AGRI food giant Olam Group : VC2 0% on Friday (Aug 11) reported a net profit of S$48 million, down 88.8 per cent from earnings of S$429.1 million in the year-ago period. 

The group said this was due to a one-off exceptional loss on lower almond yields in Australia which brought the group’s net exceptional loss to S$136.1 million, as well as significantly higher net interest costs of S$245.9 million. 

The board of directors has declared an interim dividend of S$0.03 per share for the period under review, down from S$0.04 per share in the year-ago period. The dividend will be paid out on Aug 28. 

The group also saw reduced contributions from Olam Agri following the sale of the 35.4 per cent stake. 

Revenue for H1 was down 13.2 per cent to S$24.7 billion. Segmentally, Olam’s food ingredients unit ofi saw revenue fall 5.1 per cent to S$7.7 billion due to lower volumes, but this was partially offset by pricing growth in ingredients and solutions.

Olam Agri saw a 16.7 per cent decline in revenue to S$16.3 billion on the back of reduced sales volumes and a normalisation of commodity prices from the highs in H1 last year, while the remaining Olam Group reported a 10.4 per cent drop in revenue to S$695.4 million on lower sales from de-prioritised assets and gestating businesses, despite higher volumes. 

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Speaking to reporters and analysts at a briefing to discuss the company’s latest financial results, Olam chief executive Sunny Verghese said a number of factors are resulting in “tough” conditions for the group.

Verghese, who also heads the Olam Agri unit, said these include “sticky” inflation levels and high interest rates, tougher trading conditions in the food and agribusiness sectors, geopolitical tensions, and food security issues that have prompted governments to impose regulatory measures.

Weather is also a concern for an agribusiness company like Olam, Verghese said. He cited the example of cotton crops in Texas being significantly impacted by hotter and drier weather.

“None of us knows exactly how we’re going to track over the next few years. We (need) to have a diversified portfolio that allows us to navigate across these various drivers,” said Verghese.

ofi’s chief executive A Shekhar said an “unprecedented situation” in Australia’s harvest – an estimated 35 per cent to 40 per cent reduction in yields – had resulted in a one-off exceptional loss for the company.

Based on research so far, he said he believes this impact is just one-off, and the tree health remains unaffected. About 75 per cent of the harvested crop has been processed, he noted.

“There could be some changes to the final volume and sales and sales prices. But we believe that there will not be a material difference to this number.”

With regard to the planned initial public offerings (IPOs) of Olam Agri and ofi, Verghese said he expects the dual listing of Olam Agri on both stock markets in Singapore and Saudi Arabia to take place in the first half of 2024.

“Markets are beginning to slowly come back, and we are not waiting to do an IPO in June because we believe market conditions will be substantially better then,” he said, stressing that the company has to get certain approvals from authorities before the IPO.

Verghese added that there will be “some gap” between the listings of Olam Agri and ofi to avoid forcing investors to “make a choice” between both companies.

Looking ahead, the group said ofi is leveraging recent investments to grow its innovation pipeline. New greenfield plants are being commissioned in H2 and will further expand its capacity in three important value-added areas.

The group also said it expects to continue to incur expenses associated with the execution of its reorganisation plan in H2. 

“Notwithstanding this one-off impact, the continuing impact from higher interest rates, and enhanced global macro risks, the group continues to be cautiously optimistic about its prospects for 2023,” it added. 

Shares of Olam closed flat at S$1.31 on Friday.