SHARES of Wilmar International tumbled almost 12 per cent on Wednesday, a day after the palm oil company warned that it expects to sink into the red for the second quarter ended June 30, 2016.
Wilmar shares fell 11.64 per cent from Tuesday's close to S$2.96 each, before closing at S$3.16, down 19 cents or 5.67 per cent. More than 62 million shares changed hands, making it the third-most actively traded stock on Singapore Exchange on Wednesday.
On Tuesday, Wilmar said it expects to report a net loss of US$230 million for the quarter due to "challenging operating conditions", namely in its oilseeds and grains as well as sugar manufacturing. For Q2 2015, Wilmar reported a net profit of US$201.83 million, up 18.20 per cent from a year ago.
Wilmar said untimely purchases of raw materials, specifically soyabeans, in a highly volatile and disruptive market resulted in significant losses being recorded in the oilseeds and grains segment. In addition, unexpected flooding in Argentina affected the soyabean harvest, and heavy participation by funds in the futures markets contributed to the very volatile markets.
As for the sugar division, Q2 losses are expected to be greater than a year ago. This is because of the delay in harvesting due to rain and accounting mark-to-market losses on hedges as a result of higher sugar prices. Wilmar said dry weather in Australia in the early part of the year has also reduced the volume of cane crushed in FY2016 as compared to FY2015.
The group is still expected to be profitable for the six months ended June 30, 2016, although profit is expected to be "significantly lower" than a year ago.