Olam Group remains optimistic, despite drop in earnings
Olam said lower year-on-year earnings of S$264.9 million came as net finance costs doubled despite the higher year-on-year revenue.
This brings the group’s full-year 2022 earnings to S$629.1 million, 8.4% lower than 2021, saying the decline was attributed to the strong base seen in the previous year.
Ofi, which includes the group’s cocoa division, recorded strong revenue growth of 15.3% led by pricing growth across both segments. EBIT (Earnings Before Interest and Taxes) decreased 9.0% against a very strong comparative prior period that benefited from a Covid-19 bounce-back, the Group’s financial report stated. In addition, it was adversely impacted by the external events in 2022, such as the war in Ukraine.
ofi has entered 2023 with good momentum, the Group said in a release, its actions to mitigate the external shocks of 2022 such as passing through inflationary costs are rolling through, supported also by the easing of recent supply chain disruptions. ofi is going ahead with a listing on the London Stock Exchange, with a concurrent listing in Singapore after Olam Agri IPO, subject to prevailing market conditions.
Olam Agri reported another strong year in 2022 as it sustained revenue and EBIT growth despite heightened geopolitical risks and significant macroeconomic volatility. It is targeting an IPO as early as H1 2023 subject to prevailing market conditions, with a primary listing in Singapore and potential concurrent listing in Saudi Arabia - this follows the sale of substantial minority stake to SALIC2 for US$1.24 billion, crystallising a benchmark equity valuation of US$3.5 billion for Olam Agri.
Performance in the remaining Olam Group showed strong year-on-year growth and significant turnaround with positive EBIT and it is to remain listed on SGX on completion of Olam Agri, ofi IPOs.
Sunny Verghese, Olam Group Co-Founder and CEO, said: “We delivered operational PATMI of S$781.5 million against a strong prior year and saw revenue and EBIT growth in 2022, despite the challenging environment that we are operating in.
“Our discipline in executing our strategy has enabled us to ride industry tailwinds to deliver strong operating performance, with Olam Agri in particular, delivering another strong year.
“The Olam Group is now at the cusp of transformational growth as all three operating groups have been repositioned to tap into the growing demand in their respective sectors. In the year ahead, we expect both Olam Agri and ofi to continue their growth momentum, capitalising on industry trends, the reopening of economies and the easing of supply chain disruptions.”
For 2023, the Group expects commodity prices and supply chain disruptions to ease from the highs of 2021- 2022 although geopolitical and macroeconomic uncertainties are likely to persist.
It also expects to continue incurring one-off and non-recurring expenses associated with the execution of the Re-organisation Plan, including the planned listing(s) in 2023.
“Barring any unforeseen circumstances or unfavourable geopolitical, macroeconomic and roll-back on reopening of borders by major economies, the Group is cautiously optimistic about its prospects for 2023,” it stated.
Olam Group Financial Performance
Olam Group reported steady 2022 performance against a strong prior year and a challenging macroeconomic and geopolitical environment.
H2 2022
- Revenue increased 9.5% year-on-year (YoY).
- EBIT grew 2.2% to S$798.2 million.
- PATMI declined 24.5% to S$200.0 million as net finance costs doubled.
- Excluding exceptional items, Operational PATMI was down 42.2% to S$303.0 million.
2022
- PATMI declined 8.3% YoY to S$629.1 million against a strong prior year as EBIT growth was offset by significantly higher net finance costs and taxes.
- Excluding non-recurring exceptional items, Operational PATMI decreased by 18.7% to S$781.5 million.
- Revenue increased 16.8% YoY to S$54.9 billion largely due to higher prices across many products and commodities.
- EBIT grew 13.1% to S$1.6 billion mainly on the strong contribution by Remaining Olam Group and Olam Agri. Olam Agri contributed 53.3% of the Group’s total EBIT, while ofi and Remaining Olam Group contributed 46.4% and 0.3% respectively.
- The sale of the substantial minority stake in Olam Agri resulted in a net gain of S$1.2 billion recorded in capital reserves in the equity statement.
- Free Cash Flow to Equity (FCFE) swung to a positive S$1.9 billion (2021: -S$1.0 billion) on improved net operating cash flow, lower capital expenditure and divestment proceeds from sale of substantial minority stake in Olam Agri.
- Net gearing improved to 1.47 times compared to a year ago.
