KUALA LUMPUR (BLOOMBERG) - Wilmar International Ltd. said first-quarter profit rose 3.2 per cent amid a steady performance in its tropical oils and oilseeds units, while warning the world's largest palm oil trader is entering a challenging operating environment.

Net income climbed to US$239.4 million (S$3.26 million) from a restated US$232 million a year earlier, Wilmar said in a statement Tuesday. Revenue fell 4.3 per cent to US$9 billion from US$9.4 billion, it said.

While a recent rally in palm oil will benefit Wilmar's plantation segment, higher prices will curb margins in its downstream business, Chief Executive Officer Kuok Khoon Hong said in the statement. Volatility in sugar prices will also impact the company, he said. "Operating conditions in the second quarter are expected to be challenging," Mr Kuok said.

Palm oil futures are up 7.1 per cent this year as El Nino- induced drought squeezes supplies in top growers Indonesia and Malaysia.

While Wilmar's prospects in 2016 have brightened as palm rebounds, it is the least leveraged of the major producers to rising prices and is more of a downstream player, Credit Suisse Group AG said in a May 4 note. The company reported lower oilseed crushing margins as China increased soybean imports.

"The market may be slightly concerned on the guidance for the challenging second quarter on the back of crush margins that may be weaker," Ivy Ng, regional head of plantations at CIMB Investment Bank Bhd., said by phone in Kuala Lumpur. "In terms of results, it's broadly in expectations."

Sales volumes for tropical oils increased 0.1 per cent in the quarter, supported by steady demand from the company's downstream businesses, Wilmar said.

Wilmar fell 2.3 per cent to close at S$3.41 in Singapore on Tuesday. The results were released after the market closed. Wilmar shares have surged 16 per cent this year.