Agri-business giant Olam International plans to sell off four business segments in the next six years to unlock around US$1.6 billion (S$2.2 billion), it said yesterday before markets opened.
Its rubber, sugar, wood products and fertiliser businesses have all been put on the chopping block, alongside some assets and operations from the surviving segments, as they were deemed not to be aligned with Olam's new priorities.
At the same time it will invest US$3.5 billion in 12 segments deemed attractive or proven, such as dairy, nuts, grains and animal feed.
The firm will step up its growth in new segments such as e-commerce for small and medium-sized enterprises, as well as co-manufacturing brands with customers to meet demand.
Chairman Lim Ah Doo said the Olam board has thrown its weight behind the plan and is also picking financial advisers "to explore various options to maximise value for shareholders".
He did not detail what these options might be, but the exercise, set to begin in mid-March, will wrap up by the fourth quarter of this year.
Olam co-founder and group chief executive Sunny Verghese said the new corporate strategy - for the period to 2024 - builds on an earlier focus on sustainability and digitalisation. "Now, following a comprehensive review, our strategy is fully focused on harnessing these health and ethical sourcing trends, as well as changing consumer preferences.
"Crucially, our strategy will allow us to play a leading role in re-imagining global food and agri-supply chains for the better."
Olam said it was looking at "balanced capital allocation with selective integration in the value chain", including an emphasis on mid-stream and value-added ingredients.
It plans to allocate about half of its invested capital - defined as working and fixed capital - in this area in 2024, up from 39 per cent now.
Olam has already made progress in offloading the four segments seen as being no longer compatible with its new strategy.
It halved its stake in an Indonesian sugar-refining subsidiary in December 2017, selling the 50 per cent interest to sugar giant Mitr Phol Sugar Corp for US$100 million.
Its results for the nine months to Sept 30 last year flagged a lower contribution from its sugar business, on both the reduced income from this subsidiary and margin pressures from price competition.
Under the strategic plan, Olam aims to improve its margins through tactics such as cost management and budgeting, which are expected to yield savings of US$200 million over the course of the programme.
Its financial targets for 2024 include a return on equity of at least 12 per cent, against 9 per cent for the most recently reported full year, to Dec 31, 2017.