finally, because PACTS serves various local communities in the Ivory Coast it helps us to manage the traceability of the cocoa we process. Traceability is increasingly important to our industrial customers as they in turn respond to the desires of consumers to be assured that the products they consume have been produced in a fair, sustainable and environmentally sensitive way.

Expanding and strengthening Petra Foods

During 2010 we took an important step to strengthen Petra Foods and another to strengthen our operations.

During the month of June 2010 Petra Foods issued 78.9 million new shares and raised approximately US$60 million in new capital. This increase in the capital of the Company (about 15%) was carried out so as to have adequate funds available for strategic growth opportunities, and to increase the financial resources available to fund Petra Foods' current operations.

In January 2010, for US$13.2 million we acquired the remaining 32% of the shares of our European operations from our Joint Venture partner Armajaro Trading Limited. This change allows us to completely integrate our European operations into our global Cocoa Ingredients business.

Looking to the future

Because of our strategic positioning we are optimistic that the growth momentum we have already built up will be sustained. Despite the continued economic uncertainties in the world economy, and in particular the tragic unrest that persists today in the Ivory Coast, we find that demand for cocoa ingredients remains very strong and we are convinced that the global network we have been able to put in place will allow us to continue to serve this growing demand efficiently, effectively and competitively. At the same time our technical capabilities and standards allow us to continue to create new products and services tailored to the specific needs of our customers.

And the outlook for the Branded Consumer Division remains exciting. Consumer appetite for chocolate confectionery remains strong in the ASEAN region where we have already built a strong brand equity position, and our distribution expertise and reach continually expands.

For these reasons we look forward to 2011 with excitement and enthusiasm and we hope to continue to deliver service and satisfaction to our customers and success to you, our fellow shareholders.


John T.C. Chuang
Chief Executive Officer
24th March 2011