Wilmar's sugar volume predicted to double in 2014

Here are 2 potential key drivers.

According to Barclays, the sugar business is smaller in the overall scheme of Wilmar’s group PBT. It contributed a little over 7% in the past three years on average to group PBT. 

However, its small size is no deterrent for the business to grow.

Here's more from Barclays:

There are potentially two key drivers (over and above the sugar price) for the performance of Wilmar’s sugar business in the next few years, in our view: 1) doubling of sugar crushing and processing capacity with the Renuka deal; and 2) volume growth attaining the normalisation of profitability.

We expect volumes to double in 2014 at c10mt compared to c5mt in 2011. Moreover, seasonality in the sugar business is getting more benign in favour of Wilmar with per tonne losses halving in 1H13, while the seasonal recovery in 2H has broadly remained stable.

We see a normalised PBT from the sugar business at US$200mn vs US$120mn in 2013, while the profitability at peak margins could be as high as US$350mn (which we believe is less likely). Recovery in sugar prices could be an additional tailwind for earnings.