SINGAPORE — Olam International sustained a 36.4% drop in profit in the second quarter ended June 30 due to a lower contribution from edible oils, a down cycle in coffee and unprecedented weather conditions in peanut farming in Argentina.
The company posted profit after tax and minority interest (PATMI) of S$94 million, down from S$147.7 million in the same period a year ago. For the first half of the year, PATMI was down 13.6% to S$251.9 million from $S291.5 million last year.
“While our first-half results were lower than the previous corresponding period, we expect stronger prospects for our business for the rest of the year,” said Sunny Verghese, co-founder and group chief executive officer. “Our investments in improving operational excellence (stronger cash, cost and capital focus), launch of AtSource, and digitalization initiatives have progressed well and will strengthen our business going forward.”
In its Food Staples & Packaged Foods business, revenue was up 50.7% to S$6 billion on significant volume growth.
Earnings before interest, tax, depreciation and amortization declined 23.2% to S$167.3 million against a strong first half of 2017.
The segment mainly was affected by the Edible Oils platform, which experienced volatile trading conditions, higher period costs in Olam Palm Gabon and reduced share of income from Nauvu Investments after it was sold in March.
While global markets are experiencing heightened political and economic uncertainties, Olam said it believes its diversified and well-balanced portfolio provides a resilient platform to navigate the challenges in both the global economy and commodity markets.
Olam said it will continue to execute on its 2016-18 Strategic Plan in the second half of 2018 and pursue growth in its prioritized platforms.
“Our performance was satisfactory across the business and must be seen against the particularly strong performance in the same period last year,” said A. Shekhar, executive director and group COO. “We continue to take proactive action to strengthen our balance sheet. We have significantly reduced net debt, lowered finance costs and diversified our funding sources with initiatives including undertaking Asia’ first sustainability-linked club loan and issuing private placements.”