Olam International profit up 15.1% to S$34.2mn

The company was able to weather the growing and spreading sovereign debt crisis as well as a looming banking and financial crisis in Europe, among other global macroeconomic issues.

Olam International Limited (“Olam”), a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, today reported a 15.1% growth in Profit After Tax and Minority Interests (PATMI) to S$34.2 million for the first quarter ended September 30, 2011 (“Q1 FY2012”) over the previous corresponding quarter (“Q1 FY2011”).

Sales volume grew 17.7% year-on-year to 1.86 million metric tonnes and Net Contribution (NC) improved 24.1% to S$251.9 million during the quarter. NC Margin per tonne rose from S$128 to S$135 due to increased value-added services to customers through selective integration across the value chain, according to an Olam report.

These results are particularly encouraging given the very difficult macroeconomic backdrop against which this was achieved including the growing and spreading sovereign debt crisis as well as a looming banking and financial crisis in Europe, political gridlock in the US and Europe, stalled growth in the G7 countries, increased volatility in the equity, bond and commodity markets, and volatile and unstable currency movements.

The food category accounted for 80.5% of revenue and 83.2% of volumes. This segment is relatively more recession resistant. Sales Volume for the food category increased by 19.7% and NC increased by 38.6% in Q1 FY2012. The Industrial Raw Materials category accounted for the remaining 19.5% of revenue and 16.8% of volumes. This segment is relatively more recession sensitive and was adversely impacted during this quarter. Sales Volume for this category grew by 8.7% and NC decreased by 17.4% in Q1 FY2012.

Olam’s Group Managing Director and CEO Sunny Verghese commented: “Our Q1 FY2012 results reflect the ability of our business to deliver positive results through economic and commodity cycles. We are able to perform across these cycles due to the fact that our portfolio is focused mainly on food ingredients and raw materials which are inherently more recession resistant. We also benefit from participation across multiple commodities, countries and value chain segments creating a uniquely shaped and well balanced portfolio..

Olam’s Group CFO, Krishnan Ravikumar explained the results: “Our Q1 FY2012 performance amidst significant economic turmoil provides further evidence as to the effectiveness of our strategy. We are backed by a strong and resilient balance sheet and have developed an attractive deal pipeline that will allow us to invest and grow our business going forward. We continue to manage the business with robust operating and financial discipline.”