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Chinese soy crush margins to stay positive, says Wilmar

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Wilmar International expects Chinese soybean crushing margins to remain above the breakeven point for the rest of the year.

The Singapore-listed food and agriculture group saw earnings rise thanks to the increased profitability of processing oilseeds in China.

Pre-tax profits at Wilmar's oilseeds and grains segment jumped to $115.9m, compared with $41.5m over the same time last year, with manufacturing volumes up 21%, as crush margins widened.

Positive margins

Crush margins, the difference in price between soybeans and the soymeal and soy oil they yield, determine profitability for processors.

China is the world's largest importer of soybeans, and has a high demand for soymeal from its massive domestic pork industry.

Wilmar chairman and chief executive Kuok Khoon Hong said the group "expects crushing margins in China to remain positive for the rest of the year".

Last week US-based oilseed processor Bunge forecast Chinese soybean crush margins for the second half of 2015 at $15 a tonne, down from the $30 a tonne it enjoyed in the first half a year, but better than the very narrow or negative margins seen last year.

Rising profits

On Wednesday, Wilmar reported profits up 18% over the three months to June 30, at $201.8m compared with $170.7m over the same period last year.

Revenues were down 12% over the same period, to $9.3bn, due to lower commodity prices.

However, gains from the grains and oilseed segment were partially offset by weak crude palm oil prices.

Wilmar's tropical oil segment posted a 15% drop in pre-tax profit over the three months to June 30, and the group's sugar segment posted a loss thanks to a weak global environment.

Palm margins maintained

Mr Kuok expected to maintain margins in the group's palm oil business, despite the falling crude palm oil prices.

"For the second half of 2015, refining margins are expected to be maintained for the tropical oils business with increased palm production and demand arising from lower crude palm oil prices, though plantation and palm oil mill performances will continue to be affected by the softer crude palm oil prices," he said.

"Overall, we are cautiously optimistic that second half 2015 performance will be satisfactory," said Mr Kuok.


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