Wilmar International (Wilmar) is confident that higher prices will support its palm oil and sugar businesses though it underperformed missing earnings expectations. However, there is solace-net profit jumped almost 24 per cent jump compared to the earlier year.
Moreover,Wilmar’s lower-than-expected earnings were linked to a foreign exchange loss and weaker margins from its consumer product business as the rise in cost of feedstock outpaced the price increase.
Interestingly, Wilmar’s results compared favourably when benchmarked to world giants such as Cargill and Bunge with the former losing some 66 per centof its earnings of US agribusiness.
Bunge, the world’s largest oilseed processor and among the top sugar and ethanol producers,saw its earnings declined by a third.
Wilmar remains positive of its prospects, despite uncertainties in the global economy, due to the resilience in the demand for agricultural commodities and the continued growth of Asian economies as palm and laurics will 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 (CPO) refining capacity in Indonesia, Macquarie said in a research note, adding current CPO price could give Wilmar a potential uplift of US$104 (RM324) per tonne in Indonesian refining margins.
The world’s largest listed palm oil plantation firm, which generated more than half of its revenue from China, partly benefited from an increase in its cooking oil selling price by 5 per cent in China earlier this year.
Wilmar did caution that consumer product margins in the third quarter were still lower from a year earlier due to bigger increase in cost of edible oils feedstock, 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 August 1.
The company, which owns palm oil plantations in Indonesia and Malaysia as well as sugar operations in Australia, earned a net profit of US$321.05 million for the quarter ended September 30, compared to US$259.5 million earned a year ago. That compares to an average forecast of US$461 million from five analysts.
Excluding the exceptional items, the company recorded a net profit of US$442.4 million compared to US$172.4 million a year ago.
Its earnings in the second half of 2010 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 per cent since the start of this year, compared to 10 per cent fall in the broader Singapore market.
So, will PPB see more dividends from Wilmar this year?
