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13-06-2012, 12:14 AM
It does not generate FCf because it is constantly expanding at a breakneck speed. If it decides to, it can slow growth and pay out good dividends. But I doubt that's going to happen anytime soon.
In a nutshell, they secure commodities from supppliers and sell it to manufacturers. To reduce their exposure to the spot markets, they hedge. Hedging makes their margins really small. Olam's margins (4%) are higher due to the comparatively high debt/equity of about 3. Noble's low margin (1%) correlates to its much lower debt/equity of about 1. To even further reduce exposure to spot markets from which they procure their commodities, they try to integrate vertically. But acquiring your suppliers is expensive; they need to borrow. Thereby giving you a weak balance sheet.
should commodity prices weaken in years to come, Olam and noble will be hurt pretty bad due to the vertical integration done in recent years at high prices. Oherwise, they should be fine. In any case, Olam at recent prices is still way too expensive for me.
In a nutshell, they secure commodities from supppliers and sell it to manufacturers. To reduce their exposure to the spot markets, they hedge. Hedging makes their margins really small. Olam's margins (4%) are higher due to the comparatively high debt/equity of about 3. Noble's low margin (1%) correlates to its much lower debt/equity of about 1. To even further reduce exposure to spot markets from which they procure their commodities, they try to integrate vertically. But acquiring your suppliers is expensive; they need to borrow. Thereby giving you a weak balance sheet.
should commodity prices weaken in years to come, Olam and noble will be hurt pretty bad due to the vertical integration done in recent years at high prices. Oherwise, they should be fine. In any case, Olam at recent prices is still way too expensive for me.