Olam's earnings in Q3 slip 8.6% to $20.5m

Olam is a major player in a number of commodities, including cocoa, coffee and edible nuts. It operates in 70 countries, supplying products across 16 platforms to more than 16,200 customers worldwide.
Olam is a major player in a number of commodities, including cocoa, coffee and edible nuts. It operates in 70 countries, supplying products across 16 platforms to more than 16,200 customers worldwide.PHOTO: OLAM

Revenue up 6% but report card affected by higher depreciation and amortisation charges

Higher depreciation and amortisation charges weighed down third- quarter earnings at commodity trader Olam International.

Net profit for the three months to Sept 30 slid 8.6 per cent to $20.5 million, down from a restated $22.5 million in the same period a year earlier, Olam said yesterday.

But revenue rose 6 per cent to $4.74 billion as "lower prices for some commodities offset the higher volumes", it said, adding that sales volume expanded 16.4 per cent thanks to growth across all segments except confectionery and beverage ingredients.

Net profit for the nine months ended Sept 30 leapt 61.2 per cent to $249.1 million, while revenue grew 6.4 per cent to $14.48 billion.

During the quarter, depreciation and amortisation charges widened by 43.5 per cent to $82.6 million.

  • AT A GLANCE

  • NET PROFIT:

    $20.5 million (-8.6%)

    REVENUE:

    $4.74 billion (+6%)

But operating profit rose 7.7 per cent to $205.5 million, boosted by strong performances from confectionery and beverage ingredients as well as the food staples and packaged foods segments, which offset declines in other segments.

Net finance costs shrank 2.6 per cent to $100.5 million on initiatives taken to optimise loan tenures and reduce borrowing costs.

Earnings per share was 0.33 cent, compared with the restated 0.73 cent previously, while net asset value per share rose to 185.28 cents as at Sept 30, up on the restated 179.75 cents as at Dec 31 last year.

Executive director and chief operating officer A. Shekhar noted that Olam has taken several steps during the quarter to further strengthen its balance sheet, including a benchmark perpetual bond issuance, issuing new notes under its US$5 billion (S$7 billion) euro medium-term note programme and refinancing its syndicated loans.

The group's net gearing stood at 1.87 times as at Sept 30, within its target of around two times.

Co-founder and group chief executive Sunny Verghese said: "Our differentiated strategy has enabled us to deliver improved performance year-to-date under challenging conditions. We continue to explore selective opportunities in our prioritised platforms, while remaining focused on ensuring the performance of our gestating assets."

Olam, whose biggest shareholders are Singapore's Temasek Holdings and Japan's Mitsubishi Corporation, is a major player in a number of commodities, including cocoa, coffee and edible nuts. It operates in 70 countries, supplying products across 16 platforms to more than 16,200 customers worldwide.

Olam said the long-term trends in the agri-commodity sector remain attractive, and that its "diversified and well-balanced portfolio with leadership positions in many segments provides a resilient platform to navigate current uncertainties in global markets".

Olam shares closed four cents or 1.9 per cent down at $2.06 yesterday, after the results were released in the morning.

A version of this article appeared in the print edition of The Straits Times on November 15, 2016, with the headline 'Olam's earnings in Q3 slip 8.6% to $20.5m'. Print Edition | Subscribe