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Palm oil rally sends Wilmar profits higher

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The rally in palm oil prices, which on Thursday hit a fresh two-year high, helped agricultural trading giant Wilmar International report a 47% jump in earnings, and forecast a "satisfactory full-year performance.

The world's top palm oil processor, and a major force in ags from grains to sugar, reported net profit of $392.2m for the three months ending September, equivalent to earnings per share of 6.2 cents.

The rise reflected expansion at its tropical oils division, where profits rose 81% to $169.3m, in part down to a "good performance" by its processing operations, but also thanks to strong palm oil prices.

Palm oil futures on Thursday rose above 2,900 ringgit a tonne in Kuala Lumpur for the first time since March 2014, boosted by concerns over output in Malaysia, the second-ranked producing country, as reported elsewhere on Agrimoney.com.

'El Nino phenomenon'

Output in Malaysia, and in Indonesia, the top-ranked palm oil producing nation, has been affected by dryness blamed on the El Nino weather pattern, with labour shortages growing as a concern too.

Wilmar said that its plantation yields, "affected by the El Nino phenomenon", had fallen 14% to 4.7 tonnes per hectare.

However, Wilmar said that "although plantation results were affected by lower production volume, the impact on pre-tax profit was marginal, due to improved crude palm oil prices during the quarter".

Chief executive Kuok Khoon Hong also said that the oilseeds and grains segment had achieved a "good performance" from both the consumer products and oilseed crushing businesses.

And in sugar, the company reported a 21% decline in pretax profit to $86.4m, "owing to continued disruption in harvesting due to wet weather in Australia, as well as weaker performance by the merchandising business".

Tropical oils segment outperforms

Wilmar's tropical oils segment rose 81% to $169.3m due to downstream businesses, in spite of plantation results being affected by lower production volumes.

Production yield, affected by the El Nino phenomenon, was down by 14.1% to 4.7m tonnes per hectare for the July to September period.

Profits before tax of $248.1m were also recorded in the oilseeds and grains segment.

"The group will continue to execute on its stated growth strategy, with emphasis on its downstream businesses and focusing on high-growth markets in Asia and Africa," said Mr Hong.

"Barring any unforeseen circumstances, the group's performance for the year is expected to be satisfactory," he said.

By Tanya Ashreena

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