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Wilmar Shares Slip on Profit Shortfall
February 22, 2012

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Wilmar International, the world’s biggest palm-oil processing company, fell the most in Singapore trading in more than three years after reporting quarterly profit that missed analysts’ estimates.

The shares slumped 11 percent to 5.22 Singapore dollars, their largest decline since Oct. 6, 2008, compared with a 1 percent drop in the benchmark Straits Times Index. Wilmar reported net income of $500 million in the three months ended Dec. 31, compared with the $519.8 million average estimate of six analysts in a survey compiled by Bloomberg.

Wilmar’s palm and laurics business posted a 32 percent drop in pre-tax profit as demand from China, India and Europe weakened and margins contracted because of “unfavorable market conditions” in Asia’s two fastest-growing major economies, the company said in its earnings statement today. Returns from crushing oilseeds and grains in China remained “challenging.”

“We had expected some improvement from the China business, but it apparently did not,” said Ben Santoso, an analyst with DBS Vickers Securities in Singapore. “The crushing margin in China is probably not going to improve markedly this quarter.”

Wilmar sold 8 percent fewer palm and laurics products in the fourth quarter from a year earlier even as revenue rose 6 percent, according to the statement. Margins were higher in Indonesia because of a change in the country’s export duty structure, the company said. Net income gained 57 percent from $318.6 million in the fourth quarter of 2010, according to the statement. Profit increased 21 percent last year to $1.6 billion.

Wilmar’s plantation and palm oil mills business reported a 1 percent drop in pre-tax profit in the fourth quarter from a year earlier because of lower crude palm oil prices. Unit production costs also rose as the company spent more on labor, fertilizer, fuel and repairs and maintenance.

Excluding a $262.7 million gain in a revaluation of Wilmar’s palm oil plantations, the segment’s profit before tax was $113.4 million, down 12.5 percent, the according to the statement.

“Last quarter, anyone who made money should be happy,” chief executive officer Kuok Khoon Hong said at a briefing in Singapore on Wednesday.

Wilmar’s plan to expand its plantations in Indonesia is “a big challenge” because of tighter forestry regulations, chief operating officer Martua Sitorus said. “We will push more in Africa,” he said.

Wilmar owns plantations in Indonesia, Malaysia and Africa, with Indonesia accounting for 74 percent of its total planted area and Africa 1.9 percent. As of Dec. 31, the company’s total planted area was 247,081 hectares.

The company’s plantations and palm oil mills business reported a 1 percent drop in pre-tax profit in the fourth quarter compared with a year earlier, according to its earnings statement released today. Full-year income before tax rose 15 percent.

Bloomberg