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Friday, February 8, 2013

Olam Q2 profit jumps 20% on grains, nut volumes


Olam International, the commodity trader targeted by short-seller Carson Block, said second-quarter profit jumped 20% on increased volumes of grains, nuts and industrial raw materials.
Net income was $154.1 million in the three months ended Dec 30, from $128.5 million a year ago, Singapore-based Olam said today in a statement. That compares with the $98 million estimate from Macquarie Group in a Dec. 6 report, and is the highest since the second quarter of fiscal 2010.
This is the first profit report by Olam, the world’s second-largest rice trader, since Block said in November that the company will fail, prompting a share slide. Chief Executive Officer Sunny Verghese, who says the short-seller’s claims are baseless, has been making acquisitions to boost earnings.
Many of Olam’s investments don’t “have any immediate impact, so they are just going to keep saying everything is progressing,” said Vincent Fernando, an analyst at Religare Capital Markets in Singapore who has a a sell rating on the stock, before the earnings announcement.
Olam, partly owned by Singapore’s Temasek Holdings Pte, added 0.6% to $1.635 at the close of trading in Singapore today. The stock lost 27% last year, making it the second-worst performer on the benchmark Straits Times index.
Revenue increased 9.9% to $4.94 billion. Sales volume in metric tons advanced 54% in the quarter.
Biological Assets
The company, also one of the top six cotton traders, today reported a net gain from changes in fair value of biological assets of $22.1 million, compared with $34 million in the quarter a year earlier. Olam’s biological assets include its almond orchards, coffee plantations, dairy cattle, and cotton crops.
Block’s research firm Muddy Waters LLC said in a report on Nov 27 that Olam is “likely to fail” and questioned the way the company bought assets and booked non-cash accounting gains. Block, who said he’s betting against the stock, said Olam is “aggressive’’ is reporting gains on biological assets.
These assertions were made to panic shareholders and to benefit Block’s short positions, Olam said Nov 28. It has filed a lawsuit against the short-seller and his firm for defamation.

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