Olam Q4 net profit falls 12%, weighed down by sharp currency devaluation across markets

Olam International Ltd.’s convertible bonds surged after the farm commodity supplier said it will offer to buy back as much as $150 million of debt due in 2013 to take advantage of a collapse in prices and reduce borrowings. -- PHOTO: OLAM INTERNAT
Olam International Ltd.’s convertible bonds surged after the farm commodity supplier said it will offer to buy back as much as $150 million of debt due in 2013 to take advantage of a collapse in prices and reduce borrowings. -- PHOTO: OLAM INTERNATIONAL LTD 

SINGAPORE - Commodities trader Olam International announced on Friday that its net profit for the fourth quarter ended December 31, fell 12 per cent to $118.74 million from the year-ago period, largely due to the adverse impact of sharp currency devaluation across major markets.

Revenue increased by 8.3 per cent to $4.9 billion year-on-year. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) was down 10.3 per cent to $283.2 million after an estimated net adverse impact of approximately $30 million.

Olam blamed this on "severe and concurrent currency devaluation against the US dollar across major markets, including Russia, Nigeria, Brazil and Australia and to a lesser extent Turkey, Mozambique and Indonesia.

There was also net loss of $12.0 million on the fair valuation of biological assets, compared to a net loss of $15.4 million a year ago, as most of its Australian almond plantation estates achieved peak maturity. This was partially offset by higher net fair value gains in upstream dairy operations in Russia.

For the second half-year, net profit fell 9.7 per cent to $163.03 million. Sales volume declined 11.6 per cent from a year ago as a result of the company's strategy to grow in prioritised platforms while reducing volumes from lower margin businesses. Despite lower volumes, revenue increased by 4.0 per cent to $9.2 billion due to a sharp increase in commodity prices of almonds, hazelnuts, cocoa and coffee.

Olam said it generated positive free cash flow in the six months, and has brought net gearing, a gauge of financial leverage, to 1.85 times from 2.06 times a year earlier, well below the target set for 2016 of below 2.0 times.