Olam Group&rsquo s VC2 1.6% wholly-owned subsidiary, Olam Food Ingredients (OFI) has priced US$125 million ($169.2 million) worth of five-year and seven-year floating rate notes. There were US$25 million worth of five-year floating rate notes and US$100 million worth of seven-year floating rate notes.

 

The notes were issued by OFI&rsquo s 100% indirect subsidiary, Olam Americas LLC, and priced via a private placement to US investors.

 

Proceeds from the issue of the notes will be used by Olam Americas and its US affiliates for refinancing existing debt and general corporate purposes.

 

Rabobank acted as the sole placement agent for the transaction.

 

THE food ingredients unit of Olam Group : VC2 +0.81%, OFI, has secured a multi-tranche sustainability-linked facility worth US$1.8 billion to refinance its existing loans and for general corporate purposes.

 

The facility comprises a two-year and three-year revolving credit facility as well as a three-year term loan.

 

Its interest margin is linked to the achievement of certain sustainability targets and could be reduced if those targets are met, said Olam Group on Thursday (Aug 31).

 

The facility is initially guaranteed by Olam Group, which will transfer to OFI Group following OFI&rsquo s planned initial public offering and demerger from Olam. A total of 19 banks from Australia, Canada, China, Europe, Japan, US, the Middle East and Singapore participated in the facility across four tiers.

 

Joint sustainability coordinators and senior mandated lead arrangers include DBS and JPMorgan Chase, while Standard Chartered and BNP Paribas were among the transaction&rsquo s appointed senior mandated lead arrangers.

 

Mandated lead arrangers comprise ANZ and Intesa Sanpaolo, and lead arrangers include Barclays and MUFG. HSBC was appointed as the facility agent.

 

Rishi Kalra, OFI&rsquo s executive director and group chief financial officer, said that the facility complements OFI&rsquo s strong liquidity position, sustainability efforts and its &ldquo growth strategy to deliver sustainable, natural, value-added food and beverage ingredients and solutions through a diverse channel mix to customers across the globe&rdquo .

 

With the release of Olam&rsquo s first-half financials, chief executive Sunny Verghese on Aug 11 said that the group expects its planned dual listing &ndash on the Singapore Exchange and the Saudi Exchange &ndash of Olam Agri to take place in H1 2024.

 

SHARES of mainboard-listed Olam Group : VC2 -6.11% reached a 10-month low on Monday (Aug 14) after the group posted an 89 per cent decline in first-half net profit to S$48 million.

 

The counter fell as much as 7.6 per cent or S$0.10 to a low of S$1.21 as at 9.44 am. The last time Olam&rsquo s shares closed near this level was on Oct 14, 2022.

 

By 2.21 pm, the agri-food giant&rsquo s shares were trading 6.1 per cent or S$0.08 lower at S$1.23, with around nine million shares changing hands.

 

On Friday, the group attributed the drop in net profit to a one-off exceptional loss on lower almond yields in Australia, which brought the group&rsquo s net exceptional loss to S$136.1 million. The group&rsquo s net interest costs were also significantly higher at S$245.9 million.

 

Contributions from Olam Agri were lower after the group sold a 35.4 per cent stake in the business.

 

Meanwhile, revenue slid 13.2 per cent to S$24.7 billion. By segment, revenue of the group&rsquo s food ingredients unit OFI dropped 5.1 per cent to S$7.7 billion on lower volumes, partially offset by pricing growth in ingredients and solutions.

FOOD and agri-business giant Olam Group : VC2 0% could soon be racing to a different beat.

 

The group is set to lose its biggest revenue generators with the spin-off of Olam Agri and food ingredients subsidiary ofi. Its top line would then come down to the horsepower of its &ldquo Engine 2&rdquo businesses and startup growth initiatives.

 

It has been some four years in the making now with Olam&rsquo s second growth engine revving up nicely. In 2022, revenue from the group&rsquo s associated incubating business segment came in at S$101.2 million, a sharp jump from S$22.9 million the year before.

 

Engine 2&rsquo s man in charge, Suresh Sundararajan, said he has &ldquo very clear plans&rdquo on when the key pillars &ndash farmer services platform Jiva, and carbon measurement and management platform Terrascope &ndash will start generating cash. 

 

Launched in 2020, Jiva generated more than S$70 million in revenue in 2022. Sundararajan has set his sights on Jiva becoming positive in its gross contribution this year.

