Wilmar plunges into first quarterly loss of US$220m
Group, which has warned of the loss, was hit by highly volatile soyabean market and sugar segment woes
Singapore
THE unforgiving climate led oil palm giant Wilmar International to post its first ever quarterly loss of US$220 million for the second quarter from a profit of US$193 million a year ago.
The sharp swing to the red were mainly led by losses in the manufacturing business within the oilseeds and grains division that was impacted by the highly volatile soyabean market while the sugar segment was hit by delayed harvesting (due to rainfall) in Australia and accounting mark-to-market losses on sugar hedges.
The sheer extent of the losses would have shocked the market if not for a profit warning issued by Wilmar some three weeks ago that it expected to book net losses of US$230 million which led analysts to scamper back to their spreadsheets to downgrade the stock.
Analysts were also forewarned when Wilmar released its first-quarter report card that higher feedstock prices, weaker crush margins and continued volatility in sugar prices would impact its second-quarter showing.
Revenue for the quarter was flat at US$9.4 billion, up 0.9 per cent from US$9.3 billion a year ago.
The tropical oils segment continued to perform favourably with a 14 per cent rise in pre-tax profit to US$186 million led by stronger performance from downstream businesses whilst plantation was affected by lower production, said Wilmar.
Due to the El Nino, production yield was down by 29 per cent to 3.9 MT per hectare for the quarter from 5.5 MT per hectare a year ago. This led to a fall in total fresh fruit bunches production to 783,538 MT from 1.16 million.
The oilseeds and grains segment posted a pre-tax loss of US$344 million for the quarter from a US$116 million profit. The losses were mitigated by stable performance from the consumer products business.
The sugar segment recorded a pre-tax loss of US$79 million versus a loss of US$37.5 million a year ago.
Wilmar made a loss per share of 3.5 US cents over the quarter versus an earnings per share of 3 US cents in the previous year. The company declared a dividend of 2.5 US cents, the same as the previous year.
As a result, first-half earnings came in at just US$19 million - a sharp fall of 96 per cent from US$425 million in the previous corresponding period on the back of a 1.7 per cent fall in revenue to US$18.4 billion.
Notwithstanding the one-time second-quarter loss, Wilmar said its integrated agribusiness model remains intact and resilient.
Analysts somewhat agree. "Near-term volatilities aside, we expect management to maintain its longer-term strategy of making its integrated business model even more efficient while continuing to grow its downstream business...this as it continues to see great potential from rising consumerism in Asia," said OCBC Investment Research in a July report in which it downgraded the stock from "hold" to "sell".
The shares closed unchanged at S$3.09 on Thursday.
