Olam's Q1 earnings up 26.5% at S$143.8m

Singapore

COMMODITY trader Olam International reported a 26.5 per cent jump in first-quarter net profit to S$143.8 million from S$113.6 million a year ago led by a better showing in certain food segments.

Sales revenue for the three months to March improved 21.9 per cent to S$5.8 billion while sales volumes were up 50.5 per cent largely on opportunistic trading volumes in grains over the period, said Olam in its results announcement. Healthy growth in three of the five segments - edible nuts, spices and vegetable ingredients, food staples and packaged food and commodity financial services - fuelled a 19.8 per cent rise in earnings before interest, tax, depreciation and amortisation (Ebitda) to $398.6 million.

The improvements in these segments compensated for the lower contributions from the confectionery and beverage ingredients and industrial raw materials businesses.

Revenue in the edible nuts, spices and vegetable ingredients segment grew 18.8 per cent on higher volumes and higher prices for cashews and almonds while Ebitda grew 72.1 per cent on improved contribution from the edible nuts platform, particularly peanuts, cashew and almonds.

The confectionery and beverage ingredients segment saw a 7.2 per cent drop in revenue on lower volumes and lower cocoa prices, which was partly offset by higher coffee prices. Ebitda in this segment fell 28.7 per cent as improved contribution from coffee was offset by lower contribution from cocoa - a result of margin pressure on its supply chain and trading caused by sharp market movements in late 2016 and early 2017.

The food staples and packaged foods segment saw a 64.4 rise in in revenue led mainly by opportunistic trading volumes in grains and a 38 per cent increase in Ebitda on the back of improvements on all its platforms.

Revenue for the industrial raw materials, Ag logistics and infrastructure segment rose 52.5 per cent on higher volumes and higher cotton prices while Ebitda slipped 4.6 per cent as underperformance from wood products offset growth from cotton.

Olam's earnings per share rose to 4.79 Singapore cents in the quarter from 3.95 Singapore cents.

No dividend was declared, same as the previous period a year ago.

Olam's co-founder and group chief executive Sunny Verghese said the group's first-quarter results reflected continued progress in pursuing growth in its "priority clusters" while constantly rebalancing its portfolio to ensure a good mix of gestating and contributing assets.

A. Shekhar, Olam's executive director and group chief operating officer, said: "Despite price volatility in some commodities in our portfolio, we achieved strong Ebitda growth in Q1 2017, reflecting the strength and diversity of our business, select investments and decisive actions to address any areas of underperformance."

Olam shares closed three Singapore cents or 1.5 per cent up at S$1.99 on Monday.