Financial results

Olam International reports ‘stellar year for cocoa’ in its latest financial results call

By Anthony Myers

- Last updated on GMT

Olam International reports ‘stellar year for cocoa’ in its latest financial results call

Related tags Olam International results Cocoa

Political and economic uncertainties likely to affect global trading conditions in 2019 company said, while issuing a positive outlook to navigate market challenges.

Olam International has announced a slight improvement in operating performance, and a “stellar year for cocoa​”, when it reported its second quarter and first half 2019 financial results in Singapore on Wednesday August 14.

The company recorded S$15.9bn ($11.45bn) revenues for the first half of 2019, against S$13.7bn ($9.36) for the same period last year.


Olam also hit a second quarter EBITDA earnings growth of 14.1% to S$351m business-wide, due to an uplift in its Edible Nuts, Spices and Vegetable Ingredients sector.

Q2 2019 and H1 2019 PATMI were lower by 34.5% and 8.5% to S$61.5m and S$230.3m, respectively and figures revealed that its profits for the first half of the year were down 8.5%, at S$230m, against S$251m for the same period in 2018.

Lower coffee prices and reduced sales volumes led to a decline in revenues by 9.5% to S$3.2bn in Olam’s confectionery and beverage sector, the company announced. EBITDA rose 34.7% to S$240.2 million due to improved margins in the cocoa business in both supply chain and processing operations. Despite the continued downcycle in coffee, the voffee business performed better versus H1 2018.

Olam’s Co-Founder and Group CEO Sunny Verghese said: “We delivered a steady set of results amid growing political and macroeconomic uncertainties affecting most of our markets. We are pleased with the EBITDA growth during the first half of 2019, which reflects the effectiveness of our differentiated and defensible strategy​.

We are making good progress in executing our new Strategic Plan. We are investing in several new initiatives to offer differentiated solutions to our existing customers as well as develop new customer segments and channels. We also stay focused on streamlining our portfolio by recycling capital and focusing on high-growth businesses​.”

Rains in Africa

In a call to analysts, Verghese said Olam is forecasting a mild cocoa surplus, 50,000 tons in terms of supply/demand balance and mild surplus for the 2018/19 crop, which could start at the beginning of September, weeks earlier than last year because of heavy rain over the past month in West Africa.

We have seen very strong consumption kind of growth, 3.8%, which if you look at historical average is well above trend. At this point in time, we have seen some stresses in the April, July growing period in terms of very dry conditions. However, our pod counts and estimates still show a fairly strong crop both in Cote d'Ivoire and in Ghana and in Cameroon and Nigeria. So we are expecting a S&D balance for the 2021 crop​.”

But Verghese offered a word of caution on the conference call: “[But] everything will depend on really the impact of the living income differentials and how it's going to be implemented. That's difficult to predict at this stage​.”

Neelamani Muthukumar, Olam Group CFO, told analysts: “Cocoa had a stellar year in 2018. And continuing from a strong performance of last year, the supply chain, the trading and processing operations all have continued to perform creditably and well positioned to perform strongly in the second half as well​.

Living income differential 

Recently, in July, the Ivory Coast and Ghana governments had announced a $400 premium for the farmers, what they call as the living income differential for the farmers. And that has actually resulted in some shake-up in the industry. And everybody is closely monitoring that, and we are also watching what would be the potential impact of this living income differential that has been announced jointly by these two governments​."

Muthukumar reminded analysts that more than 60% of the world's cocoa production derives from the two West African countries. “However, we are well positioned in terms of covering our cocoa beans requirement for the processing operations for the rest of the year​,” he said.

He also said that the company’s fixed capital is primarily higher due to the acquisition of the BT Cocoa processing factory bought in the first quarter in Indonesia and adjustments in accounting standards.

Olam’s executive director and group COO, A Shekhar, said: “We further strengthened our balance sheet during the first half of the year, with improved gearing and free cash flows​. 

We are well positioned for the second half of the year as we approach the peak of the procurement season for several of our commodities, with likely increases in working capital deployment. We will also stay focused on the divestment of the identified non-core assets as we complete our planned fixed capital investments, including the proposed acquisition of Dangote Flour Mills during this period​.” 


  • Steady operating performance with Q2 2019 and H1 2019 EBITDA growth of 14.1% to S$351.2 million and S$771.5 million respectively
  • Q2 2019 and H1 2019 PATMI were lower by 34.5% and 8.5% to S$61.5 million and S$230.3 million respectively
  • Excluding exceptional losses and impact of SFRS(I) 161 , Q2 2019 and H1 2019 PATMI would be higher at S$73.6 million and S$261.0 million respectively 
  • Strong, positive Free Cash Flow to Equity (FCFE) of S$864.2 million for H1 2019 
  • Further improvement in net gearing to 1.28x (from H1 2018: 1.46x)
  • Board of Directors declares interim dividend of 3.5 cents per share for H1 2019 (H1 2018: 3.5 cents) 
  • Read the full report here​.

Related topics Markets Commodities Cocoa

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