It was written all over Kuok Khoon Hong’s face – confidence. Bombarded by questions about the challenges Wilmar International is and will be facing in its oilseeds and grains segment in China during its earnings conference earlier today, the chairman of the group calmly commented “if there is anyone who can survive in China, I believe we will be one of them. I believe our integrated business model is one that is unparalleled in China.”
Still, it does not mask the weaker performance Wilmar staged in the second quarter ended 30 June 2012. Net profit was down 70.2 percent to US$117.1 million largely weighed down by negative crush margins in its oilseeds and grains segment, lower plantation profits and higher losses incurred in the sugar business. Further dragging results south was the depreciating Chinese yuan which the company record a foreign exchange loss of US$19.7 million. Excluding this and other non-operating items, core earnings would have fallen some 55 percent.
The bright spot came from its palm and laurics as well as consumer products segments as they pushed revenue 4.3 percent higher to US$11,019.7 million. Benefitting from increased volume and the revised Indonesian export duty structure, palm and laurics revenue rose 3.6 percent. Consumer products segment revenue grew 8 percent on the back of margin expansion.
For the cumulative six-month period, Wilmar posted a 6.9 percent jump in revenue to US$20,096.5 million while its earnings suffered a 52.2 percent decline to US$373 million. Dividend per share of $0.02 has been proposed.
Responding to concerns about crushing margins, Kuok opined that margins will get better going forward as weather conditions normalise and crushing activities resumed at full speed. In addition, its sugar segment should see improved results going forward as the mining season in Australia kicks off end of June.
“We are facing unprecedented challenges. Nonetheless, crusher demand for oilseeds is increasing in China….and it is definitely a growth industry”, said Kuok. In addition, Wilmar is optimistic about its business in the long term, adding that it is able to achieve crush rate of 60%. “Crushing is important and promising part of our business”, added Kuok.
Shares of Wilmar spent 15 August in the red after opening at $3.16 from previous close of $3.39. It subsequently settled 7.1 percent lower at $3.15 for the trading day.