Olam Group “carefully monitoring” Ukraine agri-food supply chain disruptions while reporting “banner year”
28 Feb 2022 --- With a major corporate reorganization in view, Olam Group reports “record” performance in fiscal 2021. With Ukrainian fighters battling Russian troops, the global agri-food heavyweight has disclosed that it has not seen any disruption to its supply chain but is keeping a close eye on the situation.
The company’s Olam Agri division reportedly delivered a strong growth trajectory in its Food & Feed segments. Meanwhile, its non-food segment, now known as Fibre, Agriindustrials & Ag Services, bounced back strongly from the impact of COVID-19 in 2020.
The group’s revenue increased 31.2% to reach SG$47.0 billion (US$34.6 billion) on higher prices across most products and commodities in 2021. Olam Agri contributed 66.5% of total Group revenue, with olam food ingredients (ofi) at 31.1%, and Olam International (OIL) at 2.4%, respectively
“We had a banner year in 2021 with our strongest Reported and Operational PATMI since Olam was founded despite the continued impacts from COVID-19. This reflects the continued strength and differentiation of our business model,” remarks Olam co-founder and group CEO, Sunny Verghese.
Headquartered and listed in Singapore, Olam currently ranks among the top 30 largest primary listed companies in terms of market capitalization on SGX-ST.
Olam undergoes significant reorganization
Olam Group has been reorganized into the new operating groups of ofi, Olam Agri and OIL, with OIL listed as the parent holding of the other two businesses until their IPOs and demergers are completed.
“The benefits of focus through the reorganization exercise has yielded strong growth momentum for both ofi and Olam Agri, and they are now well poised for their next phase of growth,” says Verghese.
Verghese highlights that ofi is set to list in both London and Singapore in Q2 2022.
“To that end, we are concurrently exploring various strategic options to unlock value and accelerate growth for Olam Agri – these include the potential introduction of strong strategic minority partners who share our vision for the business, and/or a potential IPO and demerger of Olam Agri,” reveals Verghese.
Impact of “transformational” acquisitions
Olam Group CFO, N Muthukumar, comments: “We maintained a strong balance sheet in 2021 even as we committed significant capital for transformational acquisitions such as Olde Thompson and for several organic growth initiatives.”
“With the legal separation of the new operating groups now complete, we are working closely with each of them to find the most optimal capital structure so they can meet their operational needs and deliver profitable growth,” he continues.
As the Russian invasion of Ukraine has led to fears of a return to “Cold War” diplomacy, agricultural analysts warned of the severe impact that war and economic sanctions could have on the global food market.
Grain production and export, in particular, is now under serious threat, with much of the world relying on crops grown and exported in and from areas bordering the Black Sea – a region contested by the Kremlin, with much of it (like the Crimean Peninsula) already annexed by Russian troops in 2014.
Olam Group discloses that it is closely monitoring the situation in the Black Sea region and that its “overriding priority continues to be the safety of its people and their families in Ukraine.”
The overall region is not a material contributor to the Group’s revenues and assets, Olam stresses.
“Overall, barring unforeseen circumstances including adverse impacts of the Ukraine-Russia crisis on the markets, new COVID-19 variants of concern and consequent hard lockdowns across the world, the economic outlook and prospects for the Group for 2022 remain positive, with the industry continuing to see strong demand and tight commodity supplies amid supply chain disruptions,” the company concludes.
Transparency for human welfare and sustainability
Since June 2020, Olam International has been included in the FTSE4Good Index Series, a global sustainable investment index series developed by FTSE Russell, following a rigorous assessment of Olam’s supply chain activities, impact on the environment and governance transparency.
The FTSE4Good Index Series identifies companies that demonstrate strong Environmental, Social and Governance practices and is used by a variety of market participants to create and assess responsible investment funds.
Last December, ofi ramped up its efforts to safeguard human rights in its hazelnut supply chains, which are currently implicated by poor labor conditions. With a focus on eradicating child labor, the company’s newly launched Hazelnut Trail initiative offers transparency in this field across Turkey.
By Benjamin Ferrer
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