Olam reports lower financial results with 36.4% fall to US$94m in Q2 results

SINGAPORE – Olam International, a leading and the third largest agri-business in the world, has reported lower financial results against its strong performance in previous corresponding period.

The company has reported that its Profit After Tax and Minority Interests (PATMI) is down 36.4% to US$94 million, with the operational PATMI down 40.6% to US$91.4 million.

The Free Cash Flow to Equity (FCFE) in Q2 2018 improved significantly to US$242.1 million from Q2 2017 of US$28.7 million.

FCFE in H1 2018 was negative US$167.0 million (H1 2017: US$12.8 million)

“While our first half results were lower than the previous corresponding period, we expect stronger prospects for our business for the rest of the year.

Our investments in improving operational excellence (stronger cash, cost and capital focus), launch of AtSource, and digitalisation initiatives have progressed well and will strengthen our business going forward,” said Co-Founder & Group CEO, Sunny Verghese.

The company reported that PATMI was down 36.4% year-on-year (YoY) to US$94 million against a strong Q2 2017 performance (Q2 2017: US$147.7 million) led by continued down cycle in Coffee, unprecedented weather conditions in peanut farming in Argentina and lower contribution from edible oils.

“Our performance was satisfactory across the business, and must be seen against the particularly strong performance in the same period last year.

Our Q2 2018 results were impacted by the continued down cycle in Coffee, unprecedented weather conditions in peanut farming in Argentina and lower contribution from Edible Oils,” said Executive Director and Group COO, A. Shekhar.

“We continue to take proactive action to strengthen our balance sheet. We have significantly reduced net debt, lowered finance costs and diversified our funding sources with initiatives including undertaking Asia’ first sustainability-linked club loan and issuing private placements.”

Edible Nuts, Spices & Vegetable Ingredients (SVI) revenue grew marginally by 0.2% to US$2.1 billion, in line with volume growth.

The EBITDA fell by 7.2% to US$236.7 million, when compared with strong results in H1 2017.

Edible Nuts also reported a lower EBITDA as improved performance from cashew, almonds and hazelnuts was offset by peanut farming in Argentina, while SVI, excluding tomato processing, had a steady performance.

Confectionery & Beverage Ingredients revenue decreased 17.9% to US$3.6 billion on lower volumes and lower coffee prices.

EBITDA declined 4.5% to US$178.3 million against a strong H1 2017.

The period recorded weaker results from coffee, which continued to face difficult market conditions that started in Q4 2017, although this was partly compensated by better results from cocoa supply chain and processing.

Food Staples & Packaged Foods revenue was up 50.7% to US$6.0 billion on significant volume growth.

EBITDA declined 23.2% to US$167.3 million against a very strong H1 2017.

The segment was mainly impacted by Edible Oils platform, which experienced volatile trading conditions, higher period costs in Olam Palm Gabon and reduced share of income from Nauvu Investments after it was sold in March 2018.

Industrial Raw Materials, Ag Logistics & Infrastructure revenue grew 8.6% to US$2.2 billion on higher sales volumes and higher cotton prices.

EBITDA fell 11.6% to US$94.1 million on lower contribution from Nauvu and GSEZ, which offset growth from Wood Products.

Commodity Financial Services segment reported an EBITDA loss of US$0.4 million (H1 2017: US$6.3 million).

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