The group would receive additional considerations of more than US$136 million if the first tranche of Olam Agri sale is not completed by end-2025

 

[SINGAPORE] Olam Group posted a 574 per cent rise in net profit to S$323.8 million for its first half year ended Jun 30, from S$48 million in the previous corresponding period.

 

This includes profit from continuing operations of S$177.3 million, compared with a loss of S$92 million in the corresponding period last year. Olam Agri, the division being hived off from the group under its major restructuring, registered a net profit of S$146.4 million, up 4.6 per cent from S$140 million in H1 2024.  

 

The process of getting regulatory approvals for the sale of its remaining 64.6 per cent interest in Olam Agri to Saudi Agricultural & Livestock Investment Company (Salic), announced in February, is on track, noted Olam Group co-founder and chief executive officer Sunny Verghese in an earnings briefing on Thursday (Aug 14).

 

The proposed sale in two tranches with a base consideration of US$2.6 billion was approved by shareholders at its extraordinary general meeting on Jul 4.

 

Meanwhile, the group is receiving additional consideration of US$636,855 a day multiplied by the number of days from (and including) Jun 1, up to (and including) the completion of the first tranche, under the agreements with Salic.  

 

&ldquo We can use (the additional considerations) to repay debt or pay dividends,&rdquo said Verghese, who will depart the group with Olam Agri when the sale completes. He added that the use of the additional proceeds will be up to Olam Group to decide. 

 

Shareholders of Olam Group can also expect special dividends as the group progressively divests the constituent businesses under the remaining Olam Group. 

 

The group has already entered into a sales agreement to dispose one of the 10 businesses at a consideration of US$175 million, and the sale is expected to be completed by end-2025. 

 

Verghese noted that a core element of the re-organisation plan is to create a sharper business focus while realising intrinsic value for ofi (previously known as Olam Food Ingredients). The group aims to remove the conglomerate discount and increase share liquidity for its counter. 

 

What&rsquo s next for Olam Group

While dual-listing of ofi is still on the table, Verghese said the listing status of Olam Group will depend on whether the remaining entity still meets Singapore Exchange&rsquo s listing requirements after it divests all businesses under the remaining Olam Group. 

 

Winding up the group would be one option among others, he acknowledged, adding that the outcome would depend on the divestment timeframe of the remaining Olam Group.

 

The search for a new chief executive officer is underway as Verghese will leave the group, along with Olam Agri, to Salic. However, he noted that the six-month transition period after the sale&rsquo s completion means he can continue to support the group in his current role. 

 

The first tranche of the sale of Olam Agri is expected to be completed upon regulatory approvals. The second tranche, which is under a put/call option, will be exercised within three years after the completion of the first. 

 

Improved earnings

&ldquo The reversal of losses from continuing operations in H1 2024 to profitability in H1 2025 was mainly on account of the swing in earnings contribution from the remaining Olam Group as it reported earnings before interest and tax (Ebit) of S$172.9 million in the current period, versus a loss of S$93.4 million previously,&rdquo said the group. 

 

Its food-ingredient unit ofi reported an Ebit of S$535.8 million, up 12.7 per cent on the year. Both operating groups, namely the remaining Olam Group and ofi, lifted group Ebit to S$708.7 million in H1 2025, from S$382.1 million in H1 2024.

 

Revenue of the entire group stood at S$33.3 billion, up 23.8 per cent on the year, on higher average sales prices due to increased input prices, namely cocoa and coffee in ofi, as well as volume growth coupled with price increases in rubber and edible oils in Olam Agri. 

 

Revenue of the operating groups stood at S$15.3 billion, up 49.8 per cent from S$10.2 billion in H1 2024. 

 

Net finance costs from continuing operations amounted to S$551.7 million, 11 per cent higher on the year. 

 

Earnings per share (EPS) of the entire group stood at S$0.0816, up from S$0.0084 in the prior-year period. In particular, EPS of continuing operations was S$0.0428, from a loss per share of S$0.0287 in H1 2024.

 

The group has declared an interim dividend of S$0.02 a share, down from S$0.03 a share declared for the year-ago period. It will be paid out on Aug 29, after the Aug 22 record date. 

