Olam to suffer from Gabon fertilizer project delay

It'll have to wait until 2014.

According to CLSA, in its latest strategic review, Olam is now ushering in the dawn of a change in strategy where the focus will be on sustainable growth.

This will lead to reduced leverage ratios, lowered Capex, and more importantly, turn FCF positive by FY14 and into the future. The only fly in the ointment is that the Gabon fertilizer project will be delayed till CY14.

Here's more:

Nonetheless, these were key changes that we wanted to see Olam make, and having now steered the ship in the right direction, we shall await execution for affirmation.

Management indicates further delays in the Gabon fertilizer project, with financial closure to be achieved only in CY14. Mgmt also reiterate that Tata Chemicals remains obligated to commit to buying-in thereafter.

That said, Olam is looking for other investors to take a stake in the project and aims to reduce its own stake to <50% by FY16. Given the multiple project delays, we are concerned on Tata Chemicals will commit to the deal, and hence will look positively on any divestment of stake or new partner in the deal.

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