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Wilmar Has Capacity to Invest Up to $3 Billion on Acquisitions

Wilmar International Ltd. (WIL), the largest palm-oil trader, has capacity to spend $2 billion to $3 billion on acquisitions and is interested in sugar businesses in Myanmar and Brazil including plantations, mills and refineries.

Wilmar has looked at companies including Indian producer Shree Renuka Sugars Ltd. in recent years without proceeding, Chief Executive Officer Kuok Khoon Hong said today in Singapore.

“We want to be very careful on what we buy,” Kuok said.

The company is in talks to buy a majority stake in Shree Renuka, which is seeking to reduce its debt burden, the Business Standard newspaper reported on Nov. 4, without citing anyone.

Wilmar, based in Singapore, has announced deals valued at $3.1 billion since 2010, including its $1.54 billion offer for Australia’s Sucrogen Ltd. that gave it a foothold in the global sugar trade, according to data compiled by Bloomberg. The latest major acquisition, of a 27.5 percent stake in Morocco’s sole sugar supplier Cosumar SA, was announced in April.

Sugar is the “next leg of growth,” Wei Bin, a Maybank Kim Eng Holdings Ltd. analyst, said in a note. “Wilmar will deploy more resources to higher return areas going forward to improve group return-on-asset. One of the beneficiaries is sugar, which is expected to contribute 17 percent to the group profit before tax.”

Sugar prices are below output costs for some producers, boding well for longer-term prices, Kuok, who is also chairman of the company, told reporters today.

The trader fell 2 percent to S$3.38 by the Singapore close, valuing the company at S$22 billion ($18 billion).

Wilmar yesterday reported a 2.5 percent increase in third-quarter profit to $416 million as sugar and consumer-product volumes rose. Pretax profit at its sugar operations rose 49 percent to $151.2 million on favorable weather in Australia.

While it agreed in February to buy 54 percent of Noble Group Ltd.’s palm unit, the deal was called off as conditions weren’t satisfied. The two companies still plan to continue with a proposed partnership “by leveraging on their strengths” in Papua, Indonesia, they said in July in a joint statement.

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net; Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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