SINGAPORE (May 14): Food and agriculture company Olam International has reported a 6.1% y-o-y increase in 1Q20 earnings to $179.1 million, on the back of net exceptional gains mainly from the divestment of Olam’s 50% stake in Far East Agri and the reduction of the company’s effective interest in ARISE P&L.

Revenue for 1Q20 grew 4.6% to $7.68 billion from last year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 7.0% to $390.9 million due to lower contributions from the company’s edible nuts, spices, coffee, dairy and edible oils.

Excluding exceptional items, operational profit after tax and minority interests (PATMI) fell by 24.9% to $135.9 million in line on higher finance costs arising from increased working capital, and higher depreciation and amortisation.

Olam’s net gearing for this quarter stands at 1.53 times owing to an increase in net debt from higher working capital, and weakening of the Singapore dollar against the US dollar. 

As at March 31, cash and cash equivalents stood at $4.5 billion.

Post 1Q20, Olam and its wholly owned subsidiary, Olam Treasury has secured multi-tranche financing facilities of about US$176.0 million (S$249.5 million) from the International Finance Corporation (IFC) and Japan International Cooperation Agency (JICA). 

In its outlook statement, Olam says with a majority of its revenues in the food category, where demand is less likely to suffer from a recession or economy downturns, the company believes that it will be able to better navigate the demand led uncertainties around COVID-19. 

However, the impact of COVID-19 on 2Q20 and the rest of the year remains uncertain.

“We are pleased with the resilience shown by our business in 1Q2020. Even as we stay focused on ensuring the continuity of our supply chains in these challenging times, it is even more relevant than ever, that we live our purpose of ‘Re-imagining Global Agriculture and Food Systems’, to help feed the world in a safer and a more reliable and sustainable way,” says Sunny Verghese, Olam’s co-founder & group CEO. 

“Our deep and distributed origination and manufacturing capabilities and the focus on sustainability and digitalisation as key enablers are being validated everyday as we continue to provide differentiated solutions to meet the changing and diverse requirements of our customers in these unprecedented times,” Verghese adds. 

“Looking forward, we are proactively managing our capital structure as we end the peak procurement season and manage market uncertainties amid the COVID-19 outbreak,” says N. Muthukumar, Olam’s group CFO.

“At the same time, we continue to support stakeholders through this challenging period, including by providing smallholder farmers with stable market access with our US$176.0 million term loan from IFC and JICA secured in April,” he adds.

As at 11.21am, Olam’s shares are changing hands at $1.52 down 1.3%.