Olam to invest more in cocoa business expansion

SINGAPORE: Singapore-based Olam International said it planned to invest more on expanding its cocoa business, while reporting a 34-per cent fall in quarterly profit partly due to lower contributions from its coffee and rice operations.

That comes after the global food and agri-business this week acquired an 85-per cent stake in the parent of Indonesia’s largest cocoa processor, boosting its presence in the sector in Asia, where appetite for chocolate is growing rapidly in many markets.

“As far as cocoa strategy is concerned, it is one of our crown jewel businesses,” Chief Executive Officer Sunny Verghese said at Olam’s results briefing, adding that it would invest across areas including origination, processing and research.

He said he expected a slight international surplus of 100,000 tonnes from the upcoming cocoa crop, with prices remaining steady this year. Meanwhile, Verghese said that profit-margins in the company’s coffee business would be under pressure in the first-half of 2019. Coffee bean prices have been low due to oversupply.

However, he added that an estimated combined surplus of robusta and arabica varieties of coffee of 9 million bags could be revised down to 5 million bags for reasons including adverse weather conditions in key producer Brazil.

“If you have any further weather-related surprises, this market could potentially rally. However, based on fundamentals, given the significant stock overhang the market reflects fair value,” Verghese said.

Reuters