 

In a separate filing on Thursday, Olam Group announced that ofi has secured a multi-tranche and term loan aggregating US$2.1 billion for refinancing of ofi&rsquo s existing loans. This comprises a two-year revolving credit facility and a three-year term loan, and will be transferred to ofi following its planned initial public offering and demerger. 

 

To date, ofi has secured total loan facilities amounting to US$2.5 billion, and Olam Agri has secured loan facilities totalling US$3.9 billion for refinancing of its existing loans and for general corporate purposes.

Olam Group has reported patmi of $323.8 million for 1HFY2025 ended June 30, more than four times higher y-o-y at a 573.2% surge.

 

Revenue during the period rose 49.9% y-o-y to $15.3 billion, while reported operating profit (or ebit) rose 85.5% y-o-y to $708.7 million. Including Olam Agri, or &ldquo discontinuing operations&rdquo , ebit was up 35.5% y-o-y to $1.2 billion.

 

The group has declared an interim dividend of 2 cents per share.

 

The group announced on Feb 24 that it has agreed to sell its remaining 64.57% interest in Olam Agri to Saudi Agricultural and Livestock Investment Company (SALIC) in two tranches: 44.58% (Tranche 1) and 19.99% (Tranche 2) at the end of three years, post Tranche 1 completion.

 

Given the conditional 100% sale of Olam Agri has been approved by shareholders on July 4, Olam Agri, excluding entities to be retained by Olam Group, is classified as a disposal group with assets and liabilities held for sale and defined as &ldquo Olam Agri (discontinuing operations)&rdquo in the 1HFY2025 results.

 

The results of retained entities are included under the remaining Olam Group&rsquo s continuing businesses within the group&rsquo s consolidated results.

 

&ldquo We therefore present the full results for ofi and remaining Olam Group as &ldquo continuing operations&rdquo and consolidate only the profit or loss of Olam Agri (discontinuing operations) in its aggregate group profit or loss. This approach will be adopted until the sale of the 44.58% stake in Olam Agri is completed,&rdquo says Olam in its results release on Aug 14.

 

Excluding one-off items, core patmi (or operational patmi) grew to $327.1 million on improved performance by ofi and the remaining Olam Group.

 

Free cash flow to equity (FCFE) improved to negative $945.3 million from negative $5.4 billion this time last year due to &ldquo substantially lower&rdquo working capital deployment, says the group.

 

Net gearing increased slightly to 2.83 times from 2.60 times previously, due to higher working capital, leading to an increase in borrowings.

 

To-date, ofi has secured total loan facilities amounting to US$2.45 billion, while Olam Agri has secured total loan facilities totalling US$3.85 billion for refinancing of their existing loans and for general corporate purposes.

 

Following the announcement of the proposed sale of the remaining 64.57% stake in Olam Agri to SALIC, Olam Group has committed to &ldquo right-size&rdquo the remaining Olam Group&rsquo s capital structure by allocating approximately US$2 billion to &ldquo de-lever its balance sheet and make it debt-free and self-sustaining&rdquo .

 

The group had also committed to invest US$500 million of equity into ofi, which was completed before end-June.

 

The group has also committed to &ldquo responsibly divest and monetise&rdquo all of the remaining Olam Group&rsquo s assets and businesses over time and &ldquo progressively distribute&rdquo the net proceeds to shareholders via special dividends.

 

Separately, the group announced in April the sale of its remaining 32.4% stake in ARISE P& L for US$175 million and expects this transaction to close in 2025.

 

Olam Group co-founder and CEO Sunny Verghese says: &ldquo We delivered strong patmi growth on the back of operating profit growth in 1HFY2025 despite volatile and adverse macroeconomic and geopolitical conditions. We are encouraged by the steady progress achieved in executing our updated 2025 reorganisation plan to unlock value for our shareholders. Pursuant to the proposed sale of Olam Agri to SALIC and the plan to responsibly divest the assets and businesses of the Remaining Olam Group, our focus is to prioritise ofi and support its efforts in realising its full potential value.&rdquo