Press Release

Olam Group Financial Performance 

Olam Group today reported H1 2023 performance amid a macroeconomic and geopolitical environment that remains challenging.

H1 2023 

• Revenue decreased 13.2% to S$24.7 billion on reduced sales volumes coupled with lower commodity prices across several products in its portfolio.
• EBIT increased 1.1% to S$819.6 million on ofi’s improved performance. Remaining Olam Group reduced losses significantly, which offset a lower EBIT from Olam Agri. Olam Agri contributed 68.2% of the Group’s total EBIT, while ofi and Remaining Olam Group contributed 33.8% and -2.0% respectively.
• PATMI declined 88.8% year-on-year (YoY) to S$47.9 million. This was mainly on the net exceptional loss of S$136.1 million¹, significantly higher interest costs of S$245.9 million and as well as reduced contribution from Olam Agri following the sale of the 35.4% stake in Olam Agri.
• Excluding non-recurring exceptional items, underlying net profit or Operational PATMI decreased by 61.6% to S$184.0 million.
• Free Cash Flow to Equity (FCFE) was negative S$483.7 million (H1 2022: S$465.7 million) on higher working capital, net interest costs and capital expenditure.
• Net gearing edged up slightly to 1.74 times (June 30, 2022: 1.73 times).

H1 2023 Performance by Operating Group

ofi⁽²⁾

ofi is a global leader in ingredients at the forefront of food and beverage consumer trends offering sustainable, natural and plant-based ingredients and solutions for large, attractive and high growth end-use categories.

• Revenue was lower by 5.1% to S$7.7 billion due to lower volumes, partly offset by pricing growth in Ingredients & Solutions.
• EBIT grew 3.4% year-on-year to S$277.2 million led by Ingredients & Solutions as management actions to restore margins started to take effect with the anticipated time lag.
  
  

CEO of ofi, A. Shekhar said: “We are pleased with our underlying first-half performance, which demonstrates accelerated recovery in our Ingredients & Solutions segment as management actions taken last year flow through within the anticipated time lag. Energy, logistics and packaging costs have moderated and stabilised, and supply chain bottlenecks have eased. That said, the market environment continued to be challenging, as customers right-sized inventory levels in the first-half, China’s economic re-opening has been more muted than many expected, and end-consumer demand is beginning to show some level of reduction in developed markets.”

“Our underlying performance is stated before the exceptional impact of ofi’s Australian Almond orchards, which saw an unprecedented, materially lower crop yield. This was evident across the entire almond industry in Australia for the 2022/23 growing season, reflecting lower bee activity during pollination and unseasonal cold, wet conditions through the growing and pre-harvest periods. Our crop experts and agronomists concur with external analysis that the 2023 crop was an aberration and the orchards are expected to see yields return to their normal levels from 2024 and beyond.

“We continue to execute on our strategic priorities and ongoing investments in Ingredients & Solutions. This includes imminent openings of our greenfield soluble coffee processing factory in Brazil, Dairy processing facility in New Zealand and the European customer solutions centre in Amsterdam. We also recently opened a joint venture private label nuts facility in China. Each of these investments delivers on our strategy to grow our Ingredients & Solutions business, delivering exciting and value-added opportunities for our customers, supported by our integrated supply chain that can offer supply security for sustainable and traceable products.”
 

Olam Agri⁽³⁾

Olam Agri is a market leading, differentiated food, feed and fibre agri-business with a global origination footprint, processing capabilities and deep understanding of market needs built over 33 years. Focused on transforming food, feed and fibre for a more sustainable future, it aims at creating value for customers, enable farming communities to prosper sustainably and strive for a food-secure future.

• Olam Agri demonstrated resilient performance in H1 2023, with exceptional performance and growth in the Food & Feed - Processing & Value-added segment on the back of resilient consumer demand and successful adjustment of prices to accommodate increased production and raw material costs.
• Revenue decreased 16.7% to S$16.3 billion from reduced sales volumes and a normalisation of commodity prices from the highs in H1 2022.
• EBIT was 9.0% lower at S$559.1 million, with strong growth and contribution from the Food & Feed - Processing & Value-Added segment offsetting lower operating profits in the Food & Feed - Origination & Merchandising and Fibre, Agri-industrials & Ag Services segments.
  
