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Earnings in food sector boost Olam's Q1 results

A better performance in its food divisions helped commodity trader Olam International lift first-quarter earnings by 26.5 per cent, it reported yesterday.

Net profit came in at $143.8 million while revenue was $5.8 billion in the three months to March 31, up 21.9 per cent from the same period a year earlier. The earnings lift came mainly from the edible nuts, spices and vegetable ingredients business, as well as the food staples and packaged foods business.

The commodity financial services business also turned around from a loss of $3.5 million a year ago to post earnings before interest, tax, depreciation and amortisation (Ebitda) of $5.1 million in the first quarter.The boost from these three segments offset lower contributions from the confectionery and beverage ingredients, industrial raw materials, agricultural logistics and infrastructure segments.

In the confectionery and beverage ingredients segment, Ebitda fell 28.7 per cent from a year ago as higher coffee prices failed to make up for lower takings in the cocoa supply chain and trading, which faced margin pressures due to sharp market movements in late 2016 and early this year.

Chief operating officer A. Shekhar said: "It will be a tough year for cocoa; it has been a tough start to the year, but we are quite well positioned whether on the supply chain or origination side, or the processing side. We will contend with the current volatility as we go along."

Sales volumes rose 50.5 per cent from a year earlier due to opportunistic trading volumes in grains under the food staples segment.

Earnings per share was 4.79 cents, up from 3.95 cents a year ago, while net asset value per share was 194.85 cents as at March 31, up from 190.82 cents as at Dec 31 last year.

  • AT A GLANCE

    NET PROFIT: $143.8 million (+26.5%)

    REVENUE: $5.8 billion (+21.9%)

Olam said it is "on target" to achieve positive free cash flow to equity by the year end.

It added that it is focused on turning around its underperforming assets, including its dairy upstream business in Uruguay and its tomato business in the United States.

Group chief executive Sunny Verghese said: "Our results for this quarter reflect continued progress in pursuing growth in our priority clusters, while constantly rebalancing our portfolio to ensure a good mix of gestating and contributing assets."

Olam shares yesterday ended three cents or 1.5 per cent higher at $1.99.