Olam to get boost from ADM Cocoa acquisition

Demand for cocoa will accelerate up to 4.3%.

While it reported a 5.5% decline in its net profit for 3Q16, agribusiness group Olam International could expect a boost from its $1.2b acquisition of ADM Coca late last year.

According to DBS Vickers Securities, post transaction, Olam is among the top 3 global coca processors with a 16% global market share in the US$16bn processing market.

DBS noted that demand growth is expected to accelerate from 3% p.a. to 3.4-4.3% in the coming decade.

"In addition, as an integrated player with substantial presence in the sourcing and
now the processing segment of the cocoa value chain, Olam should be able to extract higher profits through greater scale and better procurement," the brokerage firm noted.

More so, additional upside would also come from the planned US$35-40m worth of synergies by its second year of ownership of ADM Cocoa.

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