It blamed higher depreciation and amortisation, and finance costs.
Olam International’s profits after tax and minority interest (PATMI) sank 34.5% YoY in the second quarter to $61.49m from $93.9m last year, an announcement revealed. However, sales during the period rose 15.7% YoY to $8.6b from $7.43b previously.
For the first half of the year the company’s profit’s slipped to $230.36m, down 8.5% YoY from $251.88m in H1 2018; whilst revenue climbed 16.2% YoY to $15.94b from $13.72b last year.
Also read: Olam's profits grew 6.9% to $168.88m in Q1
The loss was attributed to higher depreciation and amortisation, cost of goods, and finance costs. Depreciation and amortisation soared 34.2% YoY to about $124.8m from only $93m last year, whilst net finance costs rose by 38.1% YoY to $187.7m. Meanwhile, the cost of goods sold also climbed 19% YoY to $7.92b from $6.7b over the same period last year.
The adoption of the new accounting standard SFRS(I) 16 also contributed to the losses, with profit after tax and minority interest (PATMI) and Operational PATMI losing $6.6m for Q2 and $13.0m for the first half of the year. Excluding exceptional losses and the impact of SFRS(I) 16, Q2’s PATMI would have been higher at $73.6m, whilst H1’s PATMI would’ve increased by 2.8% to $261m.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) for the second quarter grew by 14.1% YoY to $351.2m from $307.9m in Q2 2018 thanks to higher contribution from all segments except edible nuts and spices, and confectionery and beverage ingredients.
Meanwhile, EBITDA for the first half of the year grew 14.1% to $771.5m from $676m in H1 2018 on higher contribution from all segments except industrial raw materials, infrastructure and logistics.
Revenue for edible nuts and spices declined 1% YoY in H1 to $2b on lower peanut prices, although EBITDA was 8% YoY higher at $255.6m on improved contribution from cashew, almonds, hazelnuts and spices businesses, although offset by lower contribution from peanuts.
Similarly, revenue for confectionery and beverage ingredients declined 9.5% YoY to $3.2b on lower coffee prices and reduced sales volumes, but EBITDA rose 34.7% YoY to $240.2m due to improved margins in the cocoa business in both supply chain and processing operations. Revenue for food staples and packaged foods rose 38% YoY to $8.2b mainly driven by growth in grains trading volumes.
Free cash flow to equity improved to $864.2m in H1 from $167m over the same period in 2018 on significantly lower deployment of working capital.
“We are well positioned for the second half of the year as we approach the peak of the procurement season for several of our commodities, with likely increases in working capital deployment. We will also stay focused on the divestment of the identified non-core assets as we complete our planned fixed capital investments, including the proposed acquisition of Dangote Flour Mills during this period,” commented executive director and group COO A. Shekhar on the results.
The Board of Directors declared an interim dividend of $0.035 per share for H1 2019.
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