6 biggest factors to blame for Wilmar's 22% profits drop

Palm & Lauric contribution was the only bright spot.

According to DBS, Wilmar's 2Q13 core earnings fell 22% q-o-q to US$245m (+42% y-oy), about 18% below the mid-point of its US$290-305m range. The sequential drop was attributed to 6 factors.

Here's more:

1. Lower-than-expected Oilseeds & Grains M&P pretax profit of US$15m (-68% q-o-q) vs. US$35m estimate, due to lower than expected soybean volume, even though flour booked higher volume growth.

2. Lower-than-expected Consumer Products pretax profit of US$30m (+67% y-o-y; -47% q-o-q) vs. US$51m estimate, due to price cuts in Apr13 and May13 and higher promotional expenses; although these were partly offset by lower feedstock costs.

3. Lower-than-expected Plantations pretax profit of US$53m (-34% y-o-y; -27% q-o-q) vs. US$72m estimate, due to a drop in CPO prices and 10% q-o-q drop in CPO output (vs. expectation of 10% q-o-q increase)

4. Sugar pretax loss of US$30m vs. breakeven estimate, due to lower sugar prices. But sugar M&P volume has reached our initial full year target. Excluding nonoperating items, losses are smaller at US$16m.

5. Smaller-than-expected Other business pretax loss of US$33m vs. US$9m profit estimate, due to US$21m net loss from investment securities.

6. Lower-than-expected Associates contribution of US$25m (-19% y-o-y; -53% q-o-q) vs. US$38m estimate, due to smaller contribution from associates in Russia, despite improved performance at China associates.

However, these were partly offset by better-than-expected contribution from Palm & Lauric M&P, which booked US$225m pretax profit (+40% y-o-y; +3% q-o-q) vs. US$179m estimate, driven by high-value added downstream products.