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By Chris Prentice
NEW YORK Nov 14 Singapore's Olam International
Ltd is on pace to generate positive cash flow and to weather
commodities price volatility this year, the company said on
Thursday as it reported a 5.7-percent rise in profits in the
first quarter of fiscal 2014.
Olam is looking to "expand selectively," the
global commodities trading firm said in a statement after
showing a big boost in cash flow following a strategy review
announced last spring.
The merchant booked a profit of S$45.6 million in the three
months ended Sept. 30, compared with S$43.2 million in the
year-ago quarter, as the company expanded "upstream and
midstream" and in supply-chain activities.
The merchant showed a marked turn-around in cash flow at the
start of 2014, which reached to S$46 million, jumping from
negative S$706.8 million a year ago.
Olam said in April it would become free cash-flow positive
by the end of June 2014, following scathing criticism from
short-seller Muddy Waters of its business practices and debt
The firm recently offloaded an Australian cotton gin and has
signed sale and lease-back deal for its Australian almond
Even so, lower commodities prices and losses in the
company's financial services and volatility trading units led
the company's revenues to fall and offset growing volumes in the
company's almond and cotton business.
A "diversified portfolio" has left the company "well-placed
to navigate the uncertainties and volatility in global
commodities markets," said Olam's Managing Director and Chief
Executive Officer Sunny Verghese in the statement.
COFFEE, HEDGING UNITS DRAG
Sales revenues dropped 7.9 percent to S$4.3 billion, and
volumes fell 0.3 percent to 3.7 billion tonnes.
Olam's financial services and risk management division
posted a loss of S$8.3 million, on operating losses in the
company's market-making and volatility trading unit.
The unit has been restructured following the review, Olam
Launched in 2003, it has a "sell-side approach" to
exchange-traded business through Olam's broker/trader network,
according to Olam's website.
The company blamed a 27 percent drop in revenue in the
company's confectionary and beverage ingredients unit on
plunging coffee prices, which have set multi-year lows as global
Olam's revenues got a boost from the almond business, which
was a "strong contributor" to 29.9-percent growth in revenues
and 8.7-percent growth in sales volumes, according to the
The cotton division also saw strong growth, helping boost
volumes in Olam's industrial raw materials division by 4.8
(Editing by Tim Dobbyn)