10 May 2012
PPB Group's 18.3% owned Wilmar International posted 34% drop in quarter earnings due to losses at its China-based oilseeds and grains business
(PPB opening stock price today (10.5.2012) was RM 16.60)
Shares of Wilmar, which also owns palm oil plantations in Indonesia and Malaysia, fell as much as 9 percent to a three-year low in early trade on heavy volume.
Wilmar has been struggling in China, where it processes grains to turn them into cooking oil, due to rising costs and excess capacity.
"The operating environment in China continued to be challenging and crush margins remained weak. Together with the poor timing of beans purchases, this resulted in a $52.5 million pretax loss," the company said in a statement.
"All the other key business segments of the group, especially palm and laurics, are expected to perform satisfactorily for the rest of the year."
Wilmar suffered from a similar situation in the second half on 2010 when its oilseeds and grains business recorded more than $210 million in pretax losses, which the company blamed on less timely purchases of raw materials.
Wilmar's January-March net profit fell to $255.9 million from $386.7 million a year earlier, coming in well below the average forecast of $365 million from nine analysts polled by Reuters.
Excluding non-operating items such as gains from investments and an accounting profit from sugar operations, it would have had a 51 percent drop in quarterly net profit to $205.6 million.
Wilmar acquired Australian sugar firm Sucrogen in 2010 for $1.5 billion.
Wilmar's core palm and laurics business had a 20 percent rise in sales volume to 5.2 million metric tonnes and saw pretax profit increase 53 percent to $234.9 million.
"Margins improved significantly as the group maximised its capacity utilisation in Indonesia, benefiting from the revised Indonesian export duty structure which came into effect in mid-September 2011," the company said.
Palm oil prices have risen by more than 5 percent since the start of this year.
Pretax margins from Wilmar's consumer business in China, which includes cooking oil, flour and rice, had improved slightly after a price increase in August 2011 and declining feedstock costs in the fourth quarter of 2011.- Reuters