Olam posts 44.4% profit growth to $332.7m in H1

It was thanks to a net exceptional gain of $130.6m from the divestments in Far East Agri.

Olam International has recorded a profit of $332.7m in H1, a 44.4% YoY surge from $230.36m in H1 2019, a local bourse filing revealed. Revenue likewise rose 7.1% YoY to $17.08b from $15.94b over the same period.

Its profit growth was driven by a net exceptional gain of $130.6m from the divestments of the remaining 50% stake in Far East Agri and the partial stake sale of ARISE P&L. It was offset partially by one-off exit and closure costs of other de-prioritised assets that were divested or shut down.

This is also the first time Olam is reporting against its new operating groups. Its Olam Global Agri (OGA) business contributed 58.9% of total group revenue, whilst Olam Food Ingredients (OFI) 36.1%, and Olam International Limited (OIL) 5% respectively.

Earnings before interest and tax (EBIT) crashed 18.8% YoY due to lower contribution from OFI, which in turn was due to lower contribution from almonds, hazelnuts and Cocoa processing. OFI accounted for 62.1% of total group EBIT, whilst OGA makes up for 54%.

Cash flow generation with free cash flow to equity (FCFE) is at $826.9m. Net gearing was deemed steady at 1.29 times, despite higher net debt with an adjusted gearing of 0.34 times net of readily marketable inventory and secured receivables.

Olam’s board of directors has declared an interim dividend of 3.5 cents per share, remaining unchanged from the dividend in H1 2019.

In addition, OFI’s revenue edged up 8.8% YoY to $6.2b, mainly driven by volume growth as well as higher average selling prices. EBIT was down 40.1% YoY to $263.1m, against a strong H1 2019 performance, on reduced contribution from almonds, hazelnuts and cocoa processing businesses. These were impacted by adverse prices and margin pressures resulting from COVID-19.

Meanwhile, revenue in OGA similarly went up 8.4% YoY to $10.1b, thanks to higher volumes as well as higher prices in food staples including grains, rice and edible oils. EBIT was up 55.4% at $228.9m as strong performance in grains origination and merchandising, grains milling, animal feed production and rice distribution offset by lower contribution from rice, edible oils and cotton origination and merchandising.

Lastly, OIL posted lower revenue of 14.6% YoY to $849.3m with the closure of its sugar, rubber and fertiliser trading desks, the fundamental fund and the wood products business in Latin America. EBIT was lower by 6.1% with a loss of $68.3m due to the Gestating Businesses (Olam Palm Gabon, Packaged Foods Business, and the ARISE Infrastructure & Logistics business), which were impacted by COVID-19.