Olam Group expects one-off charge of US$83 million for H1 2023; net profit to be ‘materially lower’

FOOD and agri giant Olam expects to record an exceptional one-off charge of US$83 million after tax for the first half of its 2023 financial year, causing total net profit to be “materially lower” compared with the same period a year ago.

The one-off charge is primarily due to an unprecedented and materially lower crop yield in the group’s almond orchards in Australia, with estimates that the final yields would be between 35 per cent and 40 per cent lower than initially forecast.

In a bourse filing on Wednesday (Jul 26), Olam said that the entire almond industry in Australia faced a significant and unprecedented decline in crop yield in the 2022 to 2023 growing season compared to historical yields and expectations for the season.

There was a combination of lower bee activity during pollination due to disease and unseasonal cold, and wet conditions from excessive rain and flooding.

In addition to the lower crop yield of almonds in Australia, Olam is also hit by higher interest costs.

However, it added that a large part of the higher interest costs – in particular arising out of working capital funding – are being recovered through an increase in selling prices, albeit with a lag. 

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Despite this exceptional one-off charge and the impact from higher interest costs, Olam still expects its overall net profit to remain positive for H1 2023 and FY2023. 

The final repercussion for the whole of 2023 will be ascertained in the second half of the year after the entire processing and sale of the crop is completed.

“Based on available agronomy data, overall tree health post the 2023 crop harvest and industry estimates, the orchards are likely to return to their natural yield curve from 2024 onwards,” Olam said.

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Its shares closed 0.7 per cent or S$0.01 higher at S$1.40 on Wednesday.