Wilmar International Ltd., the world’s biggest palm-oil processor, fell to the lowest in more than three years in Singapore trading after it said second-quarter profit plunged 70 percent.
The stock declined 7.1 percent to S$3.15, the lowest close since April 1, 2009. Wilmar, down 37 percent this year, is the worst-performer on the benchmark Straits Times Index.
The Singapore-based company said yesterday net income was $117.1 million in the three months ended June 30, from $393.1 million a year earlier, because of losses at its oilseeds and grains business and on lower earnings from its plantations. That missed the $316.5 million average of three analyst estimates in a Bloomberg survey.
“Results were very much below expectations,” James Koh, an analyst at Maybank Kim Eng Holdings, wrote in a report today. “Soybean crushing over-capacity in China will continue to hurt margins and the market has been too optimistic to expect a turnaround.”
The company posted a pretax loss of $40 million at its oilseeds and grains division due to negative crushing margins and depreciation of the yuan against the U.S. dollar, Wilmar said. Profit also declined because of lower prices and yields at its plantations, it said.
“Crush margin in China was the worst I’ve seen in the ten years we’ve been in the business,” Chief Executive Officer Kuok Khoon Hong said today at a briefing in Singapore. Wilmar managed the timing of its soybean purchases better in the second quarter compared with the previous quarter, Kuok said.
Soybean futures have rallied 34 percent this year, reaching a record $16.915 a bushel on July 23 as the U.S. endured its worst drought in half a century.
Shares of PPB Group Bhd, Wilmar’s biggest shareholder, fell 4.6 percent, the largest decline since May 2010 in Kuala Lumpur trading. PPB holds a 18.3 percent stake in Wilmar, according to data compiled by Bloomberg.
Wilmar’s stock recommendation was downgraded to “sell” from “hold” at both Religare Capital Markets Ltd. and UOB-Kay Hian Holdings Ltd. after the earnings results.
Returns should improve in the second half, especially for its sugar business, Chief Financial Officer Ho Kiam Kong said at the briefing. Its sugar division posted a pretax loss of $60.3 million in the quarter, Wilmar said yesterday.
Wilmar also recorded a pretax loss of $34.6 million, compared with a profit of $34.9 million a year earlier, at its non-core businesses on lower fertilizer and shipping profits and higher losses from investments in securities, it said yesterday.
Wilmar may be open to selling its stake in Australian breadmaker Goodman Fielder Ltd. “at a good price,” Kuok said today. The palm oil producer, which said in February it paid A$115 million ($120.5 million) for a 10 percent stake in Goodman Fielder, had planned to make a bid but its offer price was lower than what target’s board wanted, he said.