Agribusiness sector to reap depressing profits

Wilmar, Noble and Olam earnings are expected to fall 15-21%.

According to Nomura, this is another muted quarter for supply chain players as fundamental trading conditions remain tight (crush margins, sugar prices weak, etc.). Overall, we expect Wilmar’s earnings to fall ~21%, Noble’s by 18% and Olam’s by ~15% y-y.

Here's more from Nomura:

We don't expect these results to be stock price catalysts yet (but not much downside as muted expectations should be priced in, highlighted by stock movements of the last few months). We would wait for the results to get better entry points.

Wilmar: China crush may remain an overhang 

Crush margins in China remain weak – we worry Wilmar may have been at the wrong end of rising soybean prices.

Refining margins could also struggle sequentially if they do not have trading gains (Indo margins may be good but Mal margins weak).

Sugar business would not contribute much.

Consumer pack margins should mostly be in line with last quarter.

CPO prices q-q haven't done much.

Noble: Agri margins may continue to be muted

We estimate Noble’s 2Q12F earnings at USD109mn, down 30% y-y as supply chain fundamentals remain weak.

We expect volume growth to continue. Agri margins should continue to be weak as sugar doesn't contribute in 1H, China crush margins are weak and Timbues may not still be making peak margins.

MMO and freight businesses should be mostly in line with the last few quarters.

Olam: We expect recovery to start from the next quarter

Its industrial businesses may take another quarter or so to recover – it may remain a drag on its 4Q results.

We will look forward to updates on Gabon and balance sheet requirements.