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Wilmar Q1 profit falls 41% on lower palm oil prices, loss-making sugar operations

AGRIBUSINESS group Wilmar International saw first-quarter earnings take a tumble on headwinds in the tropical oils market and losses in the sugar business, according to unaudited results out on Thursday.

Net profit dropped to US$203.28 million in the three months to March 31, or 40.6 per cent lower than in the same period the previous year.

The fall came even as higher sales volumes and prices for oilseeds and grains helped to push group revenue up by 5.7 per cent to US$11.17 billion.

Lower crude palm oil prices and poor downstream margins took a chunk out of the tropical oils segment, and the bottom line took a hit across the board.

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Pre-tax profits were down by 34.5 per cent in tropical oils and by 16.9 per cent in oilseeds and grains, while the share from joint ventures and associates combined dipped by one per cent.

Meanwhile, pre-tax losses in the sugar business widened by 13.1 per cent to US$39 million, mainly owing to weaker milling activity.

But Wilmar called the poor performance "seasonal", with chief financial officer Ho Kiam Kong noting in an earnings call that Australian milling is expected to ramp up in the second half of the year.

The company added that a recently introduced sugar marketing programme is expected to bear fruit in subsequent quarters by lifting sales volume in its Australian business.

Earnings per share slipped to 3.2 US cents, from 5.4 US cents previously.

Chairman and chief executive Kuok Khoon Hong said in a media statement that "we are cautiously optimistic that performance for the rest of the year will be satisfactory".

"With the improvements in production yields and better margins from downstream operations, the tropical oils segment will likely perform better in the subsequent quarters," he said.

With the threat of Chinese import tariffs looming over soya beans in a potential trade war with the United States, Mr Ho noted that price volatility is expected in "the next few quarters". He said: "I think the market will continue to be driven by outcomes on trade discussions."

Still, falling utilisation of Wilmar's crushing plants - in the event of "a prolonged stand-off between China and the US", as Mr Kuok put it - could be partially offset by contributions from flour and rice operations, he said.

Mr Ho added: "There are measures we have taken, or are actually taking, to reduce the demand or the purchasing of US soya beans."

He called the quarter's showing "in essence, quite a strong performance for us", with some cheer from "a good January selling-out season" on a later Chinese New Year calendar date.

Wilmar closed down by S$0.04, or 1.23 per cent, at S$3.21, before the announcement, on a turnover of 11.26 million shares.