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Wilmar profits dip, as Indonesia's biodiesel setbacks bite

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Wilmar International unveiled a slightly bigger-than-expected drop in earnings, undermined by factors including a delay to sales from its Australian sugar business, and a drop in Indonesian biodiesel quota.

 

The Singapore-based agricultural trading giant, in which US major Archer Daniels Midland in August raised its stake to 24.9%, revealed a drop of 5.7% to $370.0m in earnings for the July-to-September quarter, below the $378m figure that investors had expected.

 

The decline - heralded at the end of last month by ADM, which said that Wilmar’s results had been “lower than anticipated” – defied what Wilmar termed a “robust performance” in oilseeds and grains, in which it reported a 2.3% rise to $253.7m in pre-tax profits.

 

The division’s gains, on revenues up 16.8% at $5.54bn, reflected “higher crush volume and good crush margins”, said Wilmar, the largest crusher in China, and which claims a global workforce of some 90,000 people.

 

Sugar sales delays

 

However, this “good performance” was “offset by weaker results in the tropical oils and sugar businesses”, Wilmar said.

 

Underlying group earnings fell by 15.9% to $323.7m, said the company, which reported revenues flat at $11.1bn.

 

Wilmar, which in 2010 paid Aus$15bn for Sucrogen, the sugar business of Sydney-based CSR, reported a 13.05 drop to $75.2m in pre-tax profits from sugar, “due to timing effects from the new Australian sugar marketing programme”.

 

Under this scheme, a “certain proportion of sugar produced would only be sold in the subsequent quarters”, said the group, which six months ago agreed concessions on sales to end an 18-month dispute with cane growers.

 

‘Lower processing margins’

 

In tropical oils – typically by far the biggest earner for the group, which is the world’s top palm oil processor – pre-tax profits tumbled 51% to $83.1m.

 

While reporting growth in yields and volumes at its own oil palm plantations, “lower processing margins affected the overall performance of the segment”, Wilmar said.

 

And sales volumes dropped 2.9% to 5.75m tonnes, “mainly due to lower biodiesel quota awarded in Indonesia”, which has seen setbacks from punitive import levies from the European Union and US to its plans to promote the biofuel.

 

Indonesia is estimated to have more than 11m tonnes in annual output capacity of biodiesel, yet consumes less than 3m tonnes itself, leaving producers largely reliant on exports to maintain volumes and margins.

 

Quota cut

 

In fact, Indonesia awarded Wilmar’s Bioenergi Indonesia business 175.3m litres in biodiesel quota to state energy company Pertamina for the May-to-October period, down from 241.4m litres the previous six months.

 

For the six months starting this month, the quota was lifted to 192.0m litres.

 

Nonetheless, Kuok Khoon Hong, the Wilmar chairman and chief executive, forecast a “satisfactory” performance for the tropical oils and sugar divisions in the current October-to-December quarter, with the oilseeds and grains business to see its “good performance” continue.

 

“With good economic performance in key Asian countries, we remain optimistic about the future of Asia,” he added.

 

The results were released after the close of Singapore’s stock market, where Wilmar shares closed up 0.3% at Sing$3.32.

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