Wilmar sees high commodity prices boosting its palm oil business

New Delhi — Agribusiness major Wilmar International said April 29 it expects the sustained strong pricing environment in palm oil to boost its palm oil plantation business in the coming months, but that there is likely to be an impact on its manufacturing margins.

The company's palm oil business spans 232,950 hectares of plantations in Indonesia, Malaysia and Africa.

In the past year, vegetable oil prices have seen the sharpest uptick among agricultural commodities, with prices of palm oil and soybean oil hitting multi-year highs in 2021.

S&P Global Platts assessed FOB Indonesia crude palm oil at $1,117.5/mt on April 28, easing back from $1,140/mt the day before, when it hit the highest since Platts began assessing the commodity in September 2019.

Earnings shine

Wilmar reported higher-than-expected net profit in the first quarter, buoyed by surging palm oil and sugar prices alongside recovering demand from China.

The Singapore-headquartered company posted a net profit of $450.22 million in the first quarter, up 100.9% on the year.

Analysts had expected a GAAP net income of $439.06 million for the quarter. This was the largest first quarter profit posted by Wilmar since its listing, the company said.

Wilmar said it has a strong presence across the entire value chain of the agriculture commodity business.

Wilmar's majority of revenues come from its food product segment, followed by feed and industrial products and plantation business.

The company's quarterly revenue was up 30.6% to $14.26 billion but was lower than analysts' estimates of $14.46 billion, according to S&P Global Market Intelligence.

"Overall, sales volume for both consumer products, medium pack and bulk products in Q1 2021 was higher than pre-COVID-19 levels," the company said, adding that China -- the group's key market -- had shown strong recovery from the COVID-19 pandemic and lockdowns last year.

Cautious over uneven recovery

The company said it was "cautiously optimistic" of a "satisfactory performance" for the rest of the year, citing an uneven economic recovery around the world.

Wilmar said that its operations have not experienced any significant disruptions due to the recent spike in COVID cases and resulting lockdowns in India or the military coup in Myanmar.

India is the world's largest palm oil importer, and as cases soar in the country, domestic demand for edible oil, grains and sugar have disappeared from the markets.

Market sources are already expecting India's appetite for palm oil to take a hit, as nearly 60% of country's consumption comes from the hotels, restaurants and catering segment.

"Roughly, a countrywide lockdown for a month affects consumption of vegetable oils by 20%. Right now, refiners have pared down production by 2%-3%," Sandeep Bajoria, CEO of vegetable oil broking firm Sunvin Group, told Platts earlier.