Wilmar Misses Forecast, Eyes Palm Oil and Sugar Price Rises

Kamis, 10 November 2011 | 11:37


Singapore. Wilmar International said on Wednesday that higher prices will support its palm oil and sugar businesses, sounding bullish after missing earnings expectations despite an almost 24 percent jump in net profit from a year earlier.Wilmar’s lower-than-expected earnings were linked to a foreign exchange loss and weaker margins as the rise in cost of feedstock outpaced the price rise.

Wilmar’s results compared to a 66 percent drop in the earnings of US agribusiness and trading firm Cargill, while Bunge, the world’s largest oilseed processor and among the top sugar and ethanol producers, saw its earnings decline by a third.

“The group remains positive of its prospects, despite uncertainties in the global economy, due to the resilience in the demand for agricultural commodities,” the company said in a statement.

Wilmar said palm and laurics would benefit from the recent changes in the Indonesian export duty structure for palm products, which it said is highly advantageous for downstream processing margins.

The company has about one-third of its total crude palm oil refining capacity in Indonesia, Macquarie said in a research note, adding that current CPO prices could give Wilmar a potential uplift of $104 per ton in Indonesian refining margins.

The world’s largest listed palm oil plantation firm, which generated more than half of its revenue from China, benefited from a 5 percent increase in its cooking oil price in China earlier this year.

But it said consumer product margins in the third quarter were lower from a year earlier due to an increase in the cost of edible oils, while the group had only about one month of price increase benefit in China. Wilmar was allowed to increase its price for consumer products in China on Aug. 1.

The company, which owns plantations in Indonesia and Malaysia as well as sugar operations in Australia, earned a net profit of $321 million for the quarter ended Sept. 30, compared to $260 million a year ago. An average forecast from five analysts predicted $461 million. Excluding the exceptional items, the company recorded a net profit of $442 million compared to $172 million a year ago.

Second half 2010 earnings were hit by losses from its oilseeds and grains business, which the company blamed on weak margins and inopportune buying.

Wilmar’s share price has declined by 0.7 percent since the start of 2011, compared to 10 percent fall in the Singapore market.

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