February 23, 2012

 

 

A rise in fourth quarter net profit of 56.9% has been reported by Wilmar International Ltd., as continued weakness in the commodities supplier's margins discouraged investors.

 

Net profit for the three months ended December 31 was US$500 million, up from US$318.6 million in the same quarter a year earlier, the world's biggest palm oil trader by volume said in a statement to Singapore Exchange.

 

The strong earnings growth was largely due to contributions from its new sugar segment. A sharp improvement in associate contributions also lifted the group's net income.

 

However, Wilmar closed 10.9% lower at US$5.22, the worst performer on the 30-share Straits Times Index as investors were disappointed by the company's poor performance in its key oilseeds and grains as well as palm and laurics businesses, where margins were squeezed by difficult market conditions. The benchmark index shed 1.0%.

 

During the quarter, Wilmar's palm and laurics business recorded an 8% decline in sales volume to 5.3 million tonnes due to weaker demand from Europe and India. Margins contracted in line with unfavourable market conditions in China and India as well as the financial crisis in Europe, according to the statement.

 

Oilseeds crush margins in China remained challenging in the fourth quarter but the segment reported a pre tax profit of US$1.7 million compared with a pre tax loss of US$173.2 million in the previous year.

 

"Wilmar's soy crushing operations in China...did stage a sharp turnaround to profitability against the same quarter last year, but profit was marginal and margins remained challenging," stock broker Kim Eng Securities said in a note after the earnings were announced.

 

Wilmar, which recently ventured into the sugar business, said pre tax profit from the business was US$101.9 million. Contribution from associates also improved sharply at US$42 million in the fourth quarter of 2011, compared with a loss of US$21.1 million in the previous year. Revenue for the fourth quarter rose 26.7% to US$11.5 billion from US$9.09 billion.

 

"With Wilmar's healthy balance sheet, improved range of downstream product offerings, strong infrastructure in Asian countries and further expansion in Africa, we are well positioned to capture emerging markets growth as well as other agriculture-related expansion opportunities which might arise," Kuok Khoon Hong, chairman and chief executive of Wilmar, said in the statement.

 

The group is also "exploring closer collaborations with various parties in many of our businesses to meet the growing demand for agricultural products," Kuok said.

 

Separately Wednesday, Wilmar and US-based agribusiness firm Archer Daniels Midland Co. (ADM) jointly announced an expansion of their existing partnership to cover collaboration in fertiliser purchasing and distribution, ocean freight fleet management and tropical oil refining in Europe. Wilmar's net profit in 2011 rose 20.9% to US$1.6 billion and revenue was up 47.2% at US$44.7 billion.

 

At a press conference, Kuok said the company will list its Chinese operations in China at a later date after it abandoned plans for an initial public offering in Hong Kong. However, the proposed IPO is still "some years down the road," he said.