These are the 2 biggest drags in Olam's 3Q13 results

Blame it on La Roya crop disease.

According to Nomura, coffee and tomato processing were the two significant drags in 3Q13.

Edible nuts was impacted by tomato (resulting from higher inventory overhang, although management feels they are in a better position for next year) and cashew business (where volumes were flat, Olam is putting up capacity – there will be high kernel volume going forward, instead of high raw seed trading volumes in the past).

Here's more from Nomura:

Coffee output saw a significant impact from La Roya (crop disease) across multiple countries (ie, 30-35% in Honduras, 15-20% in other countries) – these countries account for 20-25% of Olam’s overall coffee volumes.

This disease might have some impact in 4Q13 as well.

Columbia went through La Roya 4 years ago and had spent USD440mn to fight it. Time taken for La Roya disease to be fully corrected – 2 years.

Olam is evaluating Indonesia operations given it has one of the strongest cocoa franchises there.

Confectionary business NC/ton within the range (shortfall in crop in 3Q – new procurement came in at lower margins).

In food staples, high y/y growth seen in grains in 3Q13 is not possible in 4Q (as the high base started in 4Q12, thus the growth will likely moderate from 4Q13).

Rice had more volumes and larger margins due to tax in Nigeria (import duty). We do not expect this to continue in 4Q or beyond.

The new cotton business is at reasonable margins – returning to normal NC/ton levels. Commodity finance services – no positive surprise expected in 4Q13.

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