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Olam’s Q4 net profit plunges 48%
SINGAPORE - Singapore commodities firm Olam International reported a 48 per cent fall in fourth-quarter net profit, citing higher tax charges and challenging market conditions.
Olam posted net profit of S$56.8 million for the three months ended June, down from S$109.5 million a year earlier.
The company’s earnings in the fourth quarter were hit by increased tax charges of S$50.6 million, compared to a net tax credit of S$8.2 million a year earlier.
“While the long term trends in the agri-sector remain attractive, the nearer term macroeconomic uncertainty and increased volatility could impact the sector,” Olam said.
The company had dropped its target to achieve a US$1 billion (S$1.27 billion) net profit by 2016 and has shifted to a slower growth path after an attack by short-seller Muddy Waters last year sent its stock and bond prices tumbling. REUTERS
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Do take note that Olam's Q4 results was helped by massive improvement in working capital changes. In addition, My personal preference is to look at OCF before working capital changes. Also I would prefer to observe a full FY as looking at just one quarter is lumpy.
Taking full FY, Olam's OCF before reinvestment in working capital was $1073M. Capex was $1050M and net interest expense $450M. Olam had a net cash outflow for the latest FY
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Olam management will have to tone down on its CAPEX especially M&As and look into efficiently increasing its existing operational CF to boost the investors confidence. Going forward, I also recommend that Olam management use its excess cash to pay down its debt to reduce its gearing.
Net interest expense for the new FY could hover around $600m. Dividend payment is about $100m. The excess operating cash flow can be used to pay down its debt.
I like the four priority areas of Olam management identified in the review in the latest quarterly report which will be implemented in the next quarter are:
1. Accelerate free cash flow generation
2. Reduce gearing
3. Reduce complexity
4. Promote better understanding of Olam’s business
I will review and look at its next quarter report to ensure that the management walk its talk.
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The big question is if Temasek pull out.
Frankly speaking, after I read your post (and attached news), I brought some Olam and officially vested in Olam.
The articles highlighted the danger of Temasek pull out and then Olam stock price will drop.... dangerous right?
But, my instinct told me otherwise.
Lets give Olam a few months to prove itself.
<vested>
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This counter has hit 52-week high. What's the reason?
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