Olam Group postpones Singapore-Saudi IPO of its agri-business unit

Olam Group, a Singapore-based global food and agri-business company, has announced that it will delay the initial public offering (IPO) of its agricultural unit, Olam Agri, in Singapore and Saudi Arabia, citing regulatory and market uncertainties. The company, which reported a 41% drop in its annual profit, said it will retain flexibility on the listing sequence and explore other strategic options to unlock value.

Olam Group had previously announced its plan to list its two operating groups, Olam Agri and Olam Food Ingredients, as part of its business reorganization and value creation strategy. Olam Agri, which comprises the company’s upstream and midstream food and feed operations, was expected to be dual-listed in Singapore and Saudi Arabia by the first half of 2024. Olam Food Ingredients, which consists of the company’s cocoa, coffee, nuts and spices businesses, was slated to be listed in London and Singapore after Olam Agri’s IPO.

However, on Wednesday, the company said that the IPO of Olam Agri will not happen by the first half of 2024, due to the regulatory framework still being finalized in Saudi Arabia to enable the listing of foreign companies and the issuance of Saudi Depositary Receipts on the Saudi Exchange. The company also said that it will consider the market conditions and the investor appetite before proceeding with the listing.

The company said that it remains committed to its value creation strategy and will continue to pursue other strategic options to unlock value for its shareholders, such as partnerships, joint ventures, and mergers and acquisitions. The company also said that it will launch a share buyback program for up to 5% of its total outstanding shares within the current mandate.

A profit decline amid the pandemic

Olam Group also reported its financial results for the year ended Dec. 31, 2020, showing a 41.4% decline in its operational profit after tax and minority interests (PATMI) to S$458.1 million ($340.95 million), compared to S$781.5 million in 2019. The company attributed the profit decline to higher interest rates, lower contribution from Olam Agri, and the impact of the COVID-19 pandemic on its businesses.

The company’s revenue increased by 8.6% to S$35.8 billion, driven by higher sales volume and prices across its products. The company’s earnings before interest, tax, depreciation and amortization (EBITDA) rose by 14.2% to S$1.8 billion, supported by improved margins and cost savings. The company’s free cash flow to equity improved by 35.8% to S$864.9 million, reflecting its strong cash generation and working capital management.

The company declared a final dividend of 4 Singapore cents per share, taking the full year dividend to 7 Singapore cents per share, unchanged from 2019.

A resilient performance amid the challenges

Olam Group’s co-founder and group CEO, Sunny Verghese, said that the company delivered a resilient performance in 2020, despite the unprecedented challenges posed by the COVID-19 pandemic, the geopolitical tensions, and the climate change. He said that the company’s diversified portfolio, agile execution, and digital transformation enabled it to adapt and overcome the difficulties, and to support its customers, suppliers, and communities.

Verghese also said that the company made significant progress in its reorganization and value creation plan, and achieved several milestones, such as the completion of the carve-out of Olam Agri and Olam Food Ingredients, the divestment of non-core assets, the acquisition of new businesses, and the enhancement of its sustainability and governance practices.

Verghese said that the company is confident and optimistic about the future, as it sees strong growth opportunities in its core markets and products, and as it leverages its competitive advantages and capabilities to create value for its stakeholders.

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