Commodity trader Olam reported on Tuesday that its net profit fell 36.4 percent on-year in the second quarter to S$93.91 million, hurt by a continued downcycle in coffee, “unprecedented” weather conditions affecting peanut farming in Argentina and lower contributions from edible oils.
Sales of goods and services for the quarter ended 30 June were up 13.9 percent on-year at S$7.43 billion, Olam said in a filing to SGX before the market open on Tuesday.
For the first half, net profit fell 13.6 percent on-year to S$251.88 million after a strong performance in the year-earlier period, while the sales of goods and services rose 11.4 percent on-year to S$13.72 billion, it said.
Revenue in the edible nuts, spices and vegetable ingredients segment (SVI) edged up 0.2 percent on-year in the first half to S$2.1 billion amid volume growth, but earnings before interest, tax, depreciation and amortization (ebitda) fell 7.2 percent on-year in the half to S$236.7 million on a high comparison, Olam said.
“The edible nuts platform had performed well in the previous corresponding period with higher almond volumes and prices, and favourable market conditions for cashew. During this period under review, while cashew, almonds and hazelnuts performed well, the peanut farming business in Argentina suffered from drought conditions and currency devaluation, leading to an overall reduction in ebitda for the edible nuts platform,” Olam said.
In the confectionery and beverage ingredients segment, revenue fell 17.9 percent on-year to S$3.6 billion in the first half on lower volumes and lower coffee prices, Olam said.
“Both cocoa supply chain and processing performed very well, compensating for the significantly weaker results from coffee as the difficult market conditions which started in the fourth quarter of 2017 continued to impact the coffee supply chain business adversely throughout the first half of this year,” Olam said.
In food staples and packaged foods, revenue rose 50.7 percent on-year in the first half to S$6.0 billion on “significant” volume growth, primarily in grains trading volumes, Olam said.
In the industrial raw materials, ag logistics and infrastructure segment, revenue grew 8.6 percent on-year to S$2.2 billion in the first half on higher sales volumes and higher cotton prices, Olam said.
The commodity financial services segment had an ebitda loss of S$400,000 in the first half, Olam said.
Olam declared an interim dividend of 3.5 Singapore cents a share, unchanged from the year-earlier period.