Fri, 13 May 2011

From: Reuters

SINGAPORE, May 13 (Reuters) - Wilmar International , the world's largest listed palm oil firm, posted a smaller-than-expected fall in first-quarter net profit hit by weakness in consumer products segment, derivative losses and loss from its new sugar milling business.

The firm, which generated more than half of its revenue from China, has been hit by government price control on vegetable oils as Beijing try to rein in food inflation.

"The group remains positive on its prospects, despite a challenging operating environment in China arising from the monetary tightening and anti-inflationary measures implemented by the Chinese government," its Chairman and CEO Kuok Khoon Hong said.

Its palm oil plantations in Indonesia and Malaysia supply less than 10 percent of the demand of its refineries, while logistical and regulatory issues are preventing the company from expanding plantation area.

However, diversification into sugar and expansion of its flour business in Indonesia might support the company, which has a market capitalisation of $26 billion.

Wilmar earned $386.7 million in the quarter ended March, down 3.7 percent from $401.4 million a year ago, but beat analysts' forecast of $318 million.

The company said the results included the fair value loss on embedded derivatives on its convertible bonds.

Merchandising and processing, which contributed 69 percent of its pre-tax profit, saw a 3.8 percent increase in pre-tax profit of about $346 million.

Sugar milling, which is a new segment after it acquired Australia's Sucrogen and Indonesia's PT Jawamanis Rafinasi, saw a pre-tax loss of $22.7 million.

Its earnings have been declining in the previous three quarters, driving its share price nearly 10 percent lower since the start of the year, compared with the 1.9 percent drop in the broader Singapore market