Olam Rebounds to Q4 Profit
01 Mar 2017 --- Olam International has posted a fourth quarter net profit of S$102.2 million (US$72.5 million) from a loss of S$269.5 million (US$ 191.3 million) a year ago led by better operational performance and lower exceptional losses. This was achieved on the back of a 12 percent improvement in revenue to S$6.1 billion from S$5.4 billion.
Operational PATMI, which excludes exceptional items, more than doubled to S$102.3 million. Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) increased by 34.4% to S$349.0 million on the back of a strong performance from Confectionery & Beverage Ingredients and Food Staples & Packaged Foods, which offset declines in other business segments.
Net finance costs came down from S$121.3 million to S$112.0 million on continued initiatives to optimise loan tenures and reduce borrowing costs. This helped to partly offset the increase in depreciation and amortisation on account of the acquisition of the Cocoa processing, wheat milling and peanut shelling assets.
Sales volumes grew 14.0% on volume growth recorded by the Food Staples & Packaged Foods and Industrial Raw Materials, Ag Logistics & Infrastructure3 segments. Revenues were up by 12.1% to S$6.1 billion.
For 12M 2016, Olam recorded PATMI of S$351.3 million compared to a loss of S$114.9 million in the previous year on improved operational performance and lower impact from exceptional losses. Operational PATMI was up 23.1% at S$363.8 million.
EBITDA grew 10.8% year-on-year to S$1.2 billion, driven by growth in Confectionery & Beverage Ingredients and Food Staples & Packaged Foods, which offset lower contribution from other segments.
Despite a higher asset base, net finance costs fell from S$448.9 million in 12M 2015 to S$403.5 million in 12M 2016 as a result of the initiatives undertaken to optimise loan tenures and reduce cost of borrowings. The reduction partly offset the rise in depreciation and amortisation charges during the year.
Sales volumes increased 15.3% as most segments registered higher volumes. Revenues grew 8.1% year-on-year on higher volumes, with lower prices of some commodities offsetting price increases in others.
Olam recorded substantially higher net operating cash flows of S$1.0 billion for 12M 2016 compared to S$154.9 million a year ago. As a result of the higher operating cash flows, as well as lower net capital expenditure, Free Cash Flow to Firm (FCFF) improved by S$1.6 billion to negative S$418.1 million for 12M 2016.
Net gearing as at December 31, 2016 was 1.99 times compared to 1.96 times as at December 31, 2015.
The Board of Directors has recommended a final ordinary dividend of 3.0 cents per share, bringing total dividends to 6.0 cents per share for 12M 2016. This compares to total dividend of 6.0 cents for the previous financial year of 18 months.
Olam’s Co-Founder and Group CEO Sunny Verghese said: “I am pleased to report a strong set of results for 2016, despite a challenging operating environment and uncertainties in the global commodity markets.
“We made steady progress in 2016 by executing on our refreshed Strategic Plan going into 2018 through targeted organic and inorganic investments in our prioritised platforms.
“We have also improved shareholder returns through share buybacks and enhanced dividend distribution in 2016. Looking ahead, we will continue to pursue our governing objective of maximising long-term intrinsic value for our continuing shareholders.”
Olam’s Executive Director and Group COO, A. Shekhar said: “Strong growth from the Confectionery & Beverage Ingredients and Food Staples & Packaged Foods segments demonstrates that our strategy of accelerating investments and addressing specific areas of underperformance to strengthen our leadership positions in these segments is working.”
“We reduced our interest costs despite a higher asset base and will continue to optimize our capital structure even as we focus on growth and ensure that our gestating assets reach their full potential.”
