MARKET DEVELOPMENT
Palm Price Weakness Limits Wilmar Profits Revival
Palm Price Weakness Limits Wilmar Profits Revival
07/08/2013 (Agrimoney.com) - Wilmar International unveiled profits below market expectations, and New Britain Palm Oil a slump in forward palm oil sales highlighting the grapple that corporates are having with weak prices of the vegetable oil.
Wilmar International, the world's leading producer and trader of palm oil, revealed underlying earnings of $245.4m for the April-to-June quarter, a figure which, while up 42% year on year, was below market expectations of a $254m result.
While the palm and laurics division, which processes vegetable oils into higher value products, achieved a 40% rise in pre-tax profits to $224.5m - helped by a 10% rise in sales volumes as new capacity came onstream - the plantations division suffered a 34% drop to $52.7m in pre-tax profits.
This decline was down to a "lower average selling price" for palm oil, besides a drop in yields of 7% to 4.1m tonnes per hectare thanks to a dry weather in the Kalimantan and Sumatra regions of Indonesia, where Wilmar has some of its plantations.
The group also blamed "significantly lower palm oil prices" for a 5.4% drop to $10.4bn in group revenues for the quarter, adding that the weak values were exacerbating "an already challenging environment".
Golden Agri Setback
The results, released after the close of Singapore markets, where Wilmar shares closed down 0.3% at Sing$3.15, follow disappointing results at some other palm oil groups, including Golden Agri Resources, which last week unveiled a 34% slump to $140m in earnings before interest, taxation, depreciation and amortisation (ebitda).
The drop reflected in the main a 25% slump over the past year in palm oil prices, said Golden Agri Resources which, as the largest listed palm plantation operator in Indonesia, is deemed particularly exposed to market conditions.
"Of the major palm oil companies, we would expect Golden Agri Resources to be one of the hardest hit by the weaker palm oil prices, given its vast plantation area relative to the capacity of its downstream activities," Alan Greene, senior credit officer at ratings agency Moody's, said on Tuesday.
Golden Agri Resources shares, which are listed in Singapore, on Monday touched a three-year low of Sing$0.51.
Palm Price Prospects
Separately on Tuesday, New Britain Palm Oil, the London-listed palm oil group which operates in Papua New Guinea, made a downbeat forecast for prices of the vegetable oil as it unveiled a 78% slump to $14.1m in pre-tax profits for the first half of 2013.
While world stocks of palm oil are "relatively low when compared to historical levels", prices "may remain at current levels in the medium term due to the higher stocks of palm oil in Malaysia and Indonesia at the beginning of the year", Nick Thompson, the New Britain chief executive, said.
"Although current stock levels have drawn down to their lowest levels since March 2011, forward prices remain depressed due to the expectations of large oilseed crops and the usual palm peak [production] season in the second half of the year."
Output in Indonesia and Malaysia follows a seasonal production pattern which typically sees peak volumes in coming weeks, before lows early in the calendar year.
Price Rebound Ahead?
However, Mr Thompson raised some hopes of price recovery longer term, as he revealed that New Britain had sold only 45,000 tonnes of crude palm oil ahead, at prices of $885 a tonne, for the rest of the year in line with that received in the first half of the year.
A year ago, the group had sold forward 105,000 tonnes of crude palm oil at an average price of $1,092 a tonne.
"The supply and demand fundamentals in the global vegetable oils sector generally remain tight and unforeseen negative weather events could impact global yields and therefore pricing," he said.
"While the prices of palm oil products, like all commodities, are difficult to predict, stocks held in the global supply chain remain relatively low."
New Britain Palm Oil shares stood 2.2% higher at 460p in midday deals in London.
In Kuala Lumpur, palm oil, which last week hit its lowest level since 2009, closed at 2,246 ringgit a tonne for October delivery, 0.3% higher on the day.
Wilmar International, the world's leading producer and trader of palm oil, revealed underlying earnings of $245.4m for the April-to-June quarter, a figure which, while up 42% year on year, was below market expectations of a $254m result.
While the palm and laurics division, which processes vegetable oils into higher value products, achieved a 40% rise in pre-tax profits to $224.5m - helped by a 10% rise in sales volumes as new capacity came onstream - the plantations division suffered a 34% drop to $52.7m in pre-tax profits.
This decline was down to a "lower average selling price" for palm oil, besides a drop in yields of 7% to 4.1m tonnes per hectare thanks to a dry weather in the Kalimantan and Sumatra regions of Indonesia, where Wilmar has some of its plantations.
The group also blamed "significantly lower palm oil prices" for a 5.4% drop to $10.4bn in group revenues for the quarter, adding that the weak values were exacerbating "an already challenging environment".
Golden Agri Setback
The results, released after the close of Singapore markets, where Wilmar shares closed down 0.3% at Sing$3.15, follow disappointing results at some other palm oil groups, including Golden Agri Resources, which last week unveiled a 34% slump to $140m in earnings before interest, taxation, depreciation and amortisation (ebitda).
The drop reflected in the main a 25% slump over the past year in palm oil prices, said Golden Agri Resources which, as the largest listed palm plantation operator in Indonesia, is deemed particularly exposed to market conditions.
"Of the major palm oil companies, we would expect Golden Agri Resources to be one of the hardest hit by the weaker palm oil prices, given its vast plantation area relative to the capacity of its downstream activities," Alan Greene, senior credit officer at ratings agency Moody's, said on Tuesday.
Golden Agri Resources shares, which are listed in Singapore, on Monday touched a three-year low of Sing$0.51.
Palm Price Prospects
Separately on Tuesday, New Britain Palm Oil, the London-listed palm oil group which operates in Papua New Guinea, made a downbeat forecast for prices of the vegetable oil as it unveiled a 78% slump to $14.1m in pre-tax profits for the first half of 2013.
While world stocks of palm oil are "relatively low when compared to historical levels", prices "may remain at current levels in the medium term due to the higher stocks of palm oil in Malaysia and Indonesia at the beginning of the year", Nick Thompson, the New Britain chief executive, said.
"Although current stock levels have drawn down to their lowest levels since March 2011, forward prices remain depressed due to the expectations of large oilseed crops and the usual palm peak [production] season in the second half of the year."
Output in Indonesia and Malaysia follows a seasonal production pattern which typically sees peak volumes in coming weeks, before lows early in the calendar year.
Price Rebound Ahead?
However, Mr Thompson raised some hopes of price recovery longer term, as he revealed that New Britain had sold only 45,000 tonnes of crude palm oil ahead, at prices of $885 a tonne, for the rest of the year in line with that received in the first half of the year.
A year ago, the group had sold forward 105,000 tonnes of crude palm oil at an average price of $1,092 a tonne.
"The supply and demand fundamentals in the global vegetable oils sector generally remain tight and unforeseen negative weather events could impact global yields and therefore pricing," he said.
"While the prices of palm oil products, like all commodities, are difficult to predict, stocks held in the global supply chain remain relatively low."
New Britain Palm Oil shares stood 2.2% higher at 460p in midday deals in London.
In Kuala Lumpur, palm oil, which last week hit its lowest level since 2009, closed at 2,246 ringgit a tonne for October delivery, 0.3% higher on the day.