Olam Reports Strong Year-on-Year Earnings for Both Q2 and H1
12 Aug 2016 --- For Q2 2016, Olam reported 20.0% increase in Profit After Tax and Minority Interest (PATMI) year-on-year to S$114.9 million, on improved operational performance in the overall Food Category. Operational PATMI, which excludes exceptional items, grew 19.2% year-on- year to S$114.8 million.
The Group’s EBITDA grew by 8.1% to S$315.6 million mainly on the back of strong performance from Confectionery & Beverage Ingredients and Food Staples & Packaged Foods, which offset declines from the Edible Nuts, Spices & Vegetable Ingredients and Industrial Raw Materials segments.
Contributing to a stronger bottom line were lower finance costs which came down from S$101.1 million to S$91.7 million due to the various initiatives to optimize loan tenures and reduce cost of borrowings. This helped to offset the increase in depreciation and amortization primarily arising from the acquisition of Cocoa processing assets from ADM and wheat milling assets in Nigeria. Sales volumes were up 19.9% as all segments except Edible Nuts, Spices & Vegetable Ingredients showed growth.
However, revenues rose by a modest 3.5% due to lower prices of certain commodities within the Group’s portfolio. For H1 2016, Olam achieved a 73.0% increase in PATMI to S$228.6 million due to lower exceptional losses from buying back higher priced bonds in both periods (H1 2016: S$12.4 million; H1 2015: S$97.7 million). Operational PATMI was up 4.9% at S$241.0 million.
EBITDA grew 2.1% year-on-year to S$648.4 million driven by growth from the Confectionery & Beverage Ingredients and Food Staples & Packaged Foods segments, which offset lower contribution from other segments. Despite higher overall debt, net finance costs declined from S$224.3 million in H1 2015 to S$191.1 million in H1 2016 as a result of the initiatives to optimize loan tenures and reduce cost of borrowings. Sales volumes increased 15.4% as all segments except Edible Nuts, Spices & Vegetable Ingredients registered higher volumes.
Revenues grew 6.7% year-on-year as lower prices of some commodities offset the impact of higher volumes. Olam also reported higher Free Cash Flow to Firm of S$191.2 million in H1 2016 (H1 2015: S$135.0 million) as increased operating cash flows and lower working capital offset the increase in taxes and net capital expenditure.
In Q2 2016, the Group announced the following investments, mainly in its prioritized platforms: US$150.0 million investment to set up two state-of-the-art animal feed mills, poultry breeding farms and a hatchery in Nigeria Acquisition of the remaining 50.0% in Acacia Investments (palm refining assets in Mozambique) for US$24.0 million Acquisition of 100.0% of Brooks Peanut Company for US$85.0 million Post Q2 2016, its 60.0% owned joint venture Olam Palm Gabon acquired palm and palm oil assets from SIAT Gabon for US$24.6 million.
The Group also expects its 30:70 joint venture with strategic partner Mitsubishi Corporation, MC Agri Alliance, to commence operations by October 1 this year. The joint venture will import and distribute coffee, cocoa, sesame, edible nuts, spices, vegetable ingredients and tomato products for the Japanese market.
Olam’s Co-Founder & Group CEO Sunny Verghese said: “Our strong operational and financial performance amid ongoing global macroeconomic volatility validates our differentiated strategy.”
“We look forward to generating value from our recent initiatives, including the flour and pasta manufacturing facilities in Nigeria, our enlarged peanut shelling business in the US as well as our JV in Japan with strategic partner Mitsubishi Corporation. Our uniquely shaped portfolio and strong pipeline of gestating assets will contribute to earnings going forward.”
Segmental Review Olam’s Executive Director and Group COO, A. Shekhar said: “We are pleased with the steady EBITDA growth across most of our businesses as our diversified portfolio and targeted investments in prioritized platforms performed well despite challenging industry and financial market conditions. We are also benefitting from our debt optimization initiatives. All these measures taken together will continue to drive profitable growth.”
