Olam Q3 profit drops 14.2% to S$20.7m

Singapore

AGRI-FOOD business Olam International said third-quarter earnings fell 14.2 per cent to S$20.7 million against a strong year-ago quarter on tough trading conditions in coffee, and lower performance from its peanut business and commodity financial services (CFS).

Revenue for the three months to end-September climbed 23.6 per cent to S$8.29 billion from S$6.71 billion a year ago.

Ebitda (earnings before interest, taxes, depreciation and amortisation) fell 5.7 per cent to S$229.1 million from S$243 million for the year-ago period.

For the nine months to Sept 30, Olam posted a 13.6 per cent drop in net profit to S$272.6 million. Sales volume grew 57.8 per cent mainly due to higher trading volumes in grains but revenue growth was a modest 15.7 per cent to S$22.02 billion as grains had a lower selling price than for other commodities in Olam's portfolio.

The nine-month bottomline was also weighed down by other operating expenses which amounted to S$208.9 million versus a gain of S$31.2 million for the same period last year. Olam said this was mainly due to unrealised foreign exchange losses after significant devaluation of local currencies against the US dollar, namely the Brazilian real, Indian rupee, Turkish lira and Argentinean peso.

The CFS business incurred a net loss of S$31.9 million in Ebitda for nine-month period, of which S$31.5 million came in Q3, mainly due to losses from the funds business.

Noting that "Q3 is a seasonally lower quarter" for Olam, its co-founder and group CEO Sunny Verghese said: "We further refined our portfolio and made targeted investments during the year, including into digital initiatives and sustainability solutions, that will position us to capture future growth."

Olam highlighted that its net gearing improved to 1.38 times at Sept 30, down from 1.82 times a year ago.

Executive director and group chief operating officer A Shekhar said: "We reduced our gearing and overall net debt with lower finance costs despite higher interest rates, while continuing to diversify our funding sources."

Reduced capital expenditure and divestments delivered S$602.4 million in free cash flow to equity for the nine-month period in 2018 versus S$713.2 million for the year-ago period.

Olam shares on Wednesday closed S$0.09 or 5.1 per cent lower at S$1.68.