Olam to be hit by slower volume growth

Which segment will be highly impacted?

According to Maybank Kim Eng, investment in upstream and supply chain assets play an important role in securing and growing trade flow.

Over the past few years Olam invested heavily in various upstream plantation assets as well as in logistics and storage facilities to secure the sourcing and transportation of the agri-commodities.

Here's more:

Since 2005, Olam has delivered an average of 26% annual volume growth as capex increased by 59% annually over the same period. In the next three years, we expect a broad-based slowdown in volume growth as capex is being scaled back.

Which segment to be more impacted? The four business segments within the group are: Edible nuts, spices & beans; Confectionery & Beverage Ingredients; Staples & Packaged Food; and Industrial Raw Materials.

We expect relatively strong volume growth in certain edible nuts (such as cashew, almond, peanut) and grains (under Staples & Packaged Food segment). Coffee and Cocoa (Confectionery & Beverage Ingredients segment) are also what Olam wants to invest and grow but we think medium-term outlook for these two commodities could be difficult (see sector outlook session for more details).

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