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Olam Q2 profit slumps 34.5% on higher costs, exceptional losses

AGRI and food giant Olam International’s net profit shrank 34.5 per cent to S$61.5 million for its second quarter ended June 30, from S$94 million a year ago.

This was due to higher depreciation and amortisation, net finance costs and exceptional losses, Olam said on Wednesday morning.

Olam adopted the new accounting standard SFRS(I) 16 with effect from Jan 1, 2019, which had a net impact of negative S$6.6 million on the second quarter’s bottomline.

Excluding exceptional losses and the impact of the new accounting standard, net profit for the quarter would have fallen about 21.7 per cent to S$73.6 million instead, Olam said.

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Revenue grew 15.7 per cent to S$8.6 billion during the three months to June 30.

Earnings per share came in at 1.49 Singapore cents for the quarter, down from 2.52 cents in the year-ago period.

A one-tier tax exempt interim dividend of 3.5 cents per share was declared for the first half of this year, the same as a year ago, to be paid on Aug 29.

For the half year ended June 30, net profit fell 8.5 per cent year on year to S$230.4 million, while revenue rose 16.2 per cent to S$15.94 billion.

The H1 results included a net exceptional loss of S$17.7 million from one-off costs incurred during the first-half year following the closure of the sugar, rubber and fertiliser trading desks, fundamental fund, wood products business in Latin America, as well as the sale of the peanut shelling and farming business in Argentina and the remaining stake in Collymongle gin in Australia. The net exceptional loss for the quarter was S$5.5 million.

Olam’s executive director and group chief operating officer, A Shekhar, said: “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,” Mr Shekhar added.

Shares of Olam International were down two Singapore cents or 1.03 per cent to S$1.93 at Tuesday’s close, before the results were released.