Olam Q1 profit tumbles 92.1% to $31.26 million on bond buyback, absence of one-off gain

Olam International announced on Friday a 92.1 per cent slide to $31.26 million in net profit for its first quarter ended March 31, 2015, from $396.13 million for the year-ago period. -- PHOTO: OLAM INTERNATIONAL LTD
Olam International announced on Friday a 92.1 per cent slide to $31.26 million in net profit for its first quarter ended March 31, 2015, from $396.13 million for the year-ago period. -- PHOTO: OLAM INTERNATIONAL LTD

SINGAPORE - Mainboard-listed Olam International, one of the world's biggest traders of agricultural commodities, announced on Friday a 92.1 per cent slide to $31.26 million in net profit for its first quarter ended March 31, 2015, from $396.13 million for the year-ago period.

Olam said net earnings plunged on the back of a net exceptional loss of $97.2 million in the quarter, mainly from the buyback of outstanding US$750 million worth of 6.75 per cent bonds due 2018, while net earnings in the year-ago period had included an exceptional gain of $293.9 million.

It added that the bond buyback is expected to generate interest cost savings of $55.0-60.0 million per annum over the next 3 years.

Olam said sales volume for the quarter fell 33.2 per cent as a result of its deliberate strategy to grow in prioritised platforms while reducing volumes or exiting from lower-margin business. Revenue declined 10.7 per cent to $4.3 billion as lower volumes were offset by higher prices of some commodities.

Operational PATMI (profit after tax and minority interests) increased 25.7 per cent to $128.5 million with underlying growth in all segments except food staples & packaged foods. Olam said this was despite the adverse impact of currency devaluation against the US dollar of about $12.0 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dipped 1.5 per cent to $330.1 million.

The group's capital expenditure in the first quarter jumped to $301.5 million from $180 million in the year-ago period as it included a $225.9 million investment to acquire US peanut sheller McCleskey Mills Inc.

Olam also generated positive free cash flow to firm of $120.2 million during the period under review as against negative $424.8 million in the year-ago period, from higher operating cash and divestment cash flows and lower working capital requirements.

Olam's managing director and CEO, Sunny Verghese, said the company will continue to pursue twin objectives of profitable growth and cash-flow generation while investing in selective opportunities that can enhance shareholder value over time.

Net gearing was 1.83 times as at March 31, 2015, lower than the 2.03 times as at March 31, 2014 and in line with 2016 goal at or below 2.0 times.

Earnings per share for the quarter were 7.45 cents while net asset value per share was 166.62 cents. No dividend was declared for the quarter.