Wilmar under threat as El Nino gains strength

It will suffer from higher feedstock costs.

Wilmar will be hit by higher soft commodity prices as the El Nino phenomenon gathers strength, according to

According to Maybank Kim Eng, Wilmar will be most affected by higher CPO, soybean, and sugar prices.

Its key CPO business will be adversely impacted, while impact will be mixed for its other business segments.

"An El Nino this year is likely to hurt palm-oil