Published May 14, 2009

Wilmar may list 20-30% of China business

Group posts 10.8% rise in Q1 profit despite 30.6% plunge in revenue

By OH BOON PING

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PLANTATIONS giant Wilmar International said yesterday it plans to list 20 to 30 per cent of its China business in either Hong Kong or Shanghai.

Staying healthy: Revenue from the palm and lauric segment fell 42.7% due to lower prices and a 15.5% slide in sales volume but margins improved significantly

Chief executive officer Kuok Khoon Hong said that with rising affluence and rapid urbanisation, China will consume increasing quantities of high-quality processed agricultural commodities and other consumer products.

'It is the group's intention to tap this opportunity either through organic growth or mergers and acquisitions,' he said.

Wilmar's China operations recorded revenue of US$14.3 billion in FY 2008.

Yesterday, the group reported a 10.8 per cent rise in net income to US$380 million - despite a 30.6 per cent plunge in revenue - for the first quarter ended March 31.

Related articles: Click here for Wilmar's news release Financial statements

Revenue was US$4.96 billion, while earnings per share were 5.95 US cents, up from 5.37 US cents a year earlier.

Wilmar attributed the drop in turnover to lower agricultural commodity prices than in the same quarter last year.

'Average prices of major palm and lauric products were 40 to 50 per cent lower, while major oilseed and grain products were 10 to 50 per cent lower,' it said.

But lower selling prices were mitigated by a 50.6 per cent drop in distribution costs to US$208 million. As a result, pre-tax profit was 4.8 per cent higher than a year earlier.

Revenue from the palm and lauric segment fell 42.7 per cent to US$2.4 billion, due to lower selling prices and a 15.5 per cent decline in sales volume.

But margins in this segment improved significantly 'as we were able to time our purchases of raw materials and sales of products well', Wilmar said.

Oilseed and grain sales grew strongly in volume terms, but revenue from this segment eased marginally to US$1.8 billion, due to lower selling prices.

In all, the group recorded 24.7 per cent growth in sales volume to 3.6 million tonnes, owing to strong demand for oilseed products.

The consumer products segment suffered from lower selling prices and lower volume, causing revenue to dive 36.3 per cent to US$925.7 million.

Sales in this segment were 15.4 per cent lower than a year earlier, when the figure was boosted by the sale of subsidised edible oil to the Chinese government.

However, the segment enjoyed a sharp improvement in margins during the latest quarter because of lower feedstock prices.

The plantation and palm oil milling business brought in US$211 million - down 41 per cent - as crude palm oil prices fell.

Additionally, fresh fruit bunches production dropped 1.8 per cent to 682,198 tonnes, due to a 10.9 per cent drop in yield.

'The drop in yield was caused by wet weather in various regions in Sumatra and Sarawak that affected harvesting, the after-effects of droughts in Palembang from May to September 2007 and May to July 2008, as well as the dilutive effect on total yield from newly matured hectarage,' Wimar said.

Yesterday, its share price here rose 24 cents to close at $4.40.