Olam International Ltd., the commodity supplier backed by Singapore’s Temasek Holdings Pte, said first-quarter profit gained 5.7 percent as it targets positive free cash flow this year.
Net income was S$45.6 million ($36.6 million) in the three months ended Sept. 30, compared with S$43.2 million a year earlier, Singapore-based Olam said today in a statement. Sales declined 7.9 percent to S$4.3 billion due to lower commodity prices, it said.
Olam, which sells commodities from rice to cocoa, is cutting spending and selling assets as part of a business review in April that followed allegations by short-seller Muddy Waters LLC questioning its finances. The company announced yesterday an agreement to sell and lease back almond orchards in Australia for A$200 million ($186 million) to improve cash flow and return on capital.
“We are particularly pleased with the improvement in free cash flow generation in this quarter, which is a priority for us,” Chief Executive Officer Sunny Verghese said in the statement.
Olam would consider more lease back arrangements for assets including palm and rubber plantations, and dairy operations, Verghese said on an audiocast following the earnings release.
Olam’s free cash flow swung to S$46 million in the quarter, from a negative S$706.8 million in the year-ago period, and the company reiterated an expectation set in August that it would remain positive for the full year. Olam also cut fixed capital investment to S$159.5 million from S$211.2 million.
The shares advanced 1.7 percent to S$1.495 at the Singapore close, before the results announcement.
Olam’s sales volume for foodstuffs fell slightly from a year earlier, led by a 2.7 percent decrease in its biggest unit, food staples and packaged foods, which includes rice and grains. While its cocoa and coffee unit sold slightly more on the year, revenue slide 27 percent after a steep decline in coffee prices. The edible nuts, spices and beans unit recorded 8.7 percent growth in volumes and 30 percent growth in revenue.