Here are two big reasons to blame for Olam's 13% net profit drop

Hazy oulook looms in the horizon.

According to Maybank Kim Eng, Olam’s 2QFY6/14 results came in slightly below our expectations, with net profit declining by 13% YoY to SGD134.9m.

Here's more:

The earnings miss can be attributed to (1) an 8.0% drop in revenue caused by volume decline across all business segments, and (2) a SGD15.4m biological loss vs a SGD22.1m biological gain over the same period last year.

Almond, onion, cocoa and cotton were the key outperformers in the company’s portfolio, while dairy, grain and rice were the main drag.

For now, we think the outlook for Olam’s business is still hazy. Its wide exposure to upstream operations is a key concern, as this business may be hit if commodity prices were to fall. Also worrying is its high sensitivity to rising interest rates. Maintain HOLD and TP of SGD1.57.