Financial results
Olam reports resilient performance in H1 2020 with 44.4% growth
The Olam Group has been re-organised into operating groups: Olam Food Ingredients (OFI) and Olam Global Agri (OGA) with Olam International Limited (OIL), as parent, reporting against its newly formed operating groups for the first time.
Results Snapshot
• Revenue increased 7.1% YoY. OGA contributed 58.9% of total Group revenue, OFI 36.1%, and OIL 5.0% respectively.
• PATMI grew 44.4% YoY due to a net exceptional gain of S$130.6 million from the divestments of the remaining 50.0% stake in Far East Agri and the partial stake sale of ARISE P&L, offset partially by one-off exit and closure costs of other de-prioritised assets that were divested or shut down.
• EBIT was down 18.8% YoY due to lower contribution from OFI which in turn was due to lower contribution from Almonds, Hazelnuts and Cocoa processing: OFI contributed to 62.1% of total Group EBIT, OGA 54.0%, and OIL -16.1% respectively.
• Strong cash flow generation with FCFE of S$826.9 million as the Group maintained strong discipline of its cash flows.
• Net gearing was steady at 1.29 times despite higher net debt with an adjusted gearing of 0.34 times net of readily marketable inventory and secured receivables.
• The Board of Directors has declared an interim dividend of 3.5 cents per share (H1 2019: 3.5 cents).
(Singapore dollar 1 = 0.73 US$)
Olam Food Ingredients reported strong top-line growth with revenue up 8.8% to S$6.2 billion, mainly driven by volume growth as well as higher average selling prices. EBIT was down 40.1% to S$263.1m, against a strong H1 2019 performance, on reduced contribution from Almonds, Hazelnuts and Cocoa processing businesses, which were impacted by adverse prices and margin pressures resulting from COVID-19.
Olam Global Agri reported strong operating performance with revenue up 8.4% to S$10bn, mainly driven by higher volumes as well as higher prices in food staples including Grains, Rice and Edible Oils. EBIT was up 55.4% at S$228.9m as strong performance in Grains origination and merchandising, Grains milling, Animal Feed production and Rice distribution were offset by lower contribution from Rice, Edible Oils and Cotton origination and merchandising.
Olam International Limited reported lower revenue of 14.6% to S$849.3m with the closure of the Sugar, Rubber and Fertiliser trading desks, the Fundamental Fund and the Wood Products business in Latin America. EBIT was lower by 6.1% with a loss of S$68.3 million due to the Gestating Businesses (Olam Palm Gabon, Packaged Foods Business, and the ARISE Infrastructure & Logistics business) being impacted by COVID-19.
Olam co-founder and group CEO Sunny Verghese said in a statement: “Following the Covid-19 pandemic, we are focused on delivering three key priorities in 2020: i) successfully navigate through the Covid-19 pandemic and emerge stronger; ii) execute our Strategic Plan (2019-24) and deliver our strategic and financial goals for 2020 and beyond; and iii) deliver on our Re-organisation Plan that we announced in January this year. I am pleased that we have done very well against all three objectives and are seeing growing benefits flow to both our financial performance and our competitive position.
“Our resilient performance amid Covid-19 is a testament to the strength of our diversified portfolio, our differentiated strategy, our committed, dedicated teams, and the unique Olam spirit and culture.”
Verghese added the year ahead will remain challenging and “uncertain with a range of outcomes that could impact demand and supply conditions across geographies, businesses and financial markets”.
But he said Olam International remains confident in the strength of its business model to emerge stronger from this crisis.