  

Mr Verghese, who is CEO of Olam Agri said: “Olam Agri delivered a strong performance in H1 2023 in line with historical phasing of earnings between the first-half and the second-half. It was however lower than H1 2022, which was an exceptionally strong first-half.

“In particular, we significantly grew earnings in our Food & Feed - Processing & Value-added segment, where we have resilient demand for our products in key markets, accompanied by better margins. We saw healthy, broad-based growth and successfully adjusted prices to accommodate higher raw material and production costs. We will continue to focus our investments to capture opportunities in the higher-growth and higher-margin processing and value-added segment.

“The growing importance of key global agri-business trends relating to food security concerns and our position as a differentiated and market leading global food, feed and fibre agri-business underpin our confidence in continuing to pursue an IPO. This will position the business for further expansion into higher-margin, value-added businesses, with new adjacencies and opportunities in destination markets, including the Middle East.” 

Remaining Olam Group

The Remaining Olam Group comprises Nupo Ventures (formerly Olam Ventures), which incubates new platforms to drive future growth, Mindsprint (formerly Olam Technology and Business Services), which offers shared services, digital solutions and technology services, and Olam Global Holdco, which houses de-prioritised assets earmarked for exit as well as gestating assets.

• In spite of higher volumes, revenue was down 10.4% on lower sales from de-prioritised assets and gestating businesses.
• However, it significantly narrowed EBIT losses to S$16.7 million from a loss of S$72.0 million in H1 2022, led by growth in Olam Palm Gabon and dairy farming in Russia.

Outlook and Prospects

ofi is leveraging recent investments to further grow its innovation pipeline and deliver expanded capacity in Ingredients & Solutions in H2 2023. The new greenfield plants being commissioned in H2 2023 will further expand its capacity in three important value-added areas. Customers continue to value the surety of supply, traceability and sustainability impacts offered by ofi, and the integrated customer focus strategy is further building on these long-term relationships. Customers appear to be largely through the de-stocking headwinds seen in H1 2023, though there is increased caution on end-user demand that has been building in the past few months.

Olam Agri’s results were in line with the average historical phasing of its earnings between H1 and H2 for 2019-2021 with H1 2022 being an exceptionally strong performance. The Strategic Supply and Cooperation agreement with SALIC is expected to catalyse its growth in the Gulf region. 

The Group expects to continue to incur expenses associated with the execution of the Re-organisation Plan in H2 2023. Notwithstanding this one-off impact, the continuing impact from higher interest rates, and enhanced global macro risks, the Group continues to be cautiously optimistic about its prospects for 2023.

These materials are not for publication or distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia). These materials are not an offer of securities for sale into the United States, the United Kingdom, European Economic Area, Canada, Australia or Japan. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the U.S. Securities Act), except pursuant to a registration statement or an applicable exemption from registration under the U.S. Securities Act. No public offering of securities is being made in the United States.

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¹ The S$136.1 million net exceptional loss in H1 2023 arose mainly from the one-off, non-recurring charge equivalent to the US$83.1 million (S$111.3 million) impact from the unprecedented and materially lower crop yield in ofi’s almond orchards in Australia, as announced on July 26, 2023.

² Consisting of the Cocoa, Coffee, Dairy, Nuts and Spices businesses, ofi is made up of two segments – Global Sourcing and Ingredients & Solutions. 

³ Consisting of Grains & Oilseeds, Freight, Integrated Feed & Protein, Edible Oils, Rice, Specialty Grains & Seeds, Cotton, Rubber, Wood Products and Funds Management. Olam Agri has three segments – Food & Feed - Origination & Merchandising; Food & Feed - Processing & Value-added; and Fibre, Agri-industrials & Ag Services.
 

Notes to Editors

This release should be read and understood only in conjunction with the full text of Olam Group Limited’s Financial Statements, Management Discussion and Analysis and presentation for the Half-Year ended June 30, 2023. A live webcast of the results briefing will be available at 6.00 pm SGT with replay at olamgroup.com.