Strong sugar business to bring sweetened profit for Wilmar: analysts

The spike in sugar prices is also a plus.

Sugar processing and consumer packs will continue to be the star for the agribusiness firm, as they are expected to post an 8-14% growth in net profit to US$280-300m.

According to analysts from UOB Kay Hian, the the sugar division is expected to show significant growth in terms of sales volume, largely driven by the firm’s refining business.

“This purchase of raw sugar is expected to translate into higher sales growth in 1Q-2Q16, and thereby lead to margin improvement given that sugar is selling at higher prices now than in 4Q15,” UOB Kay Hian said.

“In 2016, the rate of global sugar production is likely to fall behind consumption growth for the first time in five years and this has been the main contributing factor to the recent sugar price rally,” UOB Kay Hian added.

Meanwhile, the same could not be said about the Tropical Oils division, which would likely experience its slowest quarter given that selling prices for palm products are lower while sales volumes aren’t exactly spiking.

“The bright spot for this division would come in the form of support from biodiesel sales volume. Recall that Wilmar secured a total of 920,411 tonnes for delivery in Nov 15-Apr 16 or about 460,000 tonnes per quarter (biodiesel sales volume was very low in 2015),” UOB Kay Hian said.