Olam International continued its quest to release value from
assets built up during a multi-year takeover spree by selling for $53.7m Uruguay
farmland acquired with a dairy purchase.
Olam said that it had sold 1,769 hectares of land in western
Uruguay to farm operator Nalmer, although it will keep the land on a lease for
two years while it switches dairy cattle on the site to other farms.
In western Uruguay, Olam sold 6,002 hectares to Galperin
Group, although this site will be retained on a longer-term lease, of 12 years,
"renewable upon mutual consent".
The sales, which will release a pre-tax profit of $18.0m, are
being made from land the Singapore-based agricultural trader acquired with New
Zealand Farming Systems Uruguay, the struggling dairy operator in which Olam
acquired a majority stake in 2010, and completed its takeover late in 2012.
The deals also extends the range of disposals that Olam has
made since coming under fire from Muddy Waters last year over the extent of
dent built up during its acquisition binge.
"The transactions are aligned with Olam's strategy to pursue
profitable growth and generate positive free cash flow," said Vivek Verma, the Olam's
managing director and global head of dairy.
"Not only do we free up cash for redeployment into other
more value-accretive projects, we also retain the upstream dairy farming
economics, which remain fundamentally and structurally attractive in the
long-term due to increasing demand and supply constraints."
While Olam has failed to break out the performance of New
Zealand Farming Systems Uruguay (NZFSU) since the full takeover, the group has acknowledged
that its dairy business "underperformed" in the 2013 financial year, in part
thanks to the Uruguay business.
"Although strong milk prices were favourable to the upstream
dairy business, the positive impact was offset by lower milk production at our
dairy farming operations in Uruguay, NZFSU, as a result of poor weather
conditions persisting through the year," the Singapore-based group said in its
The annual briefing also said that Olam had "embarked on a
restructuring programme" at NZFSU "to focus our management team on improving the
NZFSU reported a loss of $7.6m for the year on revenues of
$63.1m in the end of June 2012, its last public results, following an $8.7m
loss the year before.