Investments in prioritized platforms boosts Olam earnings

15.05.2018

Revenue for the quarter was S$6.295 billion (U.S. $4.723 billion), up 8.5% from S$5.804 billion a year ago.
 
Investments in prioritized platforms, completion of planned divestments and continued working capital optimization led to stronger earnings and sales results at Olam International in the first quarter of fiscal 2018.

Profit after tax and minority interests (PATMI) for the first quarter ended March 31 was S$157.9 million (U.S. $118.5 million), up nearly 10% from S$143.9 million in the same period a year ago.

Revenue for the quarter was S$6.295 billion (U.S. $4.723 billion), up 8.5% from S$5.804 billion a year ago. Sales volume was 6.965 million tonnes in the first quarter of 2018, up 56% from 4.461 million tonnes in the same period a year ago, boosted in large part to grains trading.

“We continued to deliver earnings growth and position ourselves for the future, including the recent launch of AtSource, which enables us to turn sustainability into a key business driver for transforming agricultural supply chains,” said Sunny Verghese, co-founder and group chief executive officer. “Even as we successfully execute on our 2016-2018 Strategic Plan, we will be embarking on our next Strategic Plan exercise, which will see us evolve all the elements of Olam 2.0 and lead the industry’s digital disruption and transformation.”

Olam’s Food Staples & Packaged Foods earnings before interest, tax, depreciation and amortization (EBITDA) for the first quarter of fiscal 2018 totaled S$135.8 million, down 1.6% from a year earlier. Revenues decreased to S$874.5 million.

“In Food Staples & Packaged Foods segment there has been a marginal reduction in EBITDA,” Neelamani Muthukumar, president and chief financial officer, said during a May 13 conference call with analysts. “However, it has been a mixed performance from platforms. Rice and dairy have been steady. Both the upstream assets in Uruguay as well as in Russia has been performing on plan in the dairy business. Packaged food business, the Ghana biscuit business is doing very well. OK Foods and dairy beverage business in Nigeria have started the road to recovery post the strategy refresh that we have done. Edible oils had lower contribution, primarily because of period cost that we have been taking in our palm plantations in Gabon as more and more hectarage comes into commercial production. Even though they are not fully mature, we cannot capitalize these costs anymore and that is being charged off as period cost and that has resulted in a lower contribution for this platform. And that also explains why our non-controlling interest number is negative. It’s primarily because of the period cost that we are charging off for the palm plantations in Gabon.

“Wheat milling business in Nigeria had a slow start as well as the sugar milling businesses, both in India and Indonesia, had a slow start with historical low prices in sugar. However, in spite of dramatic increase in trading volumes, primarily led by grains trading, we have been able to contain working capital utilization through a slew of working capital optimization initiatives that were done in 2017 and being continued in 2018, however supported by some lower prices in the commodities in this segment. Higher fixed capital has been primarily due to the completion of our construction of the animal feed mills in Nigeria, which came into commercial production in the second half of last year, as well as our investments in palm plantations in Gabon.”


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