Wilmar International, unveiling a 22% drop in quarterly
earnings, forecast a "much better performance" ahead as a recovery in Chinese
soybean crush margins takes hold.
The Singapore-based group, the world's top palm oil
processor, unveiled earnings of $170.7m for the April-to-June quarter, down
from $218.5m the year before, on revenues up 0.9% at $10.52bn.
The performance reflected largely a 56% slide, to $99.0m, in
pre-tax profits at its palm and laurics business, Wilmar's biggest earner, which
suffered "compressed refining margins", reflecting "a tighter supply" of crude palm
oil, its main raw material.
The group also highlighted "excess" processing capacity in
the industry, implying curtailed pricing power over palm products.
However, Wilmar suffered its steepest drop in earnings in
its oilseeds and grains processing division which, while returning to the black
after a loss in the first three months of 2014, achieved profits of a modest
$4.06m, down 73% year on year.
The division received some support from "higher demand for
flour and rice", and flagged "recovering crushing margins", which appear set to
continue rising, including in the important Chinese soybean processing sector.
"Lower prices due improved global oilseed supplies, less
excessive imports of beans into China and higher seasonal demand in the second
half of the year should further improve crush margins," Kuok Khoon Hong, the Wilmar
chairman and chief executive, said.
With the palm and laurics division set to enjoy an improved
supply of palm oil, with production picking up from its hiccup earlier in the
year, "we expect a much better [group] performance in the second half of the
year," he said.
'Use it like there's
Ideas of improved conditions in Chinese soybean processing
chime with comments last week from Bunge, which flagged the potential for
rising demand for feed from a recovering livestock production sector to boost
"Underlying fundamental demand for proteins in China is
strong. Livestock profitability is back in positive territory and offtake
[prospects are] very strong," Bunge chief executive Soren Schroder said.
Shao Guorui, chairman of Shandong Sunrise Grain and Oil
Trading, said on Friday that "now with the price of soybean meal being so much
cheaper, people are going to use it like there's no tomorrow".
However, ideas for imports differ, with a report from US
government staff in Beijing estimating volumes at 68m tonnes in 2013-14 and 72m
tonnes next season – both 1m tonnes short of the official forecasts from the US
Department of Agriculture, whose data set world benchmarks.
Shandong Sunrise Grain and Oil Trading, however, a large
Chinese importer of the oilseed, estimates volumes at 78m tonnes for 2014-15.
Palm oil and sugar
Wilmar's results also showed a more-than-doubling, to $107.1m,
in pre-tax profits for the palm oil production division, reflecting higher
prices of the vegetable oil than a year before, and a 22% jump to 1.12m tonnes
in palm fruit output.
"Production yield improved 28% to 5.3m tonnes per hectare as
a result of better crop trend in Indonesia and Malaysia," the group said.
Sugar losses narrowed by 22% t0 $23.7m, thanks to an "improved
performance" at Wilmar's refineries in Australia and New Zealand, and better
results in marketing.
The sugar division is expected to return to profit given the
seasonal boost from the start in June of the Australian crushing season.