Wilmar’s profit jumps 24% to US$321m in 3Q11

Business Segment Performance
Merchandising & Processing – During the quarter, Palm & Laurics recorded a 14% increase in pretax profit to US$170.8 million, driven by volume growth. Sales volume increased by 16% to 5.8 million metric tonnes supported by the attractive price of palm relative to other edible oils as well as stronger demand for the festive season and for biodiesel. Oilseeds & Grains registered a 15% increase in sales volume to 5.7 million MT due to improved demand from the livestock industry and higher flour and rice volume.

Despite poor industry crush margins from the high import of beans by China, the Group achieved satisfactory margins due to the timely purchases of raw materials, and saw a sharp recovery from 3Q2010 performance, with a pretax profit of US$99.7 million in 3Q2011.

Consumer Products recorded a 15% increase in sales volume to 1.3 million MT due to improved sales of consumer pack oils in China and Vietnam, as well as stronger sales of new consumer products in China. Despite the higher sales volume and a price increase on 1 August 2011, pretax profit declined 58% to US$14.4 million. Following the price increase, margins improved over 2Q2011 but was still lower than in 3Q2010. The lower margin was due to the greater increase in the cost of edible oils feedstock.

Moreover, the Group only had about one month’s benefit of the price increase as it normally takes a few weeks before the new prices are effective.

Plantations & Palm Oil Mills saw an increase of 15% in pretax profit to US$131.0 million due to higher prices realised and increased CPO production from the Group’s own fruits as a result of a productivity improvement. This was partially offset by higher production cost from the appreciation in local currencies, as well as higher labour and fertiliser costs. The Group’s production of fresh fruit bunches increased by 23% to 1.1 million MT reflecting an increase in mature hectarage and an improvement in production yield. Yield was up 11% to 5.2 MT per hectare, due to improved crop trend and favourable weather conditions.

Sugar is a new segment following the Group’s acquisition of Sucrogen Limited and PT Jawamanis Rafinasi in FY2010, comprising Milling and Refining businesses. The crushing season went into full swing during the quarter but production remained restricted by the continued receipt of poorer quality stand over cane from the previous season with high impurity levels and low cane extraction rate.

Milling sales volume was 1.3 million MT while pretax profit was US$56.0 million. Excluding exceptional items, Milling pretax profit was US$93.4 million for the quarter. Exceptional items comprise an accounting profit of US$26.2 million relating to pre-acquisition hedging reserves and a foreign exchange loss of US$63.6 million arising from US dollar intercompany loans.

Refining reported a pretax profit of US$1.2 million. Excluding exceptional items, pretax profit was US$35.0 million for the quarter, supported by favourable refining margins. Exceptional items comprise an accounting loss of US$17.9 million relating to preacquisition hedging reserves and a foreign exchange loss of US$15.9 million arising from US dollar intercompany loans. Sales volume of 976,000 MT was from domestic sales in Australia, New Zealand and Indonesia as well as from global merchandising activities.

The Others segment recorded a pretax loss of US$62.5 million mainly due to a net loss from investment securities, partially offset by higher shipping profits.

Strong Balance Sheet
As at September 30, 2011, total assets stood at US$39.9 billion while shareholders’ funds grew to US$12.8 billion. Net gearing ratio increased to 0.96x from 0.90x as at December 31, 2010 due to higher net loans and borrowings to meet capital expenditure requirements.