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Singapore’s Most Efficient Farmers

PalmTreesMany people might say that making profits regularly is the most important part of running a sustainable business. However, that is only one part of ensuring that a business has a viable future.

If you think about it, anyone can make a profit if they simply throw heaps of money into a business. Instead, the secret of a long-term feasible business is to make profits efficiently – with little investment. In other words the key is to deliver a high return on the assets used (ROA).

In the case of farming, it could mean improving income by generating better yields and high quality crops.

Recently, Olam International (SGX: 32) was recognised by The Rainforest Alliance. It was awarded a “Sustainable Standard-Setter” Award for its commitment to helping cocoa farmers in Nigeria, Togo, Indonesia and Uganda improve their income while simultaneously protecting natural habitats.

This could be an important step for Olam to start closing its efficiency gap on its rivals. Currently, First Resources (SGX: EB5) is Singapore’s most efficient farmer. Its Return on Asset is an impressive 10%. It is closely followed in second place by Bumitama Agri (SGX: P8Z) with 9%. Olam is on level pegging with Golden Agri-Resources (SGX: E5H) and Indo Agri Resources (SGX: 5JS) with Return on Assets of around 3%

The efficient use of assets is likely to become more and more important for farmers, and not just for financial reasons. Consumers are increasingly demanding that farmers use their existing resources more efficiently. Simply extending plantations by destroying forests and threatening critically endangered species is no longer being tolerated.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.