09/11/2011 (Reuters) - Wilmar International said on Wednesday higher prices will support its palm oil and sugar businesses, sounding bullish after missing earnings expectations despite an almost 24 percent jump in net profit from a year earlier.

Wilmar's lower-than-expected earnings were linked to a loss from equities investments it made three years ago, foreign exchange losses and weaker margins from its consumer product business as the rise in cost of feedstock outpaced price increases.

The profit number disappointed investors, sending Wilmar's shares down by nearly 5 percent on Wednesday, underperforming the broader Singapore market which traded slightly higher.

Wilmar's results compared to a 66 percent drop in the earnings of U.S. agribusiness and trading firm Cargill Inc , while Bunge, the world's largest oilseed processor and among the top sugar and ethanol producers, saw its earnings declined by a third.

The company said its palm and laurics will benefit from the recent changes in the Indonesian export duty structure for palm products, which it said is highly advantageous for downstream processing margins.

Wilmar has about one-third of its total crude palm oil (CPO) refining capacity in Indonesia, Macquarie said in a research note, adding the current CPO price could give Wilmar a potential uplift of $104 per ton in Indonesian refining margins.

UBS analyst Andreas Bokkenheuser said Wilmar will benefit from Indonesia's tax move, but investors should be cautious because the company's other divisions are under pressure.

"We believe the Street will put a positive spin on the results given recent upgrades, but we are concerned about Wilmar's substantial equity investment losses, considerable increase in selling costs and overall profitability pressure across several business divisions," he said in a note.

The world's largest listed palm oil plantation firm, which generated more than half of its revenue from China, partly benefited from an increase in its cooking oil selling price by 5 percent in China earlier this year.

TINY EXPOSURE TO MF GLOBAL

Wilmar's chairman and chief executive officer, Kuok Khoon Hong, said there is no need to increase its edible oil price further in China as raw material prices have subsided recently.

He also said that the company has around a $2 million dollar exposure to the bankrupt U.S. brokerage firm, MF Global , but he expects to get the funds back.

Wilmar, which owns palm oil plantations in Indonesia and Malaysia as well as sugar operations in Australia, earned a net profit of $321.05 million for the quarter ended Sept 30, compared to $259.5 million a year ago. That compares to an average forecast of $461 million from five analysts surveyed by Reuters.

Excluding exceptional items, the company recorded a net profit of $442.4 million compared to $172.4 million a year ago.

Its earnings in the second half of 2010 were hit by losses from its oilseeds and grains business, which the company blamed on weak margins and inopportune buying.

"The group remains positive of its prospects, despite uncertainties in the global economy, due to the resilience in the demand for agricultural commodities and the continued growth of Asian economies," the company said in a statement.

But it said consumer product margins in the third quarter were still lower from a year earlier due to bigger increase in the cost of edible oils feedstock, while the group had only about one month of price increase benefit in China.

Wilmar was allowed to increase its price for consumer products in China on Aug 1.