Nov. 14 (Bloomberg) -- Olam International Ltd., one of the world’s top three suppliers of rice, cocoa and coffee, said first-quarter profit rose 15 percent after it added new businesses in dairy, almonds and timber, boosting sales volumes.
Net income grew to S$34.2 million ($26.6 million) in the three months ended Sept. 30 from S$29.7 million a year earlier, Singapore-based Olam said today in a statement. Total shipping volumes advanced 18 percent to 1.86 million metric tons.
Olam, which counts Singapore’s Temasek Holdings Pte as its second-largest shareholder, is moving from pure trading to production of crops including rice and cotton, betting on demand from emerging economies. Volatile markets this year caused Noble Group Ltd., which competes with Olam in food products, to report its first quarterly loss in more than a decade.
“Olam’s performance was achieved against a difficult macroeconomic backdrop stemming from a growing and spreading sovereign debt crisis in Europe and the U.S., a looming European banking and financial crisis, and political gridlock,” as well as volatility across all markets, the company said. First-quarter sales jumped 32 percent to S$3.24 billion, the highest in this period in at least the last seven years.
Olam aims to more than triple annual profit to $1 billion in 2016, expanding in cotton in Ghana, urea in the Republic of Gabon and dairy farming in Latin America. The company plans to produce cashews, spices, grains and sugar by 2015.
China may turn into a rice importer by 2015 from a net exporter now, while the reliance of Asia’s largest economy on buying foreign grain will only grow, Olam Chief Executive Officer Sunny Verghese said Oct. 18.
Olam has dropped 22 percent in Singapore trading this year, set for its second-worst annual decline since the company was listed in February 2005, as the risk of sovereign defaults in Europe and a slowdown in the Chinese economy roil markets. The stock rose 2.1 percent to S$2.43 today, before the earnings announcement. The Straits Times Index advanced 1.4 percent.
The food segment accounted for about 80 percent of revenue and volumes, with the rice and grains businesses performing better than expected during the quarter, Olam said. Food ingredients and raw materials are “inherently more recession-resistant,” the company said.
The commodity supplier said Nov. 10 it entered the hazelnuts business after acquiring Turkey’s Progida Group for about $38 million. Olam is currently in discussions on possible acquisitions and joint ventures, according to today’s statement.
Noble’s $17.5 million quarterly loss and the resignation of Chief Executive Officer Ricardo Leiman, both announced after trading closed Nov. 9, prompted a 26 percent plunge in Noble’s shares the next day. The loss was the first in 14 years.
A jump in cotton prices in the first half, followed by a drop, led farmers to default on contracts, Noble said. That forced the group to purchase the fiber in the spot market at elevated prices to honor its obligations to buyers. Standard & Poor’s placed Noble on credit watch with negative implications, saying the company’s financial strength has “weakened.”
“As one of the world’s largest cotton ginners, we have significant income revenue relative to our peers,” Olam Chief Financial Officer Krishnan Ravikumar said at a briefing in Singapore. While Olam faced some customer defaults and negotiations, “those are a small part of the total volumes we supply,” he said.
The price volatility in cotton has ended and the market has “reverted to more normal trading conditions,” the company said in a presentation given out at the briefing.
Olam’s net borrowings fell to S$5.6 billion as of Sept. 30 from S$5.7 billion as of 30 June 2011, the company said.
Capital Group Companies, Olam’s third-largest shareholder, after the Kewalram Chanrai Group and Temasek, raised its stake in the company to 9.17 percent from 8.11 percent, the commodity supplier said today in a separate statement.
To contact the reporter on this story: Yuriy Humber in Tokyo at firstname.lastname@example.org
To contact the editor responsible for this story: Rebecca Keenan at email@example.com.