 

He also aims for Terrascope, which was launched in June 2022, to double or treble its customer base over the next few years and become Ebitda-positive by the fourth year. Takings for Terrascope have moved from less than S$1 million by end-2022 to the &ldquo single-digit millions&rdquo currently, he divulged.

 

Sundararajan is the chief executive officer of Nupo Ventures, an independent startup foundry born in 2022, post the reorganisation of the Olam Group. While seemingly new, the work behind Nupo started in 2019 when Olam&rsquo s corporate innovation team incubated five new ventures.

 

In 2022, revenue from Olam&rsquo s associated incubating business segment came in at S$101.2 million, a sharp jump from S$22.9 million the year before. PHOTO: OLAM GROUP

How the Olam executive ended up taking the wheel after 28 years at the company was quite serendipitous. Back in late 2016, Sundararajan was put in charge of the group&rsquo s digital transformation journey, leading an internal task force that attempted to disrupt and transform the group&rsquo s own supply chains using technology. 

 

Then, the efforts were mostly experiments. One concept that captured everyone&rsquo s imaginations was Olam Direct, which explored whether an agri giant such as Olam could buy cocoa directly from a South Sulawesi farmer with just one hectare of land. 

 

This paved the way for Nupo&rsquo s first venture, Jiva, which today buys corn from more than 60,000 farmers across Indonesia. It is looking at covering other crops such as chilli, cassava, and coffee, and is considering an India expansion.

 

From Olam Direct, the group also derived the &ldquo boundary conditions&rdquo it would use to assess new ventures in a disciplined manner, said Sundararajan.

 

Climate tech

The idea that would become Terrascope came about in 2020, when Olam group CEO Sunny Verghese casually asked if the group could create a platform that compresses the time required to measure supply-chain emissions, known as Scope 3. For large enterprises, consultants were taking three to six months to make the computations.

 

By shortening the time needed, companies could spend more time on decarbonising efforts, Verghese reasoned.

 

Sundararajan was initially sceptical. But he would later go on to co-found Terrascope, which leverages machine learning to help companies cut through tens of thousands of emission factors to find the ones most relevant for their Scope 3 calculations. With the tool, Olam has managed to count its emissions in six weeks.

 

Despite only being a year old, the Singapore-headquartered venture, now staffed by around 100 employees, has attracted 20 paying customers, and announced an expansion into the Japanese market in June.

 

Names that have been onboarded include beverage giant Pokka, electric-vehicle battery startup noco-noco, food product wholesaler Mitsubishi Shokuhin, and MC Agri Alliance, a joint-venture company between Mitsubishi Corporation and Olam International.

 

Carbon measurement is a competitive space, with many climate tech startups in Europe and the United States attacking similar pain points. But Sundararajan believes the space is &ldquo still wide enough&rdquo for Terrascope to stand out.

 

In fact, he expects to see &ldquo convergence and disappearance&rdquo , given the ongoing funding winter for startups. &ldquo With capital drying up, those without a differentiated solution will probably disappear. Some may be bought over by large companies,&rdquo he remarked.

 

Terrascope is by no means a convenient tool for Olam to justify its emissions. In its first year using the tool, the group&rsquo s carbon footprint went up by 30 per cent. This upset Verghese, who wondered if Terrascope got it wrong, Sundararajan shared.

 

They soon realised that the result was a &ldquo very sharp reflection of the objective truth that many companies struggle&rdquo in getting their measurements right. Olam ended up recalibrating its targets with the more accurate set of emission figures indicated by Terrascope.

 

Farmer tech

Despite being the bigger venture hiring some 500 employees, Jiva has poor product recall in a city such as Singapore. But it has changed the lives of small-time farmers in Indonesia who reported fetching prices 10 per cent to 20 per cent higher than what they used to get through a middleman, Sundararajan tells BT.

 

Not only does the platform allow farmers to discover latest prices of their crops, it also provides on-demand advice for yield improvement, and access to micro-financing at cheaper rates.

 

These gave it its 60,000- to 70,000-strong following just eight corn seasons in. Of these, about 2,000 to 3,000 navigate the app on their own, while the non-tech savvy transact through its network of more than 5,000 micro-entrepreneurs, who earn commission directly from Jiva through a tiered reward system.

 

Before Jiva, these farmers would easily be caught in a vicious cycle of poor yields, low earnings and debt, as the fragmented supply chain makes it easy for middlemen to short-change farmers, Sundararajan said. For instance, farmers without any proper assessment of their creditworthiness could be faced with limited moneylending options, and end up borrowing at rates of up to 40 per cent per annum, he noted.

