Olam triples quarterly net profit to $94.7m

Group managing director and chief executive officer Sunny Verghese brushed off the fall in the yuan.
Group managing director and chief executive officer Sunny Verghese brushed off the fall in the yuan.PHOTOS: OLAM INTERNATIONAL
Group managing director and chief executive officer Sunny Verghese brushed off the fall in the yuan.
Group managing director and chief executive officer Sunny Verghese brushed off the fall in the yuan.PHOTOS: OLAM INTERNATIONAL

Firm says jump in bottom line from last year due to reduction of expenses by almost half

Olam International, which trades globally in agricultural commodities, nearly tripled its latest quarterly net profit from $31.8 million last year to $94.7 million this year.

The big lift to the bottom line came despite revenue dipping 16.4 per cent to $4.81 billion - and was achieved by slashing expenses by almost half.

Olam has just changed its year-end from June 30 to Dec 31, so it is calling the three months ended June 30 its "second quarter" even though it marks the fourth quarter of 12 months of results.

For the 12 months ended June 30, net profit sank 52.5 per cent to $289 million as revenue dipped 5.7 per cent to $18.31 billion.

Quarterly earnings per share was 3.71 cents, up from 1.15 cents, while net asset value per share was 165.95 cents as at June 30, down from 168.62 cents a year earlier.

  • AT A GLANCE

  • QUARTERLY REVENUE: $4.81 billion (-16.4%)

    NET PROFIT: $94.7 million (+197%)

    DIVIDEND PER SHARE: 2.5 cents (comparison not meaningful)

Lower production of nuts and vegetables in drought-hit California did not cause undue problems for Olam's edible nuts, spice and vegetable ingredients segment, which was buoyed by higher almond, hazelnut and cashew prices.

Cocoa prices also gave the confectionery and beverage ingredients segment a boost. This segment posted a 17.6 per cent increase in revenue for the half-year.

Although group managing director and chief executive officer Sunny Verghese conceded that global currency fluctuations will be a concern in the near future, he brushed off the recent fall in the yuan.

"Compared with the 50 per cent devaluation you see in some of our other markets, it's a non-event for us," said Mr Verghese, whose company has significant operations in Africa and Latin America.

Olam pointed to a 41 per cent decrease in revenue, year-on-year for the six months, in the company's food staples and packaged foods segment, where currency devaluation has hurt business in Nigeria and Mozambique.

The segment was also let down by Olam's continued underperforming dairy farming operations in Uruguay. To reduce overall costs, Olam is looking to cull its herd from 87,000 to 50,000 cows.

Mr Verghese warned that this will affect the firm's milk production and is likely to hit the company with a one-off restructuring cost in the next six months.

However, the company did not rule out building up the Uruguayan herds again in the future.

An interim dividend of 2.5 cents per ordinary share has been declared, to be paid on Aug 31.

Last year, Olam declared a first and final dividend of five cents per share as well as a special silver jubilee dividend of 2.5 cents.

A version of this article appeared in the print edition of The Straits Times on August 15, 2015, with the headline 'Olam triples quarterly net profit to $94.7m'. Print Edition | Subscribe