Wilmar Q3 Profit Slips 35% on Mark-To-Market Losses

12 Nov 2015 --- Wilmar International Limited, the world's largest palm oil processor and Asia’s leading agribusiness group, reported a 16% decline in core net profit in Q3 2015. The Group’s overall net profit was reduced to US$275.9 million in Q3, mainly from mark-to-market losses in investment securities as a result of weaker equity markets during the quarter.

Also during the period, regional currencies such as the Malaysian Ringgit, Indonesian Rupiah and Chinese Renminbi depreciated significantly but the Group did not suffer foreign exchange losses due to effective hedging.

Despite the slowdown in China, the Group’s Oilseeds & Grains segment turned in a strong performance in 3Q2015, driven by higher volumes and better margins for the soybean crushing and Consumer Products businesses. Tropical Oils recorded lower profits in line with the industry as a result of declining crude palm oil (CPO) prices and lower margins from the refining and downstream businesses. Sugar achieved higher sales during the quarter but segment profits were lower due to the translation effect from the weaker Australian Dollar in 3Q2015 compared to 3Q2014. Revenue for the quarter declined 8% to US$10.65 billion, mainly due to lower commodity prices.

The Group’s net profit for the nine months ended September 30, 2015 was down 5% to US$718.9 million, while revenue fell 9% to US$29.35 billion. Core net profit increased 1% to US$816.0 million in 9M2015.

Tropical Oils (Plantation & Manufacturing) posted a 46% drop in pretax profit to US$105.1 million in 3Q2015. Lower CPO prices continued to weigh on Plantation profit but this was partially offset by stronger production yields. Production yield improved 9% to 5.4 MT per hectare as production of fresh fruit bunches increased 7% to 1,129,946 metric tonnes (“MT”).

In Tropical Oils (Manufacturing), lower refining margins and crude oil prices, which affected the oleochemical and biodiesel businesses, resulted in lower profits. Sales volume declined 2% to 6.4 million MT in 3Q2015. Oilseeds & Grains (Manufacturing & Consumer Products) saw pretax profit surge 39% to US$243.6 million in 3Q2015. The exceptional growth was driven by higher volume and better margins for the soybean crushing and Consumer Products businesses.

Sales volume for Oilseeds & Grains (Manufacturing) registered a 32% increase to 6.6 million MT. Consumer Products sales volume grew marginally to 1.4 million MT due to the reclassification of packed palm oil from Consumer Products to Tropical Oils segment. Without this reclassification, Consumer Products’ volume would have seen an increase of 18%.

Sugar (Merchandising, Manufacturing & Consumer Products) reported a 31% decline in pretax profit to US$108.7 million in 3Q2015. This was due to lower translated profits from the Group’s Australian operations as the Australian currency depreciated by 22% against the US Dollar during the quarter as well as weaker performances from the Merchandising and Manufacturing businesses. Sales volume for Sugar increased 34% to 4.7 million MT from higher Merchandising and Milling activities.

The Others segment registered a pretax loss of US$56.2 million in 3Q2015 compared to a pretax loss of US$0.2 million in 3Q2014, mainly due to mark-to-market losses from the Group’s investment securities. This was partially offset by stronger contributions from the Shipping and Fertiliser businesses. Associates saw pretax profit decrease 55% to US$14.7 million, mainly due to losses from the Group’s Sugar investment in India as well as lower contributions from associates in China. This was partially offset by higher contributions from Goodman Fielder and Cosumar S.A.

Mr. Kuok Khoon Hong, Chairman and CEO, said, “The Group expects performance of the Oilseeds & Grains segment to remain satisfactory. Refining and downstream product margins for the Tropical Oils segment should also improve with the biodiesel mandate in Indonesia. The recent increase in CPO prices will improve Plantation margins. In addition, the Group’s Sugar Milling segment will gain from the recent surge in sugar prices on the back of anticipated sugar deficit in the coming year. Overall, we remain optimistic that performance for the remainder of the year will be satisfactory.”