Wilmar Quarterly Profit Beats Estimates With 26% Increase

Wilmar International Ltd., the world’s biggest palm oil processor, said third-quarter profit increased 26 percent, beating estimates, after pretax earnings at its sugar and palm oil units rose.

Net income was $405.8 million in the three months ended Sept. 30, from $321 million a year earlier, the Singapore-based company said today in a statement. That compares with the $328.3 million mean estimate of four analysts surveyed by Bloomberg.

Today’s profit result comes after earnings declined year-on-year the previous two quarters, missing expectations, dragged down by losses at its oilseeds crushing unit in China. Wilmar, the worst performer this year on Singapore’s benchmark index, said today its sugar unit posted a 77 percent pretax profit gain in the quarter from a year earlier, which was affected by non-operating expenses.

The results were “pretty commendable, coming from lower expectations,” said Carey Wong, an analyst at OCBC Investment Research Pte. in Singapore. “The street expectation is hopefully the worst is over.”

The stock added 1.6 percent to close at S$3.17 in Singapore. Wilmar is down 37 percent this year, compared with the 14 percent gain in the benchmark Straits Times Index.

Wilmar’s sugar unit had pretax profit of $101.3 million in the quarter, up from $57.2 million a year ago, it said. The unit will be “a major business for us in the future” as the company expands its plantations and refining capacity, Chief Executive Officer Kuok Khoon Hong said today at a briefing in Singapore.

Crush Margins

The oilseeds and grains division posted a 40 percent decline in pretax profit to $60.3 million, the company said. Still, that reverses two quarters of losses, driven by better crush margins and timely purchases of raw materials, it said.

The unit’s earnings were better than expected, said OCBC’s Wong. “It turned around a stretch of losses,” he said. “The over capacity issue is still there, so being able to buy raw materials better helps a lot.”

Wilmar’s soybean crushing capacity utilization in China was more than 50 percent in the third quarter and should improve in the fourth quarter, Kuok said.

Pretax profit from its palm and laurics business gained 6 percent to $181 million as the company benefited from a revised export tax structure in Indonesia, Wilmar said. Its plantations and palm oil mills unit posted an 11 percent drop in pretax profit to $116.6 million on lower yields and prices, and higher costs.

Palm Prices

Revenue fell 5.7 percent to $12.3 billion in the quarter because of lower palm prices and profit excluding non-operating items fell 14 percent to $388 million from a year earlier, Wilmar said. Non-operating losses from investments, foreign exchange and bond derivatives weren’t repeated this quarter.

Palm oil stockpiles have been “overly healthy,” which pushed prices down, and aren’t likely “to go away very quickly,” Executive Director Teo Kim Yong said at the briefing.

“People are still very cautious,” he said. “No one is buying inventory and stocking.”

Palm oil slumped 27 percent this year as inventories in Malaysia and Indonesia, the top producers, piled up. Stockpiles in Malaysia hit a record 2.7 million metric tons in October, according to the median of five estimates compiled by Bloomberg.

Wilmar sees expansion opportunities in Africa for palm oil and plans to spend “a few hundred million” over the next few years to tap growing domestic demand, Kuok said. The company has already made investments in Uganda, Ivory Coast, Ghana, and Nigeria, he said.

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