Wilmar profit up 18% in Q2 despite commodity woes

Wilmar's tropical oils unit - which cultivates and mills oil palm - was hit by a 15 per cent drop in pre-tax profit because of lower crude palm oil prices. Wilmar said it remains cautiously optimistic for this half of the year.
Wilmar's tropical oils unit - which cultivates and mills oil palm - was hit by a 15 per cent drop in pre-tax profit because of lower crude palm oil prices. Wilmar said it remains cautiously optimistic for this half of the year.PHOTO: BLOOMBERG

Oilseeds and grains segment was star performer with company's focus on the Chinese market

Agribusiness firm Wilmar International was able to lift earnings in the second quarter despite free-falling commodity prices this year.

Net profit was up 18.2 per cent year on year to US$201.8 million (S$278.2 million) in the three months to June 30, while revenue fell 11.7 per cent to US$9.28 billion.

The oilseeds and grains segment, which produces products such as soya bean and peanut oils, was a standout performer, with a focus on the Chinese market.

Pre-tax profit from the segment was up 179.3 per cent over the same period last year to US$115.9 million, "driven by improved crushing margins, higher volume crushed and continued robust performance in consumer products".

But the tropical oils unit - which cultivates and mills oil palm - was hit by a 15 per cent drop in pre-tax profit to US$176 million because of lower crude palm oil (CPO) prices.

Falling prices have taken a toll on firms like Wilmar, which is one of the biggest oil palm plantation owners in Malaysia and Indonesia.

CPO futures hit an 11-month low on the Bursa Malaysia Derivatives Exchange on Monday amid persistent concerns of uncertain demand and over-production.

Falling prices have taken a toll on firms like Wilmar, which is one of the biggest oil palm plantation owners in Malaysia and Indonesia.

CPO futures hit an 11-month low on the Bursa Malaysia Derivatives Exchange on Monday amid persistent concerns of uncertain demand and over-production.

Reflecting that market weakness, "sales volume from tropical oils manufacturing declined 6 per cent to 5.6 million metric tonnes in the second quarter", Wilmar noted.

In other segments, its sugar business' pre-tax losses widened 58.2 per cent to US$37.5 million. Associates also recorded a bigger pre-tax loss, up 157.5 per cent to US$10.3 million, mainly because of losses from Wilmar's sugar investments in India.

Revenue for the first half was US$18.7 billion, down 10.1 per cent, but net profit increased 33.2 per cent to US$443 million.

Earnings per share for the quarter were 3.2 US cents, up 18.5 per cent, while net asset value per share fell 0.74 per cent from Dec 31 to 240.5 US cents as at June 30.

  • AT A GLANCE

  • REVENUE: US$9.28 billion (-11.7%)

    NET PROFIT:

    US$201.8 million (+18.2%)

    INTERIM DIVIDEND:

    S$0.025 per share (+25%)

An interim dividend of 2.5 Singapore cents per share was proposed.

The company said it is still cautiously optimistic that its performance in this half of the year will be satisfactory. It said: "The group expects crushing margins in China to remain positive for the rest of the year and for consumer products to continue its strong performance.

"Refining margins are expected to be maintained for the tropical oils business with increased palm production and demand arising from lower CPO prices, though plantation and palm oil mill performances will continue to be affected by the softer CPO prices."

Wilmar shares closed two cents up at $3.17, ahead of the announcement of its results.

A version of this article appeared in the print edition of The Straits Times on August 06, 2015, with the headline 'Wilmar profit up 18% in Q2 despite commodity woes'. Print Edition | Subscribe