More  sale  and  leaseback  in  the  pipeline?  Olam  completed  a  transaction  whereby  they sold and leased back 4,795 acres of Almond Orchards in California, thereby releasing cash of  SGD 69m  and  resulting  in one-time  net  gain  of  SGD 18m.  Management  indicated  they will  explore  other  such  opportunities  which  could  help  reduce  its  gearing. A  strategic recaliberation  review  is being undertaken, and  the  gearing issue  will  be  part  of  the  review process. 

NC  continued  to  improve.  Sales  volume  rose  54%,  whilst  NC  rose  19%  YoY.    The  NC improvement  largely  came  from  1)  food  staples  and  packaged  foods  (+30%)  and  2) industrial  raw  materials  (+88%).    Whilst  the  share  of  NC  from  industrial  raw  materials  of 16% is much lower than the 88% for food (and commodity financial services had negative NC), we view the improvement in margins for cotton as a big positive for the industrial raw materials segment.  

Olam's net gearing of 2.21x is higher than the Jun 12 level of 1.81x, but remains lower than Olam's internal limit of 2.5x. Adjusted for liquid assets, Olam has a net gearing of 0.68x. Management  indicated  it  has  sufficient  liquidity  to  meet  all  financial  obligations  till  end
FY14.   Olam had planned an 18-month capex of SGD1.7b, but should the strategic review result in a lowering of gearing limit, this capex plan may be adjusted accordingly.

For  the  Gabon  fertilizer  plant,  management  said  that  contributions  can  be  expected  from FY17  onwards.  The  schedule  has  been  delayed  by  an  estimated  9  months,  but implementation is underway, and Tata is still involved in the project.

Source: OSK