Olam said to mull London IPO for food ingredients business; posts $87m second-half loss

Olam, in which Singapore state investor Temasek Holdings is the biggest shareholder, flagged the plan in January last year.
Olam, in which Singapore state investor Temasek Holdings is the biggest shareholder, flagged the plan in January last year.PHOTO: OLAM INTERNATIONAL

SINGAPORE (THE BUSINESS TIMES, BLOOMBERG) - Agri-food giant Olam International on Friday (Feb 26) said it plans to list Olam Food Ingredients (OFI) by the first half of 2022 as part of an ongoing business overhaul.

Olam is considering London for an initial public offering of  OFI, Bloomberg reported on Friday, quoting unnamed sources. It said Olam could also consider a secondary listing of the business in Singapore at a later date.

The company said it has appointed joint financial advisers and legal advisers to prepare for an IPO. It didn’t provide details on the size or venue.

As one out of two operational arms which Olam intends to demerge and list, OFI consists of the company’s cocoa, coffee, edible nuts, spices and dairy businesses.

The other unit, Olam Global Agri (OGA), comprises Olam’s grains and animal feed, edible oils, rice, cotton and commodity financial services businesses. In its latest update, Olam said it intends to continue exploring similar strategic options for maximising the value of OGA within the Olam group.

The group plans to complete the carve-out and separation of OFI and OGA by the end of this year - and said it has made “good progress” towards doing so after it established a dedicated programme office and work streams, as well as appointed legal advisers.

As part of its reorganisation, Olam said it is also evaluating a scheme of arrangement which would see Olam’s mainboard listing status move to a new holding company. The group intends to demerge OFI by way of a distribution in specie of shares in OFI to Olam shareholders at the point of demerger, in conjunction with the initial public offering (IPO).

“We are delighted to provide this update on the progress we are making in our strategic reorganisation plan. OFI is a truly global business and its independent listing is a critical first step in unlocking its long-term value,” said the group’s co-founder and group chief executive, Sunny Verghese.

In line with its profit warning issued last December, Olam separately reported a net loss of $87 million for the second half-year ended December 2020, reversing from its net profit of $85.8 million a year ago.

The group on Friday said its net loss was due to a one-off, non-cash impairment charge of $483.9 million on the group’s investment in Olam Palm Gabon (OPG), which was offset in part by gains from divestments of deprioritised assets.

Excluding one-off exceptional items, net profit would have grown 90.1 per cent to $475.7 million.

Revenue for H2 FY2020 grew 9.9 per cent to $18.74 billion from $17.05 billion for the year-ago period.

For the full year ended December 2020, Olam remained profitable with FY2020 earnings of $245.7 million, down 22.3 per cent from its net profit of $316.2 million for the previous year. Without net exceptional items, net profit for FY2020 would have grown 36 per cent to $677.8 million.

Its full-year revenue increased 8.6 per cent to $35.82 billion from restated FY2019 revenue of $32.99 billion. The top-line growth was largely driven by contributions from OGA (60.1 per cent) and OFI (35 per cent).

In terms of segmental revenue, OFI’s top line rose 3.3 per cent to $12.55 billion due to volume growth as well as higher average selling prices in the value-added food ingredients and solutions segment.

While cocoa was impacted in H1 FY2020 due to Covid-19, Olam said its cocoa business delivered a “strong, resilient performance in 2020 considering how 2019 was an exceptional year when the cocoa business had a stellar performance”.

Meanwhile, revenue for OGA grew 14.1 per cent to $21.52 billion from $18.85 billion for FY2019, mainly driven by higher volumes as well as increased prices in food staples including grains, rice and edible oils.

Olam said its commodity financial services business also contributed to the segment’s improved performance for the year.

The group’s board of directors have recommended a final dividend of four Singapore cents per share, which is lower than the 4.5 cents per share dividend declared a year ago.

The final dividend will be made payable on May 10, 2021 and will bring the total dividend for FY2020 to 7.5 cents per share, down from the group’s FY2019 dividend of eight cents per share.

Olam shares were trading down two cents or 1.2 per cent at $1.61 as of 1.52 pm on Friday.