Diversified commodities firm Olam International aims to boost production volume by 15-20 percent annually as it expands into upstream sugar and palm oil ventures, its chief executive said on Friday.
Group managing director and CEO Sunny Verghese said Olam was eyeing 10,000 hectares of sugar plantations in Indonesia, Brazil or Africa to set up a crushing plant with a yearly capacity of at least 2 million tonnes.
He said Olam, in which Singapore state investor Temasek Holdings holds a stake of about 14 percent, plans to develop between 50,000 and 100,000 hectares of palm oil plantations in Africa.
"We are focused on trying to build volume growth of between 15-20 percent annually," Verghese told Reuters.
He declined to elaborate on the impact of the increased volume on the earnings outlook for Olam, a global supply chain manager and processor of agricultural products and food ingredients.
ThomsonReuters I/B/E/S data showed analysts expect Olam to post revenue of around S$12 billion in the 2011 financial year or up by 15 percent from a year earlier.
The forecast put its pre-exceptional net profit for the 2011 financial year at S$293.56 million, or up by nearly 8 percent.
Olam's plan to develop palm oil plantations in Africa comes as Indonesia, the world's largest palm oil producer, seeks to impose a moratorium on forest clearing, which might slow the aggressive expansion of plantation firms.
Top palm oil companies in the region, including Wilmar International, the world's largest palm oil firm, and Golden Agri, have said that they are also looking to expand the edible oil business to Africa.
Verghese said the venture into sugar and palm oil was likely to take place after 2011.
Olam trades about 20 different commodities from Australian almonds to African cashew as well as operating coffee plantations in Laos and a rice business in Thailand.
The company's share price jumped more than 6 percent on Friday following strong earnings results a day earlier - fourth quarter net profit nearly doubled on strong volume growth and higher net contributions.
Still, Olam shares have been largely unchanged this year, lagging the broader Singapore market, which is up about 1 percent. Rival Wilmar has lost around 3 percent.
Rising raw material prices and narrowing margins have pressured some commodities companies in recent months, but Verghese said he expected Olam to benefit from the situation as the company moves towards upstream operations, which includes plantations and early processing activities.
"We are positioning ourselves to be able to take advantage of the long-term trend of the industry, which points to the fact that in 20 to 25 years you will expect that people who own the production and plantation assets get a larger share." "Therefore we want to have some of our assets upstream," he said.
Comments
Comments are closed.