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Olam first-half profit up 1.8% to $429.1m as higher costs weigh

SINGAPORE (REUTERS) – Commodity trader Olam Group on Friday (Aug 12) posted a marginal rise in net profit for the first half of fiscal 2022, as a weak performance in its food ingredients unit partially countered a strong showing in its Olam Agri business.

The company was hit by rising costs due to global supply chain snarls following the Russia-Ukraine conflict and broadening inflationary pressures.

The significant demand growth rate and pickup seen in the second half of 2021 has slowed down in the first half of 2022 after the geopolitical crisis, accompanied by the hard pandemic lockdowns in China, Olam said.

Still, the group is cautiously optimistic about its prospects for the rest of 2022, with the industry continuing to see strong underlying demand amid tight supplies.

Olam Agri, which trades grains, animal feed, edible oils, rice and cotton and provides commodity financial services, still posted a 49.4 per cent jump in its first-half operating profit.

“Olam Agri is poised to build on its track record by taking advantage of the rising demand for food staples and agri-industrial raw materials as well as the shift to protein-based diets in high-growth emerging end-consumption markets,” said Olam Group chief executive officer Sunny Verghese.

For the six months ended June 30, Olam Group posted a net profit of $429.1 million, up 1.8 per cent from $421.5 million a year ago.

Revenue for the period rose 24.6 per cent to $28.4 billion as the group recorded higher prices across several of its products and commodities.

Finance costs, however, increased 36.7 per cent to S327.3 million due to a high interest rate environment, taxes and higher one-off exceptional charges related to its recent reorganisation, said Olam.

It declared an interim dividend of four cents per share, in line with last year.

Olam said it remained committed and fully prepared to pursue its long-delayed initial public offering and demerger of Olam Food Ingredients (OFI), pending favourable market conditions.

In August 2021, Olam announced plans for OFI to pursue a primary listing in London and a secondary listing in Singapore in the first half of 2022, but increased market volatility has forced the company into several delays.

Olam said it was exploring strategic options for its Olam Ventures and Olam Technology and Business Services businesses.

• With additional information from The Straits Times