 

Jiva does not make transactions in India yet, but it is gaining clout through AgriCentral. The app, which shows daily price movements for 150 crops, has some 800,000 active users a month there.

 

This will remain the status quo for a while, as Jiva wants to strengthen its presence in Indonesia, before making its foray into India &ndash a nation of over 130 million farmers, versus Indonesia&rsquo s 25 million &ndash sometime in 2025.

 

Unlike India, which also has large conglomerates such as Alliance Group eyeing the space, the ground in Indonesia is &ldquo more exciting&rdquo to work on as competition is few and far between there, said Sundararajan.

 

But he is not fazed by the competition in time to come. &ldquo Eventually, people who understand agriculture, who can do this buying and selling effectively, will succeed,&rdquo he said

 

AGRI food giant Olam Group : VC2 0% on Friday (Aug 11) reported a net profit of S$48 million, down 88.8 per cent from earnings of S$429.1 million in the year-ago period.

 

The group said this was due to a one-off exceptional loss on lower almond yields in Australia which brought the group&rsquo s net exceptional loss to S$136.1 million, as well as significantly higher net interest costs of S$245.9 million. 

 

The board of directors has declared an interim dividend of S$0.03 per share for the period under review, down from S$0.04 per share in the year-ago period. The dividend will be paid out on Aug 28. 

 

The group also saw reduced contributions from Olam Agri following the sale of the 35.4 per cent stake. 

 

Revenue for H1 was down 13.2 per cent to S$24.7 billion. Segmentally, Olam&rsquo s food ingredients unit ofi saw revenue fall 5.1 per cent to S$7.7 billion due to lower volumes, but this was partially offset by pricing growth in ingredients and solutions.

 

Olam Agri saw a 16.7 per cent decline in revenue to S$16.3 billion on the back of reduced sales volumes and a normalisation of commodity prices from the highs in H1 last year, while the remaining Olam Group reported a 10.4 per cent drop in revenue to S$695.4 million on lower sales from de-prioritised assets and gestating businesses, despite higher volumes. 

 

Speaking to reporters and analysts at a briefing to discuss the company&rsquo s latest financial results, Olam chief executive Sunny Verghese said a number of factors are resulting in &ldquo tough&rdquo conditions for the group.

 

Verghese, who also heads the Olam Agri unit, said these include &ldquo sticky&rdquo inflation levels and high interest rates, tougher trading conditions in the food and agribusiness sectors, geopolitical tensions, and food security issues that have prompted governments to impose regulatory measures.

 

Weather is also a concern for an agribusiness company like Olam, Verghese said. He cited the example of cotton crops in Texas being significantly impacted by hotter and drier weather.

 

&ldquo None of us knows exactly how we&rsquo re going to track over the next few years. We (need) to have a diversified portfolio that allows us to navigate across these various drivers,&rdquo said Verghese.

 

ofi&rsquo s chief executive A Shekhar said an &ldquo unprecedented situation&rdquo in Australia&rsquo s harvest &ndash an estimated 35 per cent to 40 per cent reduction in yields &ndash had resulted in a one-off exceptional loss for the company.

 

Based on research so far, he said he believes this impact is just one-off, and the tree health remains unaffected. About 75 per cent of the harvested crop has been processed, he noted.

 

&ldquo There could be some changes to the final volume and sales and sales prices. But we believe that there will not be a material difference to this number.&rdquo

 

With regard to the planned initial public offerings (IPOs) of Olam Agri and ofi, Verghese said he expects the dual listing of Olam Agri on both stock markets in Singapore and Saudi Arabia to take place in the first half of 2024.

 

&ldquo Markets are beginning to slowly come back, and we are not waiting to do an IPO in June because we believe market conditions will be substantially better then,&rdquo he said, stressing that the company has to get certain approvals from authorities before the IPO.

 

Verghese added that there will be &ldquo some gap&rdquo between the listings of Olam Agri and ofi to avoid forcing investors to &ldquo make a choice&rdquo between both companies.

 

Looking ahead, the group said ofi is leveraging recent investments to grow its innovation pipeline. New greenfield plants are being commissioned in H2 and will further expand its capacity in three important value-added areas.

 

The group also said it expects to continue to incur expenses associated with the execution of its reorganisation plan in H2. 

 

&ldquo Notwithstanding this one-off impact, the continuing impact from higher interest rates, and enhanced global macro risks, the group continues to be cautiously optimistic about its prospects for 2023,&rdquo it added.