Olam

Olam: Good set of 1Q13 results which was within the higher end of estimates after adjusting downwards for fairvalue gains.. Rev at $4.7b, +45.2% yoy and net profit at $43.2m, +26.2% yoy, whereby Q1 is seasonally the weakest qtr for grp. The Food category accounted for 90.4% of total vol & 80.2% of total rev, with the remainder made up of Non-food category. Overall sales vol at 3.6m mt, +97.7% yoy , as all segments reported stronger sales vol, particularly the food staples due to higher grain milling volume in Africa and origination volumes across Australia, Russia and Ukraine. However, net contribution margins fell at 6.6% vs 7.9% yoy, impacted primarily by the significant growth in the Grains business which has inherently lower NC margins. Key operating segments as follow: 1) Edible nuts, Spices & Beans: Rev, +12.7%, Sales Volume, +14.7% and NC +22.3% yoy, with growth in vol largely driven by the hazelnuts business in Turkey, spices from facilities in Vietnam, China and India and the Vegetable Ingredients in California. 2) Confectionery & Beverage Ingredients: Rev +15.4%, sales vol +8.3% and NC +10.5%. Growth was led by the successful integration of Olam Macao Spain (formerly Macao Commodities Trading SL) the Cocoa business continued to pursue growth by providing higher value-added processing and services to customers. Coffee continued to achieve market share growth in origination across Asia, Africa and the Andean region. 3) Food Staples & Packaged Foods segment: Rev +189.5%, Sales Volume +101.8% and NC +36.7%. Due to the significant increase in Sales Vol, NC per ton fell mainly due to the changing product mix within the segment which saw a large increase in Grains origination vol which inherently has a lower NC per ton. Rice also contributed to the strong vol growth. Dairy and Sugar businesses continued to face difficult mkt and unfavourable trading conditions. 4) Industrial Raw Materials: Sales +38.9%, Sales vol +13.1% and NC -4.2%. The Cottonbusiness has seen vol recovery during the qtr and is expected to start delivering normalised NC margins from H2 FY13. The Wool and Rubber businesses have had a good start during the qtr while Wood products business remained lacklustre. Going forward, grp remains positive about the long-term fundamentals of the industry, as well as its overall business model and will continue to execute on the strategy to grow long term intrinsic value across all existing business segments. Ratings as follow: CLSA maintains Buy with $2.50 TP Detusche maintains Buy with $2.30 TP DMG maintains Buy with $2.56 TP Maybank-KE maintains Hold with $1.75 TP