Leading food and agro-business Olam International has released its 2019 first-quarter results, which demonstrate improved financial performance.

 

This includes EBITDA growth of 14.2 per cent to S$420.3 million on increased contribution from its Edible Nuts and Cocoa segments, while PATMII (profit after tax and minority interests) was up 6.9 per cent to S$168.8 million, as higher operating performance (EBITDA) was partly offset by increased depreciation and finance costs. The Singapore-headquartered food commodities giant also recorded a Positive Free Cash Flow to Equity of S$313.0 million. 

 

Navigating macro and industry headwinds

 

“We delivered improved financial performance in Q1 2019, with a 14.2 per cent growth in EBITDA and a 11.3 per cent growth in Operational PATMI compared with Q1 2018,” confirmed Co-Founder & Group CEO Sunny Verghese. “Our diversified portfolio enabled us to better navigate the continuing volatile macro and industry headwinds.

  

“We have started well in executing the four key pathways of our 2019-2024 Strategic Plan, which focus on strengthening our high-growth businesses and getting closer to customers based on changing consumer preferences. Our recent acquisition of BT Cocoa in Indonesia and proposed acquisition of Dangote Flour Mills in Nigeria are examples of us investing further in our leading businesses,” he continued.

  

“We have also successfully exited our Sugar trading business, the Fundamental Fund business, our Wood Products business in Latin America, and our Peanut farming and processing operations in Argentina in Q1 2019 as planned.” 

 

Maintaining “a disciplined approach”

 

Executive Director and Group COO, A. Shekhar, added that the company has “maintained a disciplined approach” to managing its balance sheet, even as the firm continue to invest in growth. “Our targeted capital expenditure and divestments enabled us to deliver positive Free Cash Flow to Equity of S$313.0 million, while improving gearing to 1.35 times,” he advised.

 

“As part of Re-imagining Global Agriculture and Food Systems, we are pleased to pioneer the world’s first ‘Digital Loan’ of US$350 million, following on from our launch of Asia’s first sustainability-linked club loan last year.” 

 

In its outlook statement, the firm said: “Even as political and economic uncertainties continue into 2019, Olam believes its diversified and well-balanced portfolio provides a resilient platform to navigate the challenges in both the global economy and commodity markets. 

 

“Olam will continue to execute on the four strategic pathways for growth as set out in the 2019-2024 Strategic Plan. It will strengthen, streamline and focus its business portfolio, drive margin improvement by enhancing cost and capital efficiency, generate additional revenue streams by offering differentiated products and services, and explore partnerships and investments in new engines for growth.” 

 

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FINANCIAL RESULTS Q1 2019

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• EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) grew by 14.2% to S$420.3 million (Q1 2018: S$368.1 million) due to higher contribution from Edible Nuts and Cocoa, which offset lower contributions from Peanuts, Rice and Sugar. 

• PATMI (Profit After Tax and Minority Interest) increased 6.9% year-on-year (YoY) to S$168.8 million (Q1 2018: S$157.9 million) as improved operating performance was partly offset by higher depreciation and finance costs

• Operational PATMI, which excludes exceptional items, was 11.3% higher YoY at S$181.0 million (Q1 2018: S$162.6 million). 

 

Cash flow and gearing 

• Generated positive Free Cash Flow to Equity of S$313.0 million (Q1 2018: -S$409.2 million) on improved operating cash flow and lower working capital. 

• Net gearing as at March 31, 2019 improved to 1.35 times (Q1 2018: 1.49x) on lower net debt arising from a reduction in working capital. 

 

 

SEGMENTAL PERFORMANCE FOR Q1 2019

 

Edible Nuts and Spices

• Revenue increased 10.0 per cent to S$962.1 million as sales volumes improved. 

• EBITDA was 14.9 per cent higher at S$156.0 million on improved contribution from Cashew, Almonds, Hazels and Spices businesses, offset by lower contribution from Peanuts. 

 

Confectionery and Beverage Ingredients

• Revenue declined 9.4 per cent to S$1.7 billion on lower cocoa and coffee prices in addition to reduced coffee volumes

• EBITDA rose 118.5 per cent to S$133.7 million due to improved margins in the cocoa business in both supply chain and processing operations. Despite the continued downcycle in coffee, the business performed marginally better in Q1 2019. 

 

Food Staples and Packaged Foods 

• Revenue rose 32.5 per cent to S$3.5 billion mainly driven by the growth in Grains trading. 

• EBITDA was lower by 18.0 per cent at S$82.3 million, mainly due to reduced contribution from Sugar and Rice

 

Industrial Raw Materials, Infrastructure and Logistics 

• Revenue was up 31.0 per cent to S$1.2 billion on higher sales volumes for Cotton and Rubber. 

• EBITDA fell 42.2 per cent to S$38.1 million on lower contribution from Cotton and Infrastructure & Logistics, which offset growth from Wood Products

 

Commodity Financial Services 

• The segment reported an EBITDA of S$10.2 million in Q1 2019, compared to S$4.5 million in Q1 2018. 

• This was on improved performance in the Quantitative Fund.