Hot stock: Wilmar shares decline after profit drops 16% on weak margins

[SINGAPORE] Wilmar International Ltd, the world's largest palm oil trader, retreated in Singapore after reporting a 16 per cent drop in fourth-quarter profit on weaker margins from its downstream business.

Shares slid as much as 1.9 per cent to S$3.05 and were at S$3.10 by 12:51 pm local time, trimming gains this year to 5.4 per cent. They fell 9.3 per cent in 2015, touching an almost seven-year low in September as commodity prices plunged.

"Across the board, crude oil prices are still going nowhere and the rest of vegetable oil prices still remain on the low side," said Carey Wong, research manager at OCBC Investment Research Pte in Singapore. The market remains cautious about the outlook for the trader's profit, he said.

Net income fell to US$337.2 million in the three months ended December from US$401.2 million a year earlier, Wilmar said after the market closed on Thursday. Full-year profits slid 8.7 per cent from a year ago to US$1.06 billion, below the US$1.1 billion average of 18 estimates compiled by Bloomberg. Revenue dropped 12.5 per cent to US$9.4 billion in the fourth quarter.

The Bloomberg Commodity Index, a measure of returns, fell for the fifth straight year in 2015 amid a glut of everything from oil to copper and slowing demand from top consumer China. Palm oil futures in Kuala Lumpur bucked the rout in commodities to post the best annual gain since 2010.

Palm prices didn't climb at the retail level to benefit Wilmar, according to Ben Santoso, an analyst at DBS Bank Ltd, while Ivy Ng, regional head of plantations at CIMB Investment Bank Bhd, said profits were also hurt by Indonesia's levy on crude palm oil and stiff competition in the refining industry.

BLOOMBERG