Olam International full year profit up 23.6% to S$445mn

Successful execution of the company’s corporate strategy through selective and targeted integration upstream into plantations and midstream into processing has delivered accelerated earnings and returns.

Olam International Limited (“Olam” or the “Group”), a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, today reported a Net Profit After Tax (including exceptional items) of S$444.6 million for the twelve months ended 30 June 2011 (“FY2011”), a growth of 23.6% compared to S$359.7 million achieved in FY2010. Net Profit After Tax (excluding exceptional items) grew 37.1% to S$372.8 million compared to S$271.8 million achieved in the previous corresponding period (“FY2010”).

The FY2011 results include gain from exceptional items amounting to S$57.1 million compared to a gain of S$87.6 million from exceptional items in the previous corresponding period (FY2010). Net Profit After Tax (including exceptional items) in Q4 FY2011 grew by 54.3% to S$142.9 million compared to S$92.6 million reported in the previous corresponding quarter (Q4 FY2010). Net Profit After Tax (excluding exceptional items) in Q4 FY2011 grew by 4.9% to S$106.2 million from S$101.3 million in Q4 FY2010.

Olam’s Group Managing Director and CEO, Sunny Verghese said: “Olam’s record results in FY2011 reflect the resilience of the Olam model to perform across economic and commodity cycles. Our ability to achieve this consistency in performance despite the volatility that has now become a way of life in our markets is a function of our well balanced and diversified portfolio (across 20 products, focused primarily on the agri-complex and 65 countries) and our unique business model. In that model we aim to out-originate competition through effective farmgate sourcing, selectively and differentially integrate across the value chain, providing differentiated and customised marketing solutions and services. This model is supported by our strong control systems and risk management capabilities.

“We are now two years into the execution of the 6 year Corporate Strategic plan for the period FY2010-2015. I am pleased to announce that we have exceeded the milestones that we had set for this period. We have extended our competitive advantage and built a unique portfolio by investing selectively in attractive-return upstream (plantations) and midstream (value-added processing) growth initiatives, which have helped us enhance margins and strengthen returns. Most importantly, we have fortified our leadership and corporate culture which serves as one of our distinctive advantages and which will serve us well going forward”.

Olam’s Group CFO, Krishnan Ravikumar explained the results: “Our FY2011 Full Year results provide further evidence of the effectiveness and potential of our growth strategy. The success of this ‘Olam model’ is reflected in the strong growth in Net Contribution per ton for the portfolio of 12.5% which is one of the strongest margin enhancements that we have realised for any period.

All five business segments, namely Edible Nuts, Spices & Beans, Confectionery & Beverage Ingredients, Food Staples & Packaged Foods, Industrial Raw Materials and Commodity Financial Services, contributed to the growth in NC, according to an Olam report.

“We are also very pleased to have improved our capital productivity by improving materially our cash-to-cash cycle during this period, which helped mitigate the increase in working capital requirements that resulted from sharply rising commodity prices. In addition, we have taken timely steps to build a strong and resilient balance sheet by raising S$740 million of equity and nearly S$1.5 billion of medium term and long term debt. These additions to our balance sheet place us in a very strong position to navigate through the current dislocation in the capital
markets and take advantage of opportunities as they emerge in the markets that are consistent with our long term strategies. We will continue our balanced and disciplined approach to capital allocation consistent with our strategy.” he added.

Given the strong performance recorded by the Group in FY2011 and the continued execution of its long term strategic growth plans, the Group continues to be positive about its prospects for FY2012.