Olam profit falls on lower sales, commodity prices

SINGAPORE (Reuters) - Commodities trading firm Olam International posted an 8.5 per cent drop in its first-half profit on lower sales volume and commodity prices, citing weakness in its coffee business, upstream dairy and wood product businesses.

The Singapore-based firm posted also saw higher depreciation and amortisation charges.

Revenue was $8.8 billion for the six months ended Dec 31, down 7.9 per cent on the year. Its net profit for the period was $180.5 million.

Olam said edible nuts, spices and vegetable ingredients, wheat milling, sugar refining, as well as dairy and cocoa supply chain businesses performed strongly, while upstream dairy and wood products performance was disappointing.

"The Cocoa business continued to perform well as we entered the main procurement season in Q2 FY2014 and is well positioned for H2 FY2014.

"The Coffee business recorded lower volumes and faced some margin pressure due to continuing low prices," the firm said in a statement."

The Oct-Dec quarter registered a 12.5 per cent drop in net profit, to $134.9 million, the company said in a statement.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half rose 5.4 per cent, though a 31.8 per cent jump in depreciation and amortisation charges, on an invested fixed capital expansion of about $1 billion, hit core profits.

Olam, which operates in cocoa, coffee, cashew, sesame, rice, cotton and wood products, posted a negative free cash flow of $282.2 million, a deterioration from a positive free cash flow of $46 million reported a quarter earlier.

The company said it remains on track to generate positive free cash flow for the financial year 2014.