Strong volumes boost Olam earnings for 3Q11

The food products supplier’s net profit jumped 43% YoY to S$127mln on the back of improved NC per ton for all but two of its segments.

Excluding exceptional gains, Olam’s core earnings rose 48% YoY to S$124mln. NC per ton, meanwhile, rose to S$136, from 3QFY10’s S$113mln.

The food staples and packaged foods segments took a hit in the quarter and suffered a 15% YoY
drop to S$68. In a statement, DMG Research said the fall was due to the dairy operation in New Zealand underperforming. However, the strong volume growth led to NC surging 49% YoY to S$305m.
Industrial raw materials did exceptionally well, with NC 2.5x that of 3QFY10. Contribution
came from both volume increase and NC per ton rise. The cotton business saw strong
performance during this period.
Net debt to equity was 2.63x, versus Dec 10’s 2.48x. The
adjusted net debt to equity ratio was a much lower 0.84x. As 3Q is typically the peak for
procurement, and commodity prices were high, 3QFY11 working capital usage was high.
Management expects the gearing to fall as procurement is reduced in 4QFY11.

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