This past week, shares of Olam Group have been hit by reports that the company’s operations in Nigeria are allegedly under probe for a “mega economic fraud” of over US$50 billion ($68.1 billion).
The reports, which have been denied by Olam, surfaced over the weekend.
Despite the denial, Olam shares plunged when a trading halt was lifted on Sept 11, ending the day 8.59% lower at $1.17. The fall might have been heavier if Olam had not bought back one million shares of its own shares at an average of just over $1.17 each from the open market on the same day.
The following day on Sept 12, Olam shares extended its losses to close at $1.15. Its share price dropped yet again on Sept 13 to close at $1.10, after the company confirmed that it posted bail for a director of its local subsidiary.
Similarly, Olam bought back another 360,000 shares at just over $1.17 each on Sept 12 and 2.5 million shares at $1.08 on Sept 13. Before these allegations, Olam had been actively buying back shares from the open market, which is down by around a fifth year to date.
For example, on Sept 6, 7 and 8, Olam had acquired 500,000 shares daily at between $1.27 and $1.28 each. Together with the buybacks on Sept 13, Olam has bought back a total of 17.1 million shares under the current mandate, equivalent to 0.4458% of its share base.
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In 1HFY2023 ended June 30, Olam reported earnings of $48 million, down 88.8% y-o-y. Revenue was down 13.2% y-o-y to $24.7 billion. The company attributes the lower earnings to a one-off exceptional loss on lower almond yields in Australia as well as “sharply higher” interest costs.
Olam, a leading supplier of agricultural products, counts Temasek Holdings as its largest shareholder with its stake of 51.15%, according to its most recent annual report for FY2022.
In its Sept 11 denial, Olam compared its cumulative turnover of US$14 billion from its Nigerian operations between FY2015 and FY2022 to the alleged fraud of about US$50 billion as claimed by the reports, saying the numbers mentioned are “manifestly inaccurate and designed to be misleading”.
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Olam Group and Union Steel Holdings
Steeling for higher demand
Lian Bee Metal, which emerged as a substantial shareholder of Union Steel Holdings recently, has been scooping up more shares of the latter. Both companies are in the business of supplying steel.
Privately-held Lian Bee on Sept 11 acquired 10,000 shares at about 93.2 cents each, raising its stake to 1.99 million shares or 5.06%.
Lian Bee emerged as a substantial shareholder on Sept 4 when it acquired 43,000 shares at 89.5 cents each. Lian Bee bought again on Sept 6, acquiring 6,000 shares at 90 cents each and on Sept 7, acquiring 5,000 shares at 91.4 cents each.
Besides Lian Bee, Ang Yew Chye, an executive director of Union Steel, increased his stake in the company with a series of purchases on the open market over the past fortnight.
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The most recent was on Sept 12 when he acquired 45,000 shares at 95 cents each. This followed an acquisition of 41,500 shares at 90 cents each on Sept 5. Ang now holds 4.35 million shares, or 11.04% of the company.
In FY2023 ended June 30, Union Steel reported earnings of $11 million, up 55.5% y-o-y. Revenue was up 33.9% y-o-y to $107.3 million as the company saw greater demand for scaffolding as construction activity picked up. Union Steel plans to pay a final dividend of 5 cents per share, versus just 1 cent in FY2022.
While Union Steel is enjoying a pick-up in its traditional markets, it is expanding into new markets too. Specifically, in FY2022, it made a series of acquisitions that will give it access to the offshore, marine and oil & gas industries.
