Olam's H2 Profit Falls 83.4% Amid Higher Net Finance Costs

Olam International Limited, a leading global food and agri-business, 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). The company attributed this decline to higher net finance costs and volatile macroeconomic conditions. Despite the setback, Olam's group operating profit (EBIT) grew by 9.2% YoY, driven by strong performances from both Olam Food Ingredients (ofi) and Olam Agri.



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 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's EBIT grew by 9.2% year-on-year, driven by growth at both ofi and Olam Agri. The Ingredients & Solutions segment at ofi 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% year-on-year, with the Fibre, Agri-industrials & Ag Services segment reporting a 32.2% year-on-year growth in EBIT.

The divestment strategy has also allowed Olam to unlock significant value for its shareholders. 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.

By focusing on its core businesses and divesting non-strategic assets, Olam has been able to improve its financial performance and align its operations with its long-term strategic plan. This strategy has allowed the company to invest in high-growth potential areas, such as ofi's Ingredients & Solutions segment, and position Olam Agri for further profitable growth and value creation.

In conclusion, Olam's H2 profit decline of 83.4% YoY reflects the challenges faced by the company in navigating volatile market conditions and elevated commodity prices. Despite this setback, Olam's strategic investments in high-growth businesses and its divestment strategy have contributed to the company's overall financial performance. 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.