Olam shares fall on profit warning, dividend cut

Shares in Olam International Ltd. fell sharply on Thursday after the Singapore-based agribusiness group issued a profit warning and reduced its dividend payout.

The company said it now expects full-year core profit to decline by at least 15% compared with 2023, citing weaker demand in key markets and higher financing costs. Olam also announced a 50% cut to its final dividend, reducing it to 5 Singapore cents per share from 10 cents previously.

The profit warning and dividend reduction sent Olam’s stock down 6.5% to S$2.35 in early trading, extending a broader decline in the Singapore market. The company’s shares have now fallen nearly 15% over the past month, underperforming the Straits Times Index.

Olam attributed the weaker outlook to softening demand in its core food and agri-business segments, particularly in Asia and Africa. The group also noted elevated interest expenses due to higher borrowing costs amid a tightening monetary environment.

Analysts at DBS Group Research downgraded Olam to "hold" from "buy," citing the reduced dividend and weaker earnings outlook. The bank also lowered its price target to S$2.80 from S$3.20, reflecting concerns over margin pressures and slower volume growth.

Olam, which operates in over 60 countries, has faced challenges in recent quarters as global commodity prices remain volatile and consumer spending weakens in key markets. The company’s agri-business division, a major revenue driver, has been particularly affected by lower crop prices and reduced trade flows.

The dividend cut marks a significant shift for Olam, which had maintained a consistent payout policy for more than a decade. The move underscores the financial strain facing the company as it navigates a challenging operating environment.

Olam’s management is expected to provide further details on its revised guidance during an investor briefing scheduled for later this month.