Olam Group logs marginal rise in profit despite higher costs

Bengaluru - Singapore’s Olam Group on Aug 14 posted a 0.2 per cent increase in its first-half net profit, as improved performance in its agricultural products and food ingredients business was dented by higher financing costs.

Despite challenges, Olam expects inflationary pressure to ease in the second half of 2024, anticipating that high and volatile prices for key commodities such as cocoa and coffee will stabilise.

The company said its net finance costs “increased sharply” primarily due to higher working capital needs caused by record-high prices for commodities such as cocoa and coffee, together with rising benchmark interest rates.

Finance costs for the global food trader grew 36 per cent year on year to $824.6 million in the first half.

Olam, which is in the midst of a bidding battle with Dutch rival Louis Dreyfus for control of Australia’s Namoi Cotton, reaffirmed its commitment to the planned listing of its food ingredients and agricultural products unit.

In February, the company said the agricultural products unit’s listing in Saudi Arabia, initially slated for the first half of 2024, would be delayed.

Similarly, Olam Food Ingredients’ (OFI) planned dual listing in London and Singapore, originally scheduled for the second quarter of 2022, was pushed back.

“We continue to evaluate all internal and external factors that would underpin the success of the proposed initial public offerings of OFI and Olam Agri, while exploring all other strategic options,” said Olam chief executive Sunny Verghese.

Earlier in August, the Wall Street Journal reported on a potential sale of Olam’s agricultural products business, citing people familiar with the matter, though Olam did not respond to a request for comment.

Olam’s strategic pivot from just commodity trading to include value-added products, coupled with targeted investments in production facilities, has helped profitability.

The company, however, said its net finance costs “increased sharply” primarily due to higher working capital needs, caused by record-high prices for commodities such as cocoa and coffee, together with rising benchmark interest rates.

Olam, which is among the world’s biggest agricultural commodity traders, posted net profit attributable of $48.03 million for the six months ended June 30, compared with $47.96 million a year ago.

It declared an interim dividend of three cents, in line with the year earlier.

Shares of Olam closed 6.5 per cent lower at $1.15 on Aug 14, after jumping 8.9 per cent a day earlier. REUTERS