Singapore, November 14, 2014 – Olam International Limited (“Olam”, “the Group” or “the Company”), today reported its first quarter FY2015 results.
For the three months ended September 30, 2014 (“Q1 FY2015”), volumes declined 14.6% as a result of discontinued and restructured operations. Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) were down 11.9% to S$219.4 million compared with the corresponding period in FY2014. This was mainly driven by adverse price movements in the hazelnuts and dairy businesses, coupled with execution challenges in upstream dairy. Excluding the impact from these businesses, overall EBITDA grew as compared to the prior corresponding period.
Profit After Tax and Minority Interest (PATMI) for Q1 FY2015 was down 2.9% to S$44.3 million. Excluding a net exceptional gain of S$12.1 million, Operational PATMI declined by 29.4% to S$32.2 million. These results included an overall reduction in fair value of biological assets of S$19.2 million from a net gain of S$3.3 million in Q1 FY2014 to a net loss of S$15.9 million in Q1 FY2015.
Olam reported negative Free Cash Flow to Firm (“FCFF”) of S$54.6 million compared to a positive S$46.0 million in Q1 FY2014, driven largely by a S$72.6 million increase in working capital, resulting from higher commodity prices in the Confectionery & Beverage Ingredients and Edible Nuts, Spices & Vegetable Ingredients segments.
Despite the increase in working capital, gearing of 1.85 times as at the end of Q1 FY2015 was in line with the FY2016 objective of below 2.0 times.
Olam’s Group Managing Director and CEO, Sunny Verghese said: “With 15 of our announced 18 initiatives completed, we remain focused on executing our strategic plan. We continue to invest selectively in platforms prioritised for growth and we are confident that our investments, many of which are still in gestation, will be significant contributors going forward.”
Strategic Plan Update
Since the strategic plan was launched in April 2013, Olam has announced 18 initiatives. Of these, 14 were completed in FY2013 and FY2014. In Q1 FY2015, Olam sold its dairy processing unit in Côte d’Ivoire to Royal FrieslandCampina, which resulted in a net exceptional gain of S$12.1 million and a cash release of S$31.5 million.
These 15 completed initiatives have released cash of S$635.4 million, generated a P&L gain of S$106.1 million and added S$16.5 million directly to capital reserves. Three more initiatives are expected to close within this financial year, and are likely to release further cash of approximately S$313.1 million, generate a P&L gain of approximately S$22.4 million and add approximately S$118.8 million directly to capital reserves. (A summary of the initiatives and details about the strategic plan can be found in the Management Discussion and Analysis statement.)
Olam’s Executive Director of Finance and Business Development, A. Shekhar said: “The seasonality of our business makes the first quarter traditionally a modest contributor for the year. Lower volumes reflected our deliberate actions to discontinue and restructure lower margin operations. While the hazelnuts and dairy businesses underperformed for the quarter, the growth trajectory in operational performance and EBITDA across the rest of the portfolio was maintained.
“In addition to the focus on improving operating performance, we have taken steps to optimise the tenor and reduce the overall cost of debt.”