Olam&rsquo s announcement comes after Namoi&rsquo s largest shareholder, Samuel Terry Asset Management, accepted Louis Dreyfus&rsquo sweetened offer

 

OLAM Agri Australia will not declare its takeover offer for Australia&rsquo s Namoi Cotton free from its conditions, nor will it extend its offer beyond the closing date on Oct 8, 2024.

 

On Tuesday (Oct 1), the indirect 64.6 per cent-owned subsidiary of Olam Group : VC2 0% said Namoi shareholders who have accepted the offer will retain ownership of their shares after its offer lapses, and will be free to deal with them.

 

&ldquo Olam Agri, together with its subsidiary Queensland Cotton, is an integral participant in the Australian cotton industry. We hope that our interest in acquiring Namoi Cotton is seen as a testament to Olam Agri&rsquo s willingness to invest in the Australian agriculture industry,&rdquo said Ashish Govil, who is managing director, Queensland Cotton and country head for Olam Agri Australia.

 

Govil added that Olam&rsquo s proposed acquisition &ldquo led to a robust and competitive process&rdquo for Namoi &ndash allowing the cotton ginner to &ldquo realise a full and fair valuation for the benefit of all shareholders&rdquo .

 

Olam&rsquo s announcement comes after Namoi&rsquo s largest shareholder Samuel Terry Asset Management accepted Louis Dreyfus Company Melbourne&rsquo s sweetened offer for the cotton processor at A$0.77 per share from A$0.68 earlier.

 

This brings Louis Dreyfus&rsquo stake in Namoi to 47.66 per cent after receiving acceptances of 30.63 per cent under its offer as at Sep 30, 2024, said the French merchant firm in a Tuesday filing to the Australian Securities Exchange.  

 

Olam&rsquo s offer &ndash which was most recently raised to A$0.75 per share from A$0.70 &ndash remains conditional and subject to regulatory approvals, as well as to receiving acceptances of at least 50 per cent.

 

In its bidder&rsquo s statement, Louis Dreyfus noted &ldquo significant risks&rdquo that such conditions would not be satisfied at all or within Olam&rsquo s offer period, as it would be &ldquo extremely difficult&rdquo for Olam to satisfy the minimum acceptance condition.

 

The company also underscored Olam&rsquo s &ldquo inferior offer price&rdquo , noting how Olam received acceptances under its takeover offer for only 6.35 per cent of Namoi shares.

 

Olam Group Limited&rsquo s wholly-owned subsidiary Olam Food Ingredients (ofi) has secured a JPY46.5 billion ($427.2 million) medium-term samurai loan facility. 

 

The facility has Olam Treasury as a borrower and comprises a three-year tranche. Proceeds from the facility will be applied towards refinancing of ofi&rsquo s existing loans and general corporate purposes.

 

MUFG Bank has been appointed as the facility agent, with MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corporation as lead arrangers and bookrunners for the facility. 

 

Currently, the facility is guaranteed by Olam Group VC2 , which will later transfer to ofi following the planned IPO and demerger of the latter. 

 

Prior to this loan, Olam announced that ofi secured a US$1.8 billion ($2.44 billion) multi-tranche revolving credit facility and term loan on June 26. 

The board declares an interim dividend of S$0.03 per share

 

AGRI-FOOD giant Olam Group on Wednesday (Aug 14) reported a net profit of S$48.03 million for the first half-year, inching up 0.2 per cent from S$47.96 million in the year-ago period.

 

Earnings per share stood at S$0.0084, unchanged from the previous corresponding period.

 

An interim dividend of S$0.03 per share was declared for the period, unchanged from the previous year. It will be paid out to shareholders on Aug 29, after the record date of Aug 22.

 

The group said the slight improvement in earnings was due to operational profit growth being offset by higher net finance costs and taxes.

 

Operational profit increased 8.3 per cent to S$888 million in H1 2024, from S$819.6 million, mainly due to higher contributions from its food ingredients unit ofi, said the group.

 

Meanwhile, net finance costs rose 42.1 per cent on the year to S$733.9 million in H1 2024, mainly due to the rise in net debt from price-led working capital increases and higher average interest rates than in the previous year.

 

Revenue, excluding exceptional items, for H1 was up 9.1 per cent to S$26.9 billion. The group attributed this to a fall in commodity prices across several products in Olam Agri portfolio, offset by higher selling prices for some products within the ofi unit.

 

Exceptional items, comprising costs related to closure of the fund management business and on-going re-organisation costs including gross interest and tax, fell to S$25.6 million in H1 FY2024, from S$180.3 million.

 

Sales volume grew 13.9 per cent to 24.3 million tonnes in H1, mainly due to growth from Olam Agri which helped offset the marginal reduction in sales volumes from ofi and the remaining Olam group. 

 

Segmentally, ofi&rsquo s revenue rose 24.9 per cent to S$9.6 billion due to higher volumes in the ingredients and solutions segment, as well as higher average selling prices.

 

The ingredients and solutions segment recorded a slight 3.1 per cent increase in sales volume. Revenue rose by 36.9 per cent to S$5.3 billion due to higher sales prices, particularly for cocoa and coffee, as well as increased dairy volumes.

 

Olam Agri&rsquo s revenue increased 2.7 per cent to S$16.7 billion on the back of higher sales volumes. This was offset by lower commodity and selling prices compared with H1 last year. The group noted that sales volumes for H1 FY2024 normalised with a 16 per cent increase from a lower base in H1 FY2023, which was characterised by delays in harvesting, grain shipments and port congestion.

 

Meanwhile, the remaining Olam group reported an 18.3 per cent drop in revenue to S$568.1 million, due to a decline in sales across all segments. Sales volume fell 9.8 per cent largely from de-prioritised assets and incubating businesses.

 

Olam&rsquo s group chief financial officer N Muthukumar said: &ldquo Our net finance costs increased sharply mainly due to higher working capital needs, driven by record prices for some of the commodities, including cocoa and coffee, and increased benchmark interest rates.&rdquo

 

There is less worry about working capital as long as it is covered by sold and hedged inventory, or secured receivables. While gearing is higher due to the need cover margin calls on hedges, as long as it covers the risk of Olam&rsquo s sold contracts and secure receivables, it would be the prudent thing said A. Shekhar, chief executive officer, ofi.

 

&ldquo Out of the S$5 billion working capital increase that is almost entirely covered,&rdquo he said.

 

The volatility with cocoa and coffee might be alleviated in the coming months, as a new batch of crops are harvested, but it is likely prices will only fall as the supply enters the market. Olam will be focused on securing margins and returns for the elevated cost of capital.

 

Sunny Verghese, chief executive officer, Olam said: &ldquo So prices will come down in three months or six months or nine months, it really doesn&rsquo t matter. We&rsquo ll do exactly what we have been doing.&rdquo

 

Looking forward, Muthukumar expects operating conditions in the second half of the year to continue being affected by geopolitical and macroeconomic factors, while inflationary pressures begin to soften.

 

Olam is still committed to listing ofi and Olam Agri, however the listings are dependent on factors such as the capital markets conditions and strong performance of the two entities. The company is targeting a dual listing in Singapore and Saudi Arabia for Olam Agri, but it would not wait for too long for regulatory approvals from Saudi authorities.

 

&ldquo So at some point of time we will decide if the Saudi market is not available to us from a regulatory standpoint, we will look at other options,&rdquo said Verghese.