Wilmar Reports Decrease in Net Profit Due to Losses in Oilseeds & Grains in H1

The Group’s net profit for the half year ended June 30, 2012 (“2H2012”) declined 52% to US$373.0 million while revenue increased 7% to US$21.49 billion. Net profit excluding non-operating items declined 53% to US$378.0 million in 1H2012.

20 Aug 2012 --- Wilmar International Limited, Asia’s leading agribusiness group, posted a 70% decrease in net profit to US$117.1 million for the quarter ended June 30, 2012 (“2Q2012”). Excluding non-operating items, the Group registered a drop of 55% in net profit to US$172.3 million in 2Q2012.The decline in net profit was largely due to losses in Oilseeds & Grains and lower profits from Plantations & Palm Oil Mills. In addition, Sugar posted higher losses while associates recorded lower contributions. However, Palm & Laurics and Consumer Products reported higher profits.

Revenue was up 4% to US$11.02 billion for the quarter mainly due to revenue growth in Palm & Laurics, Consumer Products and Sugar, which in turn was driven primarily by volume growth in these segments.

The Group’s net profit for the half year ended June 30, 2012 (“2H2012”) declined 52% to US$373.0 million while revenue increased 7% to US$21.49 billion. Net profit excluding non-operating items declined 53% to US$378.0 million in 1H2012.

The non-operating items comprise foreign exchange differences from intercompany loans to subsidiaries, gains or losses from investment securities, fair value changes on embedded derivatives of the Group’s convertible bonds, interest expense on borrowings which are directly attributable to the funding of the Sucrogen acquisition and an accounting profit within the Sugar segment relating to pre-acquisition hedging reserves.

Business Segment Performance
Merchandising & Processing – During the quarter, Palm & Laurics recorded a 17% increase in sales volume to 5.6 million metric tonnes (“MT”). Despite the strong volume growth, margins dropped due to lower margins from oleochemicals and biodiesel, in an environment of lower selling prices in 2Q2012. This resulted in a 5% increase in pretax profit to US$160.1 million. Oilseeds & Grains registered a slight decrease in sales volume to 4.6 million MT on the back of a difficult operating environment for oilseeds while flour and rice continued to record significant volume growth. Crush margin during the quarter was extremely poor and this was exacerbated by losses from the depreciation of Renminbi against US dollar, resulting in a US$40.0 million pretax loss in 2Q2012.

Consumer Products posted a 7% increase in sales volume to 897,000 MT on the back of consumption growth in edible oils, flour and rice. Margins improved following the price increases in August 2011 and late March 2012 (for groundnut and rapeseed oils only) in China compared to 2Q2011 when a price increase restriction was in effect. As a result, pretax profit rose to US$18.0 million in 2Q2012.

Plantations & Palm Oil Mills saw a decrease of 45% in pretax profit to US$79.2 million due to lower prices realised by the Group’s own plantations which was in line with market trend, higher unit production cost and a drop in production yield. Production yield was down 15% to 4.4 MT per hectare as a result of low crop trend in Sabah and Sarawak and also the after-effects of dry weather in mid-2010 in Sabah and Sumatera and in mid-2011 in Kalimantan and Sumatera. However, as mature hectarage was higher than in 2Q2011, total fresh fruit bunches production was down by a lower 9% to 938,397 MT in 2Q2012.

Sugar comprises the Milling and Merchandising & Processing businesses. In 2Q2012, Sugar reported a pretax loss of US$60.3 million compared to a pretax loss of US$7.1 million in 2Q2011. Excluding non-operating items, the pretax loss increased 41% to US$50.2 million (2Q2011: US$35.7 million pretax loss excluding non-operating items).

The sugar milling season in Australia normally commences in May/June and it is normal for the Milling division to incur losses in the first two quarters of the year. Milling reported a pretax loss of US$79.1 million compared to a pretax loss of US$49.6 million in 2Q2011. Excluding non-operating items, pretax loss increased 4% to US$71.9 million (2Q2011: US$68.9 million pretax loss). The increase was due to wet weather across all cane regions in Australia which delayed the crushing season and resulted in lower sugar production. In addition, higher maintenance cost was incurred relating to Proserpine which was acquired in December 2011, and extra maintenance was performed during wet weather stops. Milling sales volume decreased by 3% to 257,000 MT in 2Q2012.

Merchandising & Processing reported a 56% decrease in pretax profit to US$18.9 million. Excluding non-operating items, pretax profit declined 35% to US$21.7 million (2Q2011: US$33.2 million). The decline was due to lower merchandising profit. Sales volume increased 87% to 1.0 million MT due to increased merchandising activities and the acquisition of PT Duta Sugar International, which was completed in 3Q2011.

The Others segment recorded a pretax loss of US$34.6 million compared to a pretax profit of US$34.9 million in 2Q2011 due lower fertiliser and shipping profits as well higher losses from investment securities. Associates saw a decline of 36% to US$30.7 million mainly due to lower profits generated by the Group’s associates in China and India, consistent with a more challenging operating environment in those markets.