SINGAPORE – Olam Group shares rallied on Feb 28 after it reported a significant improvement in its second-half results and announced a share buyback programme.
The agribusiness group also said the initial public offering (IPO) for its agriculture unit will no longer take place in the first half of 2024.
The share buyback programme will be for up to a maximum of 5 per cent of total outstanding shares, it said.
Olam’s shares jumped 6 cents, or 6.7 per cent, to close at 96 cents on Feb 28.
Co-founder and chief executive Sunny Verghese said the group remains committed to pursuing the listings of Olam Food Ingredients (OFI) and Olam Agri.
“We will, however, retain flexibility around the sequencing of the two proposed listings and explore other strategic options to unlock value for shareholders,” he added.
The Olam Agri IPO will not take place in the first half of 2024 as the regulatory framework is still being finalised in Saudi Arabia to enable the listing of foreign companies and issuance of Saudi Depositary Receipts on the Saudi Exchange, Olam Group said in a statement.
It added it will consider internal and external factors, such as the business performance of all three operating groups, prevailing capital market conditions and global macroeconomic developments.
Reuters reported in May 2023 that the Olam Agri dual listing in Singapore and Saudi Arabia could raise as much as US$1 billion (S$1.35 billion), citing sources.
OFI was initially slated to be listed in London and Singapore in the second quarter of 2022.
The group previously said it was restructuring the company into three distinct businesses as demand increases and prices grow more volatile. The plan was to spin off OFI and Olam Agri and list them both.
Mr Verghese said the group remains committed to the plans for reorganisation, which has helped the company to grow the businesses “very significantly”.
He added: “So we are very clear that the decisions that we have taken to undergo this massive reorganisation, radical restructuring and transformation of our business will pay significant dividends in terms of creating a lot of incremental value.”
He noted that there has been delays in the listings for a variety of reasons, one being that capital markets froze and there were “no real meaningful IPOs being launched”. There were also challenges such as the readiness of Saudi Arabia’s regulatory regime of the capital markets to allow the listing of foreign companies, but he said the Saudi ecosystem is working hard such that companies that intend to tap those markets can do so.
“Saudi Arabia is very critical for us because we are rapidly growing our business in the Gulf Cooperation Council region,” he noted. The council is a six-member bloc comprising the Middle Eastern countries of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.
Mr Verghese said that in addition to the IPOs, the group is also evaluating other corporate actions that can unlock value.
“I cannot be specific on what we’re contemplating for each of these operating entities. But we are not only putting all our eggs into the one basket,” he said.
The group posted a 15.4 per cent rise in net profit to $230.8 million for the second half of the year ended December, from about $200 million a year ago.
This came despite a 10.8 per cent fall in revenue to $23.6 billion, which was offset by a drop in direct operating expenses of 11.9 per cent.
Olam saw growth in earnings before interest and tax (Ebit) in both OFI and Olam Agri segments. Ebit grew 19.3 per cent to $952.3 million.
Mr Verghese said: “The double-digit Ebit growth at both OFI and Olam Agri in H2 2023 reflects their differentiated, unique business propositions and solid execution post-reorganisation.
“We are confident of our growth prospects and are taking steps to ensure we continue to drive returns for investors amid a challenging macroeconomic backdrop and uncertain geopolitical conditions.”
Olam’s full-year net profit fell 55.7 per cent to $278.7 million.
Its board recommended a final dividend of four cents per share, taking full-year dividend to seven cents per share, compared with 8.5 cents in 2022.
Olam also announced it will close the fund management business of its subsidiary, Olam Fund Management, as part of a strategic portfolio re-alignment. A total of 14 employees in Singapore and China will be affected.
Its start-up business-to-consumer purpose brand business will also be closed, affecting eight employees – six in Singapore, one in India and one in Malaysia.
Olam said each affected employee will be supported with redeployment or transition with a severance package. Additionally, they will be provided outplacement services and access to an employee assistance programme.
The closures are not expected to have a material financial impact on the group.
Moving forward, global macro risks and market volatilities are expected to heighten while shipment disruptions are forecast to continue as geopolitical events unfold, Olam said.
However, it expects the food and agriculture industry to remain resilient.
“OFI continues to execute its strategy by investing for the future with new manufacturing assets and enhanced capabilities in sustainability, digital, innovation and other customer-facing areas,” it added.
It noted that OFI’s guidance remains unchanged at low to mid-single digit total volume growth and high single-digit adjusted total Ebit growth over the medium term.
Olam Agri continues to execute its strategy of scaling up its global origination and trading operations while investing in value-added destination processing across Africa and Asia.
Mr Verghese also addressed reports that Nigeria’s Department of State Services was investigating Olam Nigeria, Olam Group and its subsidiaries for alleged fraud.
He reiterated that Olam announced on Feb 19 that an independent internal investigation comprising external counsels and an independent auditor found no evidence supporting any of the specific allegations reported.
He added that business in Nigeria has been operating normally and the group looks forward to continue investing and growing there.
