Olam International Limited (“Olam”, “the Group” or “the Company”), a leading agri-business operating across the value chain in 65 countries, today reported its Q3 FY2014 and 9M FY2014 results with continued progress on the implementation of its strategic plan.
For the nine months ended March 31, 2014 (“9M FY2014”), Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) improved 2.7% to S$900.1 million from the same period last year, reflecting margin expansion and improved operating efficiencies.
The Group reported an 88.6% growth in Profit After Tax and Minority Interests (“PATMI”) to S$576.7 million. The results included an exceptional fair value gain of S$271.0 million from the revaluation of its holding in PureCircle Limited which was recorded in Q3 FY2014. Operational PATMI, which excludes exceptional items, declined 7.9% to S$276.9 million.
The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at S$168.1 million compared to S$123.3 million in 9M FY2013 and an increase in tax expenses to S$65.0 million as compared to S$44.7 million (excluding exceptional items) for the same period last year. These results include an overall reduction in the fair value of biological assets by S$70.7 million, from a net gain of S$50.0 million in 9M FY2013 to a net loss of S$20.7 million in 9M FY2014.
Sales volumes were down 2.4% in 9M FY2014 as compared to 9M FY2013, which had shown a record 61.5% growth over the prior period (9M FY2012).
For the three months ended March 31, 2014 (“Q3 FY2014”), EBITDA was down 1.5% to S$335.3 million. PATMI was up 265.1% to S$396.1 million. Excluding exceptional items, Operational PATMI for Q3 FY2014 declined 15.9% to S$102.2 million. The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at S$57.5 million compared to S$39.4 million in Q3 FY2013 and an increase in tax expenses to S$37.6 million as compared to S$26.8 million for the prior corresponding period. These results include an overall reduction in the fair value of biological assets by S$26.4 million, from a net gain of S$17.7 million in Q3 FY2013 to a net loss of S$8.7 million in Q3 FY2014.
The Group continued to deliver improved free cash flow generation compared to the prior period, with higher operating cash flows of S$875.5 million (9M FY2013: S$820.7 million), a reduction in net fixed capital investments to S$168.0 million (9M FY2013: S$665.2 million) and the continued execution of strategic plan initiatives to unlock value and release cash. This was partially offset by an increase in working capital of S$1,376.5 million (9M FY2013: S$999.6 million) due to market-led price increases in certain commodities.
Net gearing was 2.03 times at March 31, 2014, which was lower than the 2.20 times gearing at March 31, 2013 and the 2.06 times as at the end of the previous quarter.
Olam’s Group Managing Director and CEO, Sunny Verghese said: “The twin goals of profitable growth and generating positive free cash flow continued to be the focus of our actions during this period. We are ahead of target in executing our strategic plan initiatives to release cash and optimise our balance sheet. We have achieved a good balance between investing selectively for future growth while continuing to extract value from investments already made.”
Strategic Plan Update
Olam has announced 12 strategic initiatives, of which nine have been completed by Q3 FY2014. These nine completed initiatives have released cash of S$395.8 million, generated a P&L gain of S$85.7 million and added S$16.5 million to capital reserves. Six out of the nine initiatives contributed S$309.5 million of cash, S$55.5 million in P&L gains and S$16.5 million addition to capital reserves, which were recognised in 9M FY2014 results.
The remaining three initiatives, which are expected to be completed in Q4 FY2014, are likely to release further cash of approximately S$154.6 million, generate a P&L gain of approximately S$22.8 million and add approximately S$18.2 million to capital reserves. (A summary of the initiatives and details about the strategic plan can be found in the Management Discussion and Analysis statement.)
Segmental Review
Quarter 3