Olam's Q2 net profit drops 36% to $94m

Ebitda from Olam's edible nuts, spices and vegetable ingredients segment fell 13.8 per cent to $100.9 million, as the peanut-farming business in Argentina suffered from drought conditions and currency devaluation, offsetting the stronger performance
Ebitda from Olam's edible nuts, spices and vegetable ingredients segment fell 13.8 per cent to $100.9 million, as the peanut-farming business in Argentina suffered from drought conditions and currency devaluation, offsetting the stronger performance from cashew, almonds and hazelnuts.PHOTO: REUTERS

Firm hit by weaker earnings from coffee, peanuts and edible oils

Commodity trader Olam International has posted a net profit of $93.9 million in the second quarter, down 36.4 per cent from the same period a year earlier, on weaker earnings from coffee, peanuts and edible oils.

Excluding exceptional items, core profit fell 40.6 per cent to $91.4 million.

Revenue climbed 13.9 per cent to $7.4 billion, supported by a 48.3 per cent rise in sales volume, led by the food staples and packaged foods segment.

"Our performance was satisfactory across the business, and must be seen against the particularly strong performance in the same period last year," said Olam group chief operating officer A. Shekhar.

"Our second-quarter results were impacted by the continued down cycle in coffee, unprecedented weather conditions in peanut farming in Argentina and lower contribution from edible oils."

Chief executive officer Sunny Verghese said: "We expect stronger prospects for our business for the rest of the year."

  • AT A GLANCE

  • REVENUE: $7.4 billion (+13.9%)

    NET PROFIT: $93.9 million (-36.4%)

    DIVIDEND PER SHARE: 3.5 cents (unchanged)

Earnings before interest, tax, depreciation and amortisation (Ebitda) - a measure of operating profit - declined 17.6 per cent to $307.9 million.

The group's Ebitda from the confectionery and beverage ingredients segment rose 4.9 per cent to $117.1 million despite a fall in volumes, as better results from the cocoa supply chain and processing offset tough coffee conditions that started in the fourth quarter last year.

But Ebitda from the edible nuts, spices and vegetable ingredients segment fell 13.8 per cent to $100.9 million, as the peanut-farming business in Argentina suffered from drought conditions and currency devaluation, offsetting the stronger performance from cashew, almonds and hazelnuts.

Ebitda from food staples and packaged foods dived 32.7 per cent to $66.9 million, owing mainly to volatile trading conditions in the edible oils platform, higher period costs in Olam Palm Gabon, and reduced share of income from Nauvu Investments after it was sold in March.

Second-quarter earnings per share were 2.52 cents, down from 4.91 cents in the same period last year. Free cash flow to equity in the second quarter improved to $242.1 million from $28.7 million in the same period last year.

Net gearing as of June 30 was 1.46 times, unchanged from Dec 31 last year. Net asset value per share slipped to 198.65 cents from 200.05 cents as of Dec 31.

An interim dividend of 3.5 cents per share was declared, unchanged from the first half last year.

Olam shares yesterday fell two cents to $2.18.

A version of this article appeared in the print edition of The Straits Times on August 15, 2018, with the headline 'Olam's Q2 net profit drops 36% to $94m'. Print Edition | Subscribe