In an after market announcement yesterday, Wilmar announced first quarter results that showed higher revenues (+0.7%) from a year ago, but a net profit figure that was 48.7% lower. Chairman and CEO Mr Kuok Khoon Hong attributed this to difficult operating conditions arising from lower palm refining margins and negative crush margins in China. He believes that “such conditions are not sustainable long term and the resultant consolidation in the industry will ultimately benefit the group”.
 
The Wilmar press release reveals seasonal losses in Sugar, negative Soybean crushing margins as well as tougher operating conditions for Palm & Laurics. However, the Plantations and Palm Oil Mills and Consumer Products segments performed strongly.
 
Business Segment
Palm & Laurics: Pretax profit decreased 26% even though there were higher sales volumes in 1Q2014. Margins were compressed because of tighter supply of crude palm oil and increased industry capacity.
 
Oilseeds & Grains: Excessive import of soybeans and lower demand for soybean meal because of bird flu and slower economy resulted in a pretax loss of US$57.4mil. This compares to a pretax profit of US$47.2mil in 1Q2013.
 
Consumer Products: Sales volumes increased 17% as demand for good quality consumer products grew. This was mainly in China, Vietnam and Indonesia. Reflecting higher sales volume and lower feedstock cost, pretax profit jumped 26%.
 
Plantations & Palm Oil Mills: Pretax profit surged 53% mainly due to higher average selling prices of CPO and palm kernel. Also, lower fertiliser costs and depreciation of the Indonesian Rupiah brought costs down.
 
Sugar: Pretax loss was US$54mil as compared to a loss of US$13.6 in 1Q2013. Milling reported a loss of US$79.2mil due to the seasonal impact pending commencement of the milling season in June as well as negative timing effects of unrealised sugar hedges. Merchandising and Processing on the other hand reported gains of US$25.1mil. Nevertheless, it was a weaker performance as compared to 1Q2013.
 
Others:  Due to higher investment losses, this segment recorded a pretax loss of US$36.6mil in 1Q2014. 
 
Associates: Lower contributions by the Group’s associates in China and India resulted in the segment announcing a 70% decrease in profits.

Source: Macquarie Research - 9 May 2014