Olam International Q1 2019 profit up 6.9% at S$168.8 million

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  • EBITDA grew 14.2% to S$420.3 million on the increased contribution from Edible Nuts and Cocoa 
  • PATMI up 6.9% at S$168.8 million as higher operating performance (EBITDA) was partly offset by increased depreciation and finance costs 
  • Positive Free Cash Flow to Equity of S$313.0 million 
  • Improved net gearing to 1.35x from 1.49x a year ago  
S$ million Q1 2019 Q1 2018 % Change
Volume (‘000 MT 8,460.6 6,965.2 21.5
Revenue 7,347.9 6,295.4 16.7
EBITDA 420.3 368.1 14.2
PAT 158.8 150.4 5.6
PATMI 168.8 157.9 6.9
Operational PATMI 181.0 162.6 11.3

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 the 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).

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

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“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.

“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.”

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.

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Executive Director and Group COO, A. Shekhar said: “We have maintained a disciplined approach to managing our balance sheet, even as we 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.

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“As part of Re-imagining Global Agriculture and Food Systems, we are pleased to pioneer the world’s first ‘Digital Loan’ of US$350.0 million, following on from our launch of Asia’s first sustainability-linked club loan last year.”

Q1 2019 SEGMENTAL PERFORMANCE

Edible Nuts and Spices

  • Revenue increased 10.0% to S$962.1 million as sales volumes improved.
  • EBITDA was 14.9% higher at S$156.0 million on the improved contribution from Cashew, Almonds, Hazels and Spices businesses, offset by lower contribution from Peanuts.
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Confectionery and Beverage Ingredients

  • Revenue declined 9.4% to S$1.7 billion on lower cocoa and coffee prices in addition to reduced Coffee volumes.
  • EBITDA rose 118.5% 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.
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Food Staples and Packaged Foods

  • Revenue rose 32.5% to S$3.5 billion mainly driven by the growth in Grains trading.
  • EBITDA was lower by 18.0% 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% to S$1.2 billion on higher sales volumes for Cotton and Rubber.
  • EBITDA fell 42.2% 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.

OUTLOOK

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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