Wilmar Profit Falls 4.7% After Lower Plantation Value Gain

Wilmar International Ltd., the world’s largest palm oil processor, said fourth-quarter profit dropped 4.7 percent after palm oil prices declined and it booked a smaller gain on the value of its plantations.

Net income was $476.8 million in the three months ended Dec. 31, from $500 million a year earlier, the Singapore-based company said today in a statement. It recorded a $28.8 million gain on its plantations, from a $262.7 million gain a year ago.

Wilmar today said it’s forming a joint venture with Noble Group Ltd., Asia’s biggest publicly traded commodity supplier by sales, to develop and operate palm projects in Papua, Indonesia. Palm oil, the most-consumed cooking oil, plunged 23 percent in 2012 as stockpiles expanded and demand weakened.

Lower crude palm oil prices will continue to affect Wilmar “in terms of the contribution from the plantations,” said Ben Santoso, an analyst at DBS Group Holdings Ltd. in Singapore. “But bear in mind they would’ve started to operate additional capacity in Indonesia from first quarter onwards so that would boost their profitability further this year.”

The stock lost 1.6 percent to S$3.62 as of 9:53 a.m. in Singapore, compared with a 0.3 percent decline in the benchmark Straits Times index. Shares have gained 8.4 percent this year, outperforming the 3.5 percent advance in the benchmark index.

Key Segments

“Most key segments delivered higher profit from operations in the fourth quarter, with the exception of plantations and palm oil mills, which was affected by lower crude palm oil prices,” Wilmar said in the statement

Fourth-quarter profit, excluding non-operating items and biological asset gains, was $400.9 million, compared with $264.5 million a year earlier. That compares with the $412.2 million average estimate of four analysts surveyed by Bloomberg News. Sales increased 0.9 percent to $11.6 billion.

Full-year net income fell 22 percent to $1.26 billion, beating the $1.1 billion average estimate of 21 analysts compiled by Bloomberg.

Wilmar will take a 53.7 percent stake in Noble Plantations Pte, which owns a majority stake in a company holding 22,953 hectares of land in Papua, the companies said today in a joint statement. It didn’t state how much Wilmar is paying.

“Papua is a difficult region to build estates because you need to develop your own infrastructure and it has to be large scale to make it worthwhile because the cost of developing it is very high,” DBS Group’s Santoso said. “The main market would be China. If you go straight north, you would reach China.”