Olam Group's Strategic Divestments Drive Long-Term Growth and Value Creation

Olam Group Limited, a leading global food and agri-business, has reported a significant decline in profit for the second half of 2024, with profit after tax and minority interests (PATMI) falling by 83.4% year-on-year (YoY). However, the company's strategic investments in high-growth businesses and its divestment strategy have contributed to its overall financial performance and alignment with its long-term strategic plan. Olam's diversified portfolio and differentiated business models have enabled it to react to market changes and navigate volatile conditions, driving revenue growth of 24.0% YoY and EBIT increase of 10.0% YoY in H2 2024.

Olam's divestment strategy has had a significant impact on its overall financial performance, aligning with its long-term strategic plan. The company has divested several businesses and assets that no longer fit with its strategic priorities, releasing US$1.6 billion in cash for reinvestment. This strategy has allowed Olam to focus on its core businesses and invest in high-growth potential areas. In 2024, Olam Group sold 44.58% of its stake in Olam Agri to SALIC for approximately US$1.78 billion, at an implied 100% equity valuation for Olam Agri of US$4.00 billion. Additionally, Olam Group agreed to sell its remaining 19.99% stake in Olam Agri to SALIC at the end of three years from the completion of the above sale at the Closing Valuation plus 6% IRR. These divestments have allowed Olam to unlock significant value for its shareholders and position Olam Agri for further profitable growth and value creation.

Olam's strategic investments in high-growth businesses have yielded mixed results in the second half of 2024. While the company's revenue grew by 24.0% YoY and EBIT increased by 10.0% YoY, the profit decline highlights the challenges faced by the company in navigating volatile market conditions and elevated commodity prices. Olam's diversified portfolio has helped it react to market changes, but the performance of individual businesses within the portfolio may have varied, contributing to the overall decline in profit.

Olam's divestment strategy has also allowed the company to improve its financial performance and align its operations with its long-term strategic plan. By focusing on its core businesses and divesting non-strategic assets, Olam has been able to invest in high-growth potential areas, such as ofi's Ingredients & Solutions segment. This segment reported a double-digit EBIT growth of 29.1%, led by a 41.8% increase in the segment's EBIT. Olam Agri's EBIT grew by 5.8% YoY, with the Fibre, Agri-industrials & Ag Services segment reporting a 32.2% YoY growth in EBIT. By focusing on its core businesses and investing in high-growth potential areas, Olam is well-positioned to continue its growth trajectory and create value for its shareholders.

In conclusion, Olam Group's strategic divestment strategy has significantly contributed to its overall financial performance and alignment with its long-term strategic plan. By focusing on its core businesses and divesting non-strategic assets, Olam has been able to invest in high-growth potential areas and drive overall growth and value creation for its shareholders. Despite the profit decline in H2 2024, Olam's strategic investments and divestment strategy have positioned the company for long-term success in a volatile market environment.