Singapore / SG. (oi) Olam International Limited, a leading global, integrated supply chain manager and processor of agricultural products and food ingredients, reported its Q3/2014 and 9M/2014 results with continued progress on the implementation of its strategic plan.
For the nine months ended March 31, 2014 (9M/2014), Earnings Before Interest, Tax, Depreciation and Amortisation (Ebitda) improved 2,7 percent to 900,1 million SGD from the same period last year, reflecting margin expansion and improved operating efficiencies.
The Group reported an 88,6 percent growth in Profit After Tax and Minority Interests (PATMI) to 576,7 million SGD. The results included an exceptional fair value gain of 271,0 million SGD from the revaluation of its holding in PureCircle Limited which was recorded in Q3/2014. Operational PATMI, which excludes exceptional items, declined 7,9 percent to 276,9 million SGD.
The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at 168,1 million SGD compared to 123,3 million SGD in 9M/2013 and an increase in tax expenses to 65,0 million SGD as compared to 44,7 million SGD (excluding exceptional items) for the same period last year. These results include an overall reduction in the fair value of biological assets by 70,7 million SGD, from a net gain of 50,0 million SGD in 9M/2013 to a net loss of 20,7 million SGD in 9M/2014.
Sales volumes were down 2,4 percent in 9M/2014 as compared to 9M/2013, which had shown a record 61,5 percent growth over the prior period (9M FY2012).
For the three months ended March 31, 2014 (Q3/2014), Ebitda was down 1,5 percent to 335,3 million SGD. PATMI was up 265,1 percent to 396,1 million SGD. Excluding exceptional items, Operational PATMI for Q3/2014 declined 15,9 percent to 102,2 million SGD. The decline in Operational PATMI was primarily driven by higher depreciation and amortisation expenses at 57,5 million SGD compared to 39,4 million SGD in Q3/2013 and an increase in tax expenses to 37,6 million SGD as compared to 26,8 million SGD for the prior corresponding period. These results include an overall reduction in the fair value of biological assets by 26,4 million SGD, from a net gain of 17,7 million SGD in Q3/2013 to a net loss of 8,7 million SGD in Q3/2014.
The Group continued to deliver improved free cash flow generation compared to the prior period, with higher operating cash flows of 875,5 million SGD (9M/2013: 820,7 million SGD), a reduction in net fixed capital investments to 168,0 million SGD (9M/2013: 665,2 million SGD) and the continued execution of strategic plan initiatives to unlock value and release cash. This was partially offset by an increase in working capital of 1’376,5 million SGD (9M/2013: 999,6 million SGD) due to market-led price increases in certain commodities.
Net gearing was 2,03 times at March 31, 2014, which was lower than the 2,20 times gearing at March 31, 2013 and the 2,06 times as at the end of the previous quarter.
Olam´s Group Managing Director and CEO, Sunny Verghese said: «The twin goals of profitable growth and generating positive free cash flow continued to be the focus of our actions during this period. We are ahead of target in executing our strategic plan initiatives to release cash and optimise our balance sheet. We have achieved a good balance between investing selectively for future growth while continuing to extract value from investments already made».
Strategic Plan Update
Olam has announced 12 strategic initiatives, of which nine have been completed by Q3/2014. These nine completed initiatives have released cash of 395,8 million SGD, generated a P+L gain of 85,7 million SGD and added 16,5 million SGD to capital reserves. Six out of the nine initiatives contributed 309,5 million SGD of cash, 55,5 million SGD in P+L gains and 16,5 million SGD addition to capital reserves, which were recognised in 9M/2014 results.
The remaining three initiatives, which are expected to be completed in Q4 FY2014, are likely to release further cash of approximately 154,6 million SGD, generate a P+L gain of approximately 22,8 million SGD and add approximately 18,2 million SGD to capital reserves.