August 18, 2015

As commodity prices continue a downward trend, Olam International has posted rising profits as the group shifts its activity up the value chain amid a restructuring.

A drive to cut costs, a shift toward higher margin products, and an exit from the Australian grain sector and packaged food business has resulted in lower revenues and sales volumes, but higher earnings for the group.

The group reported a decline in revenue for the second quarter of 16% to S$4.81 billion due to lower trade volumes, but posted an increase in net profits of 200% for the period to S$94.7 million compared to S$31.8 million for the same period a year before.

The company is planning to continue its restructuring strategy by pulling back from the struggling dairy sector, which is seeing milk prices hit a 13-year low, and shelving its planned investments into its dairy business in Uruguay.

"We stay focused on taking decisive actions to manage the few underperforming profit centers, especially the dairy farming operations in Uruguay,"said Olam finance director A. Shekhar.

While pulling away from dairy, the group is also planning to increase its exposure to cocoa and has expanded into peanut processing. The group’s $1.3 billion purchase of Archer Daniels Midland’s (ADM) cocoa business, which was agreed to in December 2014, received regulatory approval from the European Commission in June and is set to be completed in the last quarter of this year, and the group recently acquired the U.S.-based peanut processor, McCleskey Mills.