UPDATE: Olam reports 1Q19 net profit rose 7 percent on edible nuts and cocoa contributions

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This article was originally published on Tuesday, 14 May 2019 at 7:44 A.M. SGT; it has since been updated with more details.

Agri-business Olam reported Tuesday its first quarter net profit increased 6.9 percent on-year to S$168.88 million on higher contributions from edible nuts and cocoa.

Revenue for the quarter ended 31 March rose 16.7 percent on-year to S$7.35 billion, Olam said in a filing to SGX before the market open.

“We have started well in executing the four key pathways of our 2019-2024 Strategic Plan, which focuses on strengthening our high-growth businesses and getting closer to customers based on changing consumer preferences,” Sunny Verghese, co-founder and CEO, said in the statement.

“Our recent acquisition of BT Cocoa in Indonesia and proposed acquisition of Dangote Flour Mills in Nigeria are examples of us investing
further in our leading businesses,” he said, adding that the company has also exited the sugar trading, Fundamental Fund, the Latin American wood products and Argentinian peanut farming businesses.

In the edible nuts and spices segment, revenue rose 10.0 percent to S$962.1 million on improved sales volume, while earnings before interest, tax, depreciation and amortization (EBITDA) increased 14.9 percent on-year to S$156 million on an improved contribution from the cashew, almond, hazel and spice businesses, Olam said.

Peanuts face oversupply

That was partly offset by a lower contribution from peanuts, it added.

The peanut business was hit by ceasing peanut processing and farming in Argentina and reduced shelling volumes and margins in the U.S. due to an oversupplied market, Olam said.

The confectionery and beverage ingredient segment posted a 9.4 percent revenue decline on-year to S$1.7 billion on lower cocoa and coffee prices and lower coffee volumes.

But EBITDA for the segment surged 118.5 percent to S$133.7 million on improved cocoa margins for both the supply chain and processing operations, Olam said.

 

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The food staples and packaged foods segment reported revenue increased 32.5 percent on-year to S$3.5 billion for the quarter, mainly on growth in grains trading, but EBITDA fell 18 percent on-year to S$82.3 million on a lower contribution from sugar and rice.

The sugar trading desk was closed, while rice had lower merchandising volumes into Africa, Olam said. However, dairy trading and upstream farming in Russia did well, although Uruguay farming faced a drought, it said.

Lower cotton contribution

The industrial raw materials, infrastructure and logistics segment reported a 31 percent on-year increase in revenue to S$1.2 billion on higher rubber and cotton sales volumes, but EBITDA tumbled 42.2 percent on-year to S$38.1 million on lower contribution from cotton and infrastructure and logistics. That offset growth from the wood products segment, Olam said.

The commodity financial services segment reported EBITDA of S$10.2 million for the quarter, more than doubling from S$4.5 million in the year-ago period, on improved performance in the Quantitative Fund.

In its outlook, Olam was optimistic despite pointing to political and economic uncertainties.

“Olam believes its diversified and well-balanced portfolio provides a resilient platform to navigate the challenges in both the global economy and commodity markets,” it said.

 

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