Wilmar sinks deep into the red in Q2 over soya bean buys

Wilmar International's loss can be blamed on the untimely purchase of soya beans during the quarter.
Wilmar International's loss can be blamed on the untimely purchase of soya beans during the quarter.PHOTO: BLOOMBERG NEWS

Agribusiness group Wilmar International fell deeply into the red in the second quarter, with a net loss of US$220.1 million (S$296 million) against a profit of US$193.2 million in the same period last year.

Revenue for the three months to June 30 inched up 0.9 per cent to US$9.37 billion.

The loss was largely due to the manufacturing business in oilseeds and grains, which was a result of untimely purchases of soya beans during the quarter.

Wilmar reiterated that bad timing was its undoing, a point it made in a profit warning last month.

  • AT A GLANCE

  • NET LOSS: US$220.1 million (not meaningful)

    REVENUE: US$9.37 billion (+0.9%)

    DIVIDEND PER SHARE: 2.5 cents (unchanged)

"Unexpected flooding in Argentina affected the soya bean harvest, and heavy participation by funds in the futures markets, among other factors, contributed to the very volatile markets," it had noted.

In its statement yesterday, Wilmar said the oilseeds and grains business turned in a second-quarter pre-tax loss of US$343.8 million as a result of untimely purchases of soya beans in a highly volatile market.

The business posted a pre-tax profit of US$115.9 million in the same period last year.

The loss was mitigated by stable performance from the consumer products business.

Sales volume for oilseeds and grains manufacturing and consumer products grew marginally to 5.9 million tonnes and one million tonnes respectively in the second quarter.

In addition, the sugar business also turned in a weaker performance due to unfavourable weather conditions and mark-to-market losses on sugar hedges.

In contrast, the tropical oils business continued to perform favourably.

Loss per share amounted to 3.5 US cents against earnings of three US cents previously, while net asset value per share eased to US$2.225 compared with US$2.28 as at Dec 31.

For the half-year ended June 30, Wilmar eked out a net profit of US$19.3 million, down 95.5 per cent from the same period last year.

The company will pay an unchanged interim dividend of 2.5 Singapore cents a share.

Wilmar said its balance sheet remains strong, with total assets and shareholders' funds amounting to US$35.21 billion and US$14.06 billion respectively.

Net gearing ratio was stable at 0.83 times its equity.

For the first half-year, the group generated US$705.5 million in net cash flow from operating activities, resulting in free cash flow of US$445.5 million.

"Notwithstanding the one-time loss in the second quarter, the group's integrated agribusiness model remains intact and resilient," said Wilmar chairman and chief executive Kuok Khoon Hong.

"The group continues to execute on its stated growth strategy with emphasis on downstream businesses and focusing on high growth Asian and African markets. Recent developments in joint ventures in Vietnam and India strengthen the long-term prospects in these countries," he added.

Wilmar shares yesterday ended unchanged at $3.09.

A version of this article appeared in the print edition of The Straits Times on August 12, 2016, with the headline 'Wilmar sinks deep into the red in Q2 over soya bean buys'. Print Edition | Subscribe