Olam Q2 profit nearly triples as food business grows

Net income for Q2 surged 197.6 per cent to $94.7 million from $31.8 million a year earlier, Olam said in a statement.
Net income for Q2 surged 197.6 per cent to $94.7 million from $31.8 million a year earlier, Olam said in a statement. PHOTO: OLAM INTERNATIONAL

SINGAPORE - Mainboard-listed commodity trader Olam International Ltd said its second-quarter profit tripled as earnings from its food business increased.

Net income for the quarter surged 197.6 per cent to $94.7 million from $31.8 million a year earlier, Olam said Friday in a statement.

Earnings before interest, tax, depreciation and amortization at its food units rose 22 per cent to $233.1 million.

For the first half-year, Olam's net profit fell 70.6 per cent to $126.0 million due to previously reported exceptional items.

In the first half of 2014, Olam booked net exceptional gains of $277.2 million from the revaluation of its stake in PureCircle Limited and the sale-and-leaseback of its Australian almond assets, while the first half of 2015 included a net exceptional loss of $97.7 million mainly from the buyback of bonds, which Olam expects to generate cost savings of $55-60.0 million annually over the next three years.

For the second quarter, the group's earnings before interest, tax, depreciation, and amortisation grew 6.1 per cent year-on-year to $285.1 million as four out of five segments registered growth.

Gains in the food units were partially offset by declining profits in industrial materials.

Olam said sales volumes and revenues declined 17 per cent and 16.4 per cent as a result of the company's strategy to grow in prioritised platforms while reducing volumes or exiting lower-margin businesses.

The quarterly results included a net loss of $19.2 million on the fair valuation of biological assets compared to a net gain of $17.1 million in the eyar-ago period.

The board has recommended a one-tier tax exempt interim dividend of 2.5 cents per share for the current financial year ending Dec 31, 2015.

Said Olam's co-founder and CEO, Sunny Verghese: "Our strong performance despite the current depressed macroeconomic climate is testament to our disciplined focus on executing our strategic plan. We continue to expand selectively in prioritised platforms while reducing our presence or exiting from lower-margin businesses.

"We remain focused on pursuing profitable growth and are excited by the growth opportunities offered by the transformational acquisitions of McCleskey Mills, which has already started to contribute to earnings, and of ADM's cocoa business, which is expected to be completed in Q4 2015."

Already one of the world's top three traders of coffee and rice, Olam agreed to pay US$1.3 billion to Archer-Daniels-Midland Co. for its cocoa business, a move that would elevate it into the top-three processors of the bean.