Olam Q1 PATMI up 6.1% to S$179.1m on net exceptional gains

OLAM International recorded a 6.1 per cent rise in profit after tax and minority interests (PATMI) to S$179.1 million for the first quarter ended March 31, 2020, from S$168.8 million a year ago, according to a business update on Thursday.

This came on the back of S$43.2 million in net exceptional gains in the quarter due to the agri-food giant's divestment of its remaining half stake in Far East Agri, which held its sugar refinery assets in Indonesia. Moreover, the group reduced its effective interest in ARISE P&L from 40.5 per cent to 30.6 per cent.

Operational PATMI, which excludes exceptional items, fell 24.9 per cent to S$135.9 million due to higher finance costs from increased working capital and higher depreciation and amortisation.

Revenue was up 4.6 per cent to S$7.68 billion, from S$7.35 billion the year before.

Olam said that it has S$20.5 billion of total available liquidity to meet its working capital and capital expenditure requirements. It had further enhanced its liquidity position as at March 31, 2020, with cash and cash equivalents of S$4.5 billion, S$6.3 billion of readily marketable inventories, S$2.2 billion of secure receivables and unutilised bank lines of S$7.5 billion.

On the Covid-19 situation, the group said it was able to operate most of its global facilities at or near capacity in Q1 as it is deemed a provider of essential service in many locations around the world. 

The novel coronavirus's impact on demand is varied across products. Non-food categories such as cotton saw lower demand, as well as food products with significant out-of-home consumption like edible oils and coffee.

The group also saw lower demand in almonds and dairy due to the China lockdowns in the quarter. However, demand for most food staples was generally resilient and spiked in some cases due to the pantry restocking effect at the household and retail level.

"With 80 per cent to 85 per cent of the group's revenues in the food category where demand is less sensitive to recession or economic downcycles, the group believes that it will be able to better navigate the demand-led uncertainties around Covid-19," Olam added.

Olam's group chief finance officer Neelamani Muthukumar said the group is maintaining financial discipline by divesting its de-prioritised, non-core assets as part of its strategic plan to release cash and increasing its cash position and available liquidity.

Olam shares closed at S$1.54 on Wednesday, up S$0.01 or 0.7 per cent.