Olam International, a food and agri-business company headquartered in Singapore with presence in 70 countries including Nigeria, saw net income slid 8.5 percent in the first half of 2019, according to the firm’s mid-year earnings report released on Wednesday, August 14.
The company’s profit after tax and minority interest trended southwards to S$230.3 million in the first six months of 2019, from S$251.9 million a year earlier on the heels of higher depreciation and amortisation, higher net borrowing cost and exceptional losses.
The agro-business giant noted that the adoption of Singapore Financial Reporting Standard (SFRS) which took effect January 1 also weighed on bottom-line; saying excluding exceptional losses and the impact of SFRS, net income would have jumped 3.6 percent to S$261 million.
Olam’s sales revenue grew 16.2 percent to S$ 15.9 billion from S$13.7 billion realized in the preceding comparable period. Sales of goods spiked 40 percent to 19.1 billion metric tonnes on increase in grain trading volume.
Also, earnings before interest, tax, depreciation and amortization (EBITDA) jumped 14 percent due to improved EBITDA from all segments except industrial materials, infrastructure and logistics.
“We delivered a steady set of results amid growing political and macroeconomic uncertainties affecting most of our markets” said Sunny Verghese, the Group’s CEO in a note to investors.
Verghese noted that the improvement in EBITDA reflects the effectiveness of the group’s differentiated and defensible strategy.
“We are making good progress in executing our new strategic plan, and also investing in several new initiatives to offer differentiated solutions to our customers”, he said.
Meanwhile, the Board of Directors declared an interim dividend of 3.5 Singaporean cents per share, in the first six months of 2019, the same it declared in half year 2018.
Olam bettered performance in terms of cash flows and gearing. The firm generated positive cash flows to equity worth S$864.2 million half-year 2019 compared with deficit S$167 million posted last year, hinging it on lower deployment of working capital.
Anantharaman Shekhar, Olam’s Chief Operating Officer, stated that the improvement recorded in gearing and free cash flows helped strengthen the group’s balance sheet.
“We are well positioned for H2’19 as we approach the peak of the procurement season for several of our commodities with likely increases in working capital deployment”, Shekhar said.
He noted that the group is focused on divesting the identified non-core assets to complete its planned fixed investment.
The move to acquire Nigeria’s most-capitalized miller, Dangote Flour Mills Plc, is to support the strategy of Olam’s Grain & Animal Feed business to expand its wheat milling capacity in high-growth market like Nigeria.
Olam says acquisition would also provide enhanced manufacturing capacity and create synergies with the Group’s existing business.
Recall that in August 5, Dangote Flour said it received a revised N120 billion offer from Olam Int’l through Crown Flour Mill to acquire the entire shares of the former excluding the ones held by Crown Flour Mill through Olam.
This equates to a consideration fee of N24 for each share of Dangote Flour following the adjustment. The Group expects the transaction to be finalized during the fourth quarter of the year.
A further dive into the company’s earnings report showed mixed performance across its four business segments.
While proceeds from food staples & packaged food and industrial materials, infrastructure & logistics rose some 38 percent and 15 percent respectively, cash from edible nuts & spices tanked 1 percent and 10 percent respectively.
Olam in early days of the year unveiled a 5-year strategic plan to capitalize on key trends shaping the sector.
The firm cited increasing demand for healthier foods, traceable and sustainable sourcing, e-commerce and rise of purpose brands as trends it seeks to leverage.
Going forward, the group expressed optimism for full year 2019 performance despite political and economic uncertainties in the global economy.
“We believe our diversified and well-balanced portfolio provides a resilient platform to navigate challenges in both global economy and commodity market”, Olam said.
Olam Int’l began operations in Nigeria in 1989, and has evolved to a multinational agribusiness giant today, supplying food and industrial raw materials to over 23, 000 consumers globally.
ISRAEL ODUBOLA
