Olam food business to expand in region

The Singapore-listed agribusiness company Olam is considering investments in Dubai, Iran and Saudi Arabia.

Olam, which has warehouses in Jebel Ali as well as across the Arabian Gulf region, expects to invest further in the emirate this quarter, according to Sunny Verghese, Olam’s co-founder and group chief executive. He did not give details.

In Dubai, Olam imports edible nuts, coffee, cocoa and grain among other products – from its plantations or from third parties – which are re-exported by buyers.

The products are imported for the local market as well as for 14 other markets in the region. The Middle East and North Africa is among Olam’s top five markets worldwide.

Last week, Olam secured a revolving credit facility of US$650 million that would be used as working capital and refinance existing debt.

Following the low oil prices and a slowdown in the economy in the region, governments across the Arabian Gulf have been cutting subsidies. Olam is evaluating opportunities in Saudi Arabia, which is encouraging the privatisation of all state-owned wheat mills and some storage facilities.

“If asset prices are more realistic, that’s a good opportunity for us to invest,” Mr Verghese said.

“In the past, we made our biggest investments during the global financial crisis because assets and initiatives that are in line with our strategy became affordable.”

Olam invested 2.3bn Singapore dollars (Dh6.3bn) worldwide last year.

After the opening up of Iran, Olam is also looking to expand in the market. Egypt and Algeria are also countries where it is looking to invest in, expanding there in the next three years.

“We are already supplying to Iran – wheat, corn and soybeans – but we are also looking to set up a physical presence there,” Mr Verghese said. “We want to supply cotton, originate and export pistachios and set up feed milling and edible oil refinery.”

Olam sources its products from 4 million farmers around the world, about 80 per cent of whom are small-scale farmers

The geopolitical tension in the region poses a challenge to the food deficit in Middle East and North Africa region, said Mr Verghese.

“In Libya, 2011 onwards, there has been a massive drought and the country lost 60 per cent of land to desertification in the last five years and 80 per cent of the livestock, and given rise to 1.5 million climate refugees and war refugees, which is potentially dangerous,” he said.

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