All quiet on the Wilmar International M&A front

Soft commodity prices have been on the slide over the past two months, in line with the broader economic climate, but are now showing signs of a pickup. On average, CPO and soybean prices are currently trending below our full‐year assumptions, and this is a positive for Wilmar, as it is a net buyer of these commodities for its downstream production.

In the last reported quarter, soybean crushing margins had shown some improvement and we expect this trend to continue. However, the operating environment remains difficult with muted sales volumes. While average selling prices did show some improvement, price caps on cooking oil are still in place, limiting upside despite lower input costs.

On the acquisition front, Wilmar has been uncharacteristically quiet, with only a small A$115m purchase in the past few months. Early last month, its Australian sugar subsidiary Sucrogen acquired Proserpine Mill to increase sugar milling capacity from 15m tonnes to 17m tonnes, and
raise overall raw sugar production by 10%, or 2.2m tonnes. Wilmar controls about half of Australia’s total raw sugar supply.

Wilmar’s plans to establish sugar plantations in West Papua, Indonesia, are also progressing slower than initially expected due to administrative issues. We have not yet factored contributions from this in our forecasts.