Published November 13, 2008

Wilmar Q3 net soars, says funding healthy

A bank said to have withdrawn credit line due to exit from commodity financing

By EMILYN YAP

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WILMAR International's funding situation remains healthy despite a bank having withdrawn its credit line, the palm-oil group said yesterday as it unveiled a more than doubling in third-quarter net profit.

Oiling the margins: For the nine months ended Sept 30, Wilmar's net profit more than trebled to US$1.2b, driven by a 134% surge in revenue to US$23.3b

According to Wilmar's chief financial officer Francis Heng, HSH Nordbank pulled its funding following a strategic decision to exit from commodity finance. The move was not a reflection of Wilmar's credit standing, he said at the results briefing.

'We are very happy that our bankers continue to support us strongly. As of today, we only have one bank that has cancelled our lines,' Mr Heng pointed out.

BT understands that HSH Nordbank's credit line withdrawal is unlikely to have significant impact on Wilmar. Its 2007 annual report lists 16 principal bankers which include DBS Bank and OCBC Bank.

As at Sept 30, when HSH Nordbank's funding was still available, the palm oil giant had access to credit facilities totalling US$11.4 billion. Around US$3.9 billion was unutilised.

'The group has minimal refinancing risk as most of its borrowings are short- term trade financing facilities which are backed by inventories and receivables,' said Wilmar.

But the company remains watchful about the financial turmoil today. 'A strong financial position is beneficial in a tight credit environment,' said chairman and chief executive Kuok Khoon Hong.

Wilmar had a net gearing ratio of 0.4x as of Sept 30. This was an improvement from Dec 31 last year because of improved cashflows and smaller working capital requirements as commodity prices fell.

News of the credit line pullback did little to dampen high spirits at the briefing, as Wilmar posted strong results for the third quarter ended Sept 30.

Net profit for the group more than doubled to US$482.6 million from the year-ago period's US$195 million as sales volume and margins rose. The merchandising and processing business alone accounted for 82 per cent of pre-tax profit and was the largest profit contributor among other segments.

Wilmar attributed the growth in net profit to 'timely purchases of raw materials and sales of products, prudent hedging of raw materials inventories as well as significant cost advantages from its integrated business model'.

Revenue for the group was US$8.3 billion, up 67 per cent from Q3 2007. The strong showing allowed Wilmar to declare an interim dividend of 2.8 Singapore cents per share for the quarter.

For the nine months ended Sept 30, Wilmar's net profit more than trebled to US$1.2 billion from US$346 million a year ago. This was driven by a 134 per cent surge in revenue to US$23.3 billion.

'We are confident that through the strengths of our balance sheet and integrated business model, as well as the relative resilience in the demand for staple food commodities, we will be able to weather this period of uncertainty to deliver credible performance,' said Mr Kuok.