SINGAPORE – Olam International Limited (“Olam”, “the Group” or “the Company”), a leading agri-business operating across the value chain in 65 countries, today reported its Q2 FY2014 and H1 FY2014 results with significant progress on the implementation of its strategic plan.
For the six months ended December 31, 2013 (“H1 FY2014”), Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”), Olam’s key metric for operating performance, improved 5.4% to S$564.8 million from the same period last year, reflecting margin expansion and improved operating efficiencies.
The Group reported an 8.5% reduction in Profit After Tax and Minority Interests (“PATMI”) to S$180.5 million, while Operational PATMI, which excludes exceptional items, declined 2.6% to S$174.6 million. Sales volumes were down 5.3% in H1 FY2014 as compared to H1 FY2013, which had shown a record 71.9% growth over the prior period (H1 FY2012).
These results include an overall reduction in the fair value of biological assets by S$44.2 million, from a net gain of S$32.2 million in H1 FY2013 to a net loss of S$12.0 million in H1 FY2014.
The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at S$110.6 million compared to S$83.9 million in H1 FY2013 and an increase in tax expenses to S$27.4 million as compared to S$18.0 million (excluding exceptional items) for the prior corresponding period.
For the three months ended December 31, 2013 (“Q2 FY2014”), EBITDA was up 0.9% to S$315.9 million. PATMI was down 12.5% to S$134.9 million. Excluding exceptional items, Operational PATMI for Q2 FY2014 declined 5.2% to S$129.0 million.
These results include an overall reduction in the fair value of biological assets by S$37.5 million, from a net gain of S$22.1 million in Q2 FY2013 to a net loss of S$15.4 million in Q2 FY2014.
The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at S$49.8 million compared to S$40.0 million in Q2 FY2013 and an increase in tax expenses to S$19.6 million as compared to S$11.9 million (excluding exceptional items) for the prior corresponding period.
The Group showed significant improvements on its free cash flow generation with increase in net operating cash flows to S$582.3 million (H1 FY2013: S$511.1 million), reduction in fixed capital investments to S$262.4 million (H1 FY2013: S$469.6 million), lower increase in working capital to S$574.9 million (H1 FY2013: S$816.2 million) and continued execution of its strategic initiatives to unlock value and release cash.
Net gearing was 2.06 times at H1 FY2014, which was lower than the 2.21 times gearing at H1 FY2013.
Olam’s Group Managing Director and CEO, Sunny Verghese said: “We are pleased with the progress made in the first half of FY2014, both in terms of operating performance as well as execution against our four strategic priorities and six key pathways identified in our strategic plan. This is reflected in the EBITDA growth and improved cash flow generation for the period.
“We will continue to work on all these pathways to achieve our twin goals of pursuing profitable growth and generating positive free cash flow on a sustained basis.”
Strategic Plan Update
Olam has announced 10 strategic initiatives, of which five were completed as at end-H1 FY2014. These five completed initiatives have released cash of S$134.1 million, generated a P&L gain of S$36.1 million and added S$14.2 million to capital reserves.
Out of these amounts, S$47.8 million of cash, S$5.9 million in P&L gains and S$14.2 million addition to capital reserves from two of the five completed initiatives were recognised in H1 FY2014.
The remaining five initiatives, which are expected to be completed in H2 FY2014, are likely to release further cash of approximately S$312.4 million, generate a P&L gain of approximately S$39.8 million and add approximately S$2.3 million to capital reserves. (A summary of the initiatives are described on pages 5 to 7 of the Management Discussion and Analysis.)
