“Our strong performance despite the current depressed macroeconomic climate is testament to our disciplined focus on executing our strategic plan,” said Sunny Verghese, Olam’s co-founder, group managing director and chief executive officer (CEO). “We continue to expand selectively in prioritized platforms while reducing our presence or exiting from lower-margin businesses.”
Food Staples and Packaged Foods volumes and revenue fell 35.1% and 41% respectively on the back of the deconsolidation of the grains business in Australia and the discontinued operation in South Africa.
The grains milling business in West Africa, the sugar trading and the rice distribution business performed well during the period. However, segment EBITDA declined by 14.9% due to reduced volumes from the discontinued operations, continued underperformance of the dairy farming operations in Uruguay and the impact of currency devaluation on the packaged foods business in Nigeria and the palm refining business in Mozambique. The segment also recorded a lower contribution from its SIFCA associate due to lower palm prices.
Given the continued underperformance of the dairy farming operations in Uruguay, Olam has decided to further restructure this business and defer its planned processing investment there. These actions are likely to result in a one-time restructuring cost in second half of 2015.
The edible nuts, spices and vegetable ingredients segment posted a 6.5% year-on-year growth in revenue in first half of 2015 despite a 9.4% decline in volumes as prices of almonds, hazelnuts and cashew increased. The lower volumes were primarily due to lower tomato paste and dehydrated vegetable volumes in the U.S. following the closure of a plant in California, U.S., and lower cashew volumes from the closure of the processing plant in Nigeria.
EBITDA grew 16.4% over the previous corresponding period as the almond business and the spices and vegetable ingredients business in the U.S. continued to show strong growth. Earnings from the consolidation of MMI offset the underperformance of the Argentinean peanut business that was caused by lower prices and the adverse impact of currency.
“We remain focused on pursuing profitable growth and are excited by the growth opportunities offered by the transformational acquisitions of McCleskey Mills, which has already started to contribute to earnings, and of ADM’s cocoa business, which is expected to be completed in Q4 2015,” said Verghese.