Wilmar recovery in jeopardy as China capacity persists

It will take up to three years for the current crushing capacity to ease which will prevent Wilmar from raising its margins.

Already, Wilmar is suffering poorer-than-expected profits due to its inability to raise prices in its critical oilseeds crushing segment.

There is no short-term relief for the agribusiness giant, according to management's latest guidance said OCBC, since China capacity will continue to remain high. This has led to a sweep of downgraded forecasts and a steep tumble for Wilmar's trading stock. 

Here's more from OCBC:

The market seems to have priced in a much stronger recovery which did not materialise. Instead, WIL’s 1Q12 results suggest that the outlook for its prospects in China continue to be quite muted, especially on the oilseeds crushing segment. During its results briefing, management said it continues to see surplus crushing capacity in China, which may take as long as three years to clear, suggesting that depressed margins may persist into the foreseeable future.