Wilmar to be pummeled by US$230m net loss in 2Q

On back of challenging operating conditions.

The agribusiness firm is about to take a huge hit due to headwinds in its oilseeds and grains manufacturing and its sugar business segment.

According to OCBC Research, “untimely purchases” of soybeans in the highly volatile and disruptive market resulted in the group recording significant losses; adds that the unexpected flooding in Argentina also affected soybean harvest.

In its sugar segment, OCBC Research said the expected 2Q losses are likely to be larger than usual, given the delay in harvesting due to rain and accounting mark-to-market losses on hedges; further warns of lower volume of cane crushed in FY16 due to the dry weather in Australia.

Nevertheless, OCBC Research notes Wilmar expects to be profitable for the first half of 2016 albeit earnings will be “significantly lower” from a year ago; this as it posted a reported net profit of US$239.4m in 1Q16.

“To its credit, management did highlight that it would be facing “challenging operating conditions” in the second quarter during its 1Q16 analyst briefing, citing higher feedstock prices, weaker crush margins and continued volatility in sugar prices,” OCBC Research said.

“It also mentioned that it will continue to see healthy growth in its Consumer Products business. Coupled with the expected seasonal turnaround in 2H for its sugar business, WIL expects the operating environment to “normalize” in 2H16,” the report added.