The disposal aligns with its updated reorganisation plan, says the agribusiness company

 

[SINGAPORE] Olam : VC2 +1.12% will dispose of its entire stake in port and logistics operator Arise P& L for a US$175 million consideration, as part of plans to reorganise its business and monetise one of its units. 

 

The agribusiness giant in a bourse filing on Thursday (Apr 17) said that it entered into a conditional sale and purchase agreement with Equitane DMCC to dispose of its whole stake in Arise P& L. This amounts to 161.1 million ordinary shares, or around 32.4 per cent of Arise P& L&rsquo s issued and paid-up share capital.

 

Olam will not hold any shares of Arise P& L after the sale, which is expected to complete by end-2025, subject to terms and conditions.

 

Arise P& L manages ports and logistics infrastructure projects in West Africa, including a mineral port and a general cargo port in Gabon, and a bulk port in San Pedro, Cote d&rsquo Ivoire.

 

The buyer, Equitane DMCC, is a Dubai-based long-term investment platform that creates sustainable solutions in Africa.

 

The proposed disposal is part of Olam&rsquo s updated business reorganisation unveiled on Apr 14. This includes plans to divest and monetise the assets and businesses of the remaining Olam group, one of three operating units carved out in the company&rsquo s earlier restructuring exercise in 2022.

 

It also announced plans to inject US$500 million into its other unit, Olam Food Ingredients (ofi), and to focus on its delayed initial public offering (IPO). This follows its announcement in February that it was divesting its Olam Agri unit for US$2.6 billion.

 

The US$175 million consideration is &ldquo attractive&rdquo as it represents a 7 per cent premium over the carrying value of the Arise P& L shares held by Olam as at Dec 31, 2024, the group said.

 

The shares&rsquo book value stood at around US$164 million as at December 2024, based on audited FY2024 accounts. This brings the excess of the estimated proceeds and gains from the proposed sale to about US$11 million, Olam said.

 

The group added that it will consider factors such as its future earnings, cash flow, capital requirements as well as other financial and business concerns when deciding on the use of the divestment monies.

 

It also said that the completion of the proposed sale is conditional, as it depends on the group and Equitane DMCC obtaining consent from multiple parties. They include the conceding authority of Cote d&rsquo Ivoire, the Gabonese Republic, and Societe Librevilloise Maritime, as well as shareholders of Arise P& L.

 

Olam said that it would make further announcements if material developments arise, and urged shareholders to exercise caution in dealing with its shares.

 

Business reorganisation, IPO plans

On Apr 14, Olam unveiled plans to invest US$500 million of equity into ofi and to deleverage its other unit &ndash the remaining Olam group &ndash for progressive liquidation, as part of its business reorganisation.

 

It intends to monetise the remaining Olam group by divesting all assets and businesses under the unit over time, and distributing the net proceeds to shareholders via special dividends.

 

This, along with the equity investment, will position ofi for growth and facilitate the resumption of its delayed IPO plans in both Europe and Singapore, the company said.

The investment, funded by internal resources, is aimed to &lsquo position ofi to pursue profitable growth&rsquo

 

[SINGAPORE] Olam Group : VC2 +4.71% will invest US$500 million equity into Olam Food Ingredients (ofi) within the next three months, while de-leveraging the remaining Olam group for progressive liquidation, as part of its reorganisation plan amid the disposal of Olam Agri.

 

The US$500 million investment, funded by internal resources, is aimed to &ldquo position ofi to pursue profitable growth&rdquo so that Olam can resume the delayed ofi initial public offering (IPO) plans in both Europe and Singapore, said Olam&rsquo s chief executive officer Sunny Verghese in a press conference on Monday (Apr 14).

 

The agri-business giant, which announced its divestment plan of the main profit-making unit &ndash Olam Agri &ndash in February, is also open to private routes to unlock value from ofi.

 

Meanwhile, Olam will re-initiate share buybacks after renewing its share buyback mandate in the upcoming annual general meeting on Apr 25.

 

Monetising remaining Olam group

Olam will allocate about US$2 billion to de-leverage the balance sheet of the remaining Olam group, one of the three operating groups carved out in an early restructuring completed in 2022.  

 

After making the unit debt-free and self-sustainable, Olam will &ldquo responsibly divest&rdquo all of its assets and businesses over time, and distribute the net proceeds to shareholders via special dividends.

 

The proceeds from the disposal of Olam Agri, estimated at US$2.6 billion gross, will finance the plan.

Olam to sell remaining stake in Olam Agri for US$2.6 billion, focuses on IPO of business unit ofi

However, Verghese noted that it is hard to predict either the timeline or target valuation of the divestment of the 10 assets and businesses under the remaining Olam group.

 

&ldquo But what we want to clarify is that there will be no fire sale of these assets... we have already initiated a process of finding the right long-term owners of these businesses,&rdquo he added.

 

As at end-2024, the remaining Olam group comprised of about US$2 billion invested capital. &ldquo We expect to get the fair value from these businesses after we have restructured the business and made that entire business debt free,&rdquo noted Verghese.

 

On what would happen to the listed parent company once the remaining Olam group is divested and ofi is public separately, Verghese said that Olam will update as the situation progresses given the limited predictability.

 

&ldquo It is a function of a lot of factors, some of which are in our control, a lot of which are not in our control... when there is any material development, we will keep you informed,&rdquo he noted.

On Feb 28, Olam Group executive director, co-founder and CEO Sunny Verghese bought 500,000 shares at an average price of S$0.99 per share. With a consideration of S$495,580, this increased his direct interest from 4.43 per cent to 4.45 per cent.

 

His preceding acquisition on the open market was in July 2022, with 500,000 shares acquired at S$1.54 apiece.

 

On Feb 28, Olam Group reported that its FY2024 core operating profit, or earnings before interest and tax, increased by 9.2 per cent year on year to S$1.9 billion.

 

Full-year sales volume grew 12.5 per cent to 49.6 million tonnes, driven by Olam Agri. However, significantly higher net finance costs of S$445.7 million led to a 69 per cent decline in profit after tax and minority interests to S$86.4 million.

 

It was reported that the higher net finance costs were due to elevated net debt levels from price-led working capital increases.

 

Prior to the release of the results, on Feb 24, Olam Group announced that it had entered into a conditional sale and purchase agreement with Saudi Agriculture and Livestock Investment Company (Salic) to dispose of its remaining shareholding in Olam Agri in two tranches.

 

Meanwhile, it was focusing on unlocking value for its remaining businesses and Olam Food Ingredients (ofi), including an ofi initial public offering.

 

Verghese said that with Salic, the group expected to further deliver on its shared vision and focus on sustainable sourcing.

Company blames earnings slide on higher net finance costs, exceptional losses in a &lsquo tough year for the industry&rsquo

 

AGRIBUSINESS giant Olam Group : VC2 -3.85% on Friday (Feb 28) reported a net profit of S$38.4 million for the second half ended Dec 31, down 83.4 per cent from S$230.8 million in the previous corresponding period.

 

This translated to earnings per share of S$0.0058 for the half-year period, down from S$0.0567 the previous year.

 

Earnings declined as earnings before interest and tax (Ebit) growth was offset by &ldquo a significant increase in net finance costs and higher net exceptional losses&rdquo , noted the group.

 

Finance costs for the half year rose to S$933.3 million from S$684.9 million.

 

The exceptional losses were mainly from the temporary cessation of operations at its food ingredients unit ofi&rsquo s onion and parsley processing plant, as well as the lease surrender and exit of two non-strategic almond orchards in the US.

 

Excluding these exceptional items, underlying profit fell 47.9 per cent on the year to S$142.8 million.

Revenue for the period, however, rose 24 per cent to S$29.2 billion from S$23.6 billion.

 

Sales volume for H2 grew 11.2 per cent and Ebit was up 10 per cent at S$1 billion, led by strong growth from the group&rsquo s ofi and Olam Agri units, which offset higher losses from the remaining Olam group.

 

Olam&rsquo s board proposed a final dividend of S$0.03 per share, down from S$0.04 per share the prior year. This takes the full-year dividend to S$0.06 per share, down from S$0.07 per share the year before. The dividend will be paid on May 14, following the record date of May 6.

 

For the full year, net profit declined 69 per cent to S$86.4 million from S$278.7 million. This was because Ebit growth was offset by the significant increase of S$445.7 million in net finance costs, which was driven by elevated net debt levels from price-led working capital increases.

 

Revenue, however, climbed 16.3 per cent to S$56.2 billion from S$48.3 billion, due to high revenue growth from ofi, on the back of input price increases.

 

Challenging price condition

Net gearing at end-2024 increased to 2.79 times from 1.73 times at end-2023, which Olam&rsquo s co-founder and group chief executive officer Sunny Verghese attributed to &ldquo extraordinary price situations&rdquo of commodities such as cocoa and coffee in 2024, during a results briefing on Friday.

 

A Shekhar, ofi&rsquo s CEO, noted that 2024 saw increased volatility, record price peaks and supply challenges across several key products.

 

&ldquo It&rsquo s been the toughest year to manage and balance all these constituencies and stand by them... it&rsquo s been tough for the whole industry,&rdquo he said.

 

As ofi has been directing capital towards global sourcing, total invested capital increased significantly to S$17.4 million in 2024, up 47.5 per cent from S$11.8 million in 2023. Shekhar added that the capital growth is reflected in &ldquo higher readily marketable inventories&rdquo , which will keep its factories running.

 

Full-year sales volume was up 12.5 per cent at 49.6 million tonnes, with 90.9 per cent contributed by its departing unit, Olam Agri.

 

On Feb 24, Olam said that it had entered into a conditional sales and purchase agreement with Saudi Agricultural and Livestock Investment Company (Salic), to dispose of all its remaining shareholdings in Olam Agri in two tranches, while focusing on unlocking value for the remaining Olam group businesses and ofi, including an ofi IPO.

 

The first tranche involves 44.58 per cent of the stake, which Salic will acquire for about US$1.8 billion. This implies an equity valuation of US$4 billion of the whole of Olam Agri.

 

Following that, Salic&rsquo s stake in Olam Agri will be raised to a controlling 80.01 per cent, from the current 35.43 per cent.

 

Within three years of the completion of the first tranche, the group will sell the remaining 19.99 per cent stake in Olam Agri via a call/put option.

 

Including the initial sale of a 35.43 per cent stake in Olam Agri in 2022, Olam would have raised total gross proceeds of US$3.9 billion, and accreted US$2.7 billion to its equity reserves, from the 100 per cent divestment of Olam Agri.

 

Continued volatility

Verghese expects continued volatility stemming from geopolitical tensions, US trade policies, and a potential revival of interest rate hikes amid uncertain inflation outlook.

 

He noted that Olam, as one of the few players in both upstream and downstream commodity businesses, has faced the &ldquo full brunt of this market volatility&rdquo .

 

While the group continues navigating the &ldquo exceptional circumstances&rdquo , Verghese highlighted that it will focus on pushing through the divestment of Olam Agri, and reducing losses of the remaining Olam group.

 

&ldquo We will hopefully make some progress in selling some of the exiting assets that have been earmarked for divestment,&rdquo he added.