May 20, 2011

 

Wilmar plans RMB300-million grain processing operation in China's Yunnan

Yihai Kerry Group, the China arm of Singapore agribusiness giant Wilmar International Ltd, plans to invest RMB300 million (US$46 million) in grain processing facilities in China's southern province of Yunnan, Wilmar and a state-backed Chinese grain agency said separately on Thursday (May 19).

 

The expansion in Yunnan by Yihai Kerry, already a major producer of processed food-grain products in China, is planned despite pressure on profitability from price controls the government has been relying on to contain inflation.

 

The planned facilities, to be located in the province's Jinning county, will include logistics and distribution sites, and processing facilities for grain, potato and walnut products, the China National Grains & Oils Information Centre said.

 

Wilmar set up the Yunnan subsidiary, Yihai Kerry (Kunming) Foodstuffs Industries Co Ltd in December, and construction on the plant will start soon, according to a Wilmar spokesman.

 

The subsidiary is 70% owned by Yihai Kerry Investments Co Ltd, the parent company said in a statement.

 

Yihai Kerry's sales in Yunnan of 650,000 tonnes a year are valued at more than RMB3 billion (US$462 million), the CNGOIC said.

 

The Singapore company's advance in China comes despite pressure from the government's price controls on food products.

 

Beijing has asked the company, along with other large domestic producers, to cap prices of cooking oils as part of the government's efforts to contain inflation.

 

Last week, Wilmar, the world's largest palm oil producer, said its net profit in the January-March quarter fell to US$386.7 million from US$401.4 million in last year's first quarter.

 

The company attributed the decline partly to narrower profit margins for consumer products, as "government regulations in some countries" prevented it from raising prices in response to higher raw material costs. It also attributed the dip, which was not as sharp as expected, to fair-value losses.

 

"The Group remains positive on its prospects, despite a challenging operating environment in China arising from the monetary tightening and anti-inflationary measures implemented by the Chinese government," said Kuok Khoon Hong, Wilmar's chairman and chief executive.

 

Grain processing in China has traditionally been dominated by local companies such as Cofco Ltd. Yihai Kerry's foray into the wheat-processing sector is only about five years old.