Olam's profit down in quarter, but improved for nine months

15.11.2016

Food Staples & Packaged Foods were higher mainly because of higher wheat milling volumes following the acquisition of BUA Group’s milling assets in Nigeria.
 
Olam’s profit dropped in the third-quarter ended Sept. 30 but the company’s performance for the first nine months of the year was up 61.2% compared to a year ago.

Profit after tax and minority interests (PATMI) for the quarter ended Sept. 30 was S$20.5 million ($14.464 million), down 8.6% from S$22.5 million in the same period a year ago. For the first nine months of 2016, PATMI increased 61.2% to S$249.1 million, up from S$154.6 million in the same period of last year.

Prior period financial statements have been restated due to changes to accounting standards pertaining to Agriculture (SRFS 41) and Property, Plant and Equipment (SRFS 16) that came into effect Jan. 1.

Revenue for the quarter was S$4.738 billion, up 6% from S$4.471 billion. For the first nine months, revenue was S$14.480 billion, up 6.4% from S$13.604 billion in the same period of last year. Sales volume was 3.227 million tonnes for the quarter and 10.205 million tonnes for the first nine months of 2016.Z

“Our differential strategy has enabled us to deliver improved performance year-to-date under challenging conditions,” said Sunny Verghese, co-founder and chief executive officer, when results were announced on Nov. 14. “We continue to explore selective opportunities in our prioritized platforms, while remaining focused on ensuring the performance of our gestating assets.”

Olam’s Food Staples & Packaged Foods earnings before interest, tax, depreciation and amortization (EBITDA) for the third quarter was $60 million, up significantly from S$31.1 million a year earlier. EBITDA for the first nine months was S$225.6 million, up 37.6% from S$163.9 million in the same period of last year. Olam attributed the EBITDA increase to improved performance across most platforms, except Packaged Foods, where performance was affected by ongoing currency volatility and disruption of its dairy and beverage juice production in Nigeria following a plant fire in April 2016.

The segment’s sales volumes for the quarter were 2.558 million tonnes, up 15% from 2.223 million tonnes a year earlier. Food Staples & Packaged Foods were higher mainly because of higher wheat milling volumes following the acquisition of BUA Group’s milling assets in Nigeria, as well as higher volumes from Grains’ origination and export operations in rice trading.

In the third quarter, Olam acquired the remaining 50% in Acacia Investments (Al). On June 1, Olam announced it would be acquiring the remaining 50% interest in AI it does not already own from its joint venture partner for $24 million. Al has a significant presence in edible oils refining and distribution in East Africa. Olam acquired its first 50% share in AI in October 2012 for $35 million.

Olam also began operation of its 30:70 joint venture with the Mitsubishi Corp. on Oct. 1. The venture, MC Agri Alliance, imports and distributes coffee, cocoa, sesame, edible nuts, spices, vegetable ingredients and tomato products for the Japanese market.

The long-term trends in the agri-commodity sector remain attractive, and Olam said it is well positioned to benefit from this as a core global supply chain business with selective integration into higher value upstream and mid/downstream segments. Olam said its diversified and well-balanced portfolio with leadership positions in many segments provides a resilient platform to navigate current uncertainties in global markets, and continues to execute on its strategic plan to invest in prioritized platforms between 2016 and 2021.


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