Olam 3Q profits surge 45% YoY but still disappoint

Olam's profit growth slowed QoQ.

Olam International Limited (Olam) reported 1QFY13 revenue of S$4689.1m, though up 45% YoY, it was down 9% QoQ.

Reported net profit came in at  S$43.2m, up 26% YoY but down 61% QoQ.

OCBC estimates that core  earnings (excluding financial and biological revaluation gains) fell 16% YoY and 18% QoQ to S$28.4m.

OCBC said it still deem this set of results to be in line as 1Q typically contributes just 5-10% of its full-year earnings due to the unique seasonal pattern of its portfolio but near-term outlook still cautious.

Here's more from OCBC:

Going forward, Olam is maintaining its fairly cautious outlook, noting that the cyclical events experienced over the past year, combined with the continuing volatility and uncertainty in the global markets, could  have some residual impact on FY13 results. In particular, management believes that the industrial raw material segment could continue to languish for the next 12 to 24 months, although it expects the food segment, especially its grains origination business to
continue to “grow significantly”.

Will continue to extract value 
Despite the short-term volatility, management remains upbeat about its longer term prospects, as it has embarked on numerous initiatives to diversify its business, like moving further upstream. Olam also stressed that it has adequate liquidity and a well-diversified loan book to fund its initiatives, without having to tap the equity market. On the other hand, the recent issuance of debt has raised its net gearing to 2.0x, but management notes that it is still comfortable with 2.5x ratio.