Wilmar reports 2Q19 net profit dropped 52 percent, missing forecast from UOB KayHian

Palm kernels at a plantation in IndonesiaPalm kernels at a plantation in Indonesia

This article was originally published on Tuesday, 13 August 2019 at 22:24 SGT; it has since been updated with more details.

Wilmar reported Tuesday it second quarter net profit dropped 52.3 percent on-year to US$150.9 million, partly on lower soybean crush margins and on weaker performance from the sugar division.

Core net profit decreased 49.7 percent on-year to US$176.8 million in the quarter, Wilmar said. UOB KayHian had forecast core net profit of US$235 million to US$255 million.

“The weaker performance was mainly due to lower crush margin for the quarter as the impact of the African swine fever outbreak on soybean meal demand was greater than previously expected. This was partially offset by strong performances from consumer products and oleochemicals,” Wilmar said.

Revenue for the quarter ended 30 June fell 9 percent on-year to US$9.78 billion on lower commodity prices, partly offset by a 4 percent increase in sales volume, the agri-business company said in a filing to SGX.

The tropical oils segment, including plantation, manufacturing and merchandising, posted second quarter pretax profit rose 15 percent to US$177.3 million on stronger performance from the manufacturing and merchandising business on higher sales volumes. That was partly offset by lower crude palm oil prices and production yields in the plantation business, Wilmar said.

The oilseeds and grains segment, including manufacturing and consumer products, reported pretax profit for the quarter tumbled to US$59.2 million from US$290.2 million in the year-ago period, mainly on strong crush volumes and margins in the year-earlier quarter.

“Barring any unforeseen circumstances, we expect the margins of our crushing business and other segments to perform better in the remaining half of the year,” Kuok Khoon Hong, chairman and CEO of Wilmar, said in the statement.

In a July note, UOB KayHian had said the second quarter of 2018 had seen “exceptionally high” crushing margins for soybeans as soymeal prices in China had surged when the U.S.-China trade tensions began.

The sugar segment, including milling, merchandising, refining and consumer products, posted a pretax loss of US$69.4 million for the quarter, wider than the pretax loss of US$46.2 million in the year-ago quarter.

“Although the group’s sugar operations in Australia and Indonesia have performed better this year, the segment was impacted by the consolidation of Shree Renuka Sugars Limited which became a subsidiary in June 2018 and the accounting losses of its discontinued operations in Brazil,” Wilmar said.

For the first half, Wilmar reported net profit fell 21.5 percent on-year to US$407.9 million on revenue of US$20.23 billion, down 7.6 percent on-year.

Wilmar proposed a first half dividend of 3 Singapore cents a share, compared with 3.5 Singapore cents a share in the year-ago period.

Outlook

In its outlook, Wilmar was cautiously optimistic.

“The African swine fever’s impact on China soybean meal demand is likely to take several years to eradicate, although the lower China hog production will be offset partially by strong growth in the poultry sector,” Wilmar said.

“We are fortunate to be in the agri processing business as the slowing economy, due partly to the U.S.-China trade conflict, has not impacted Chinese domestic consumption of food. In fact, the demand for better quality food products in China continues to grow,” it added.

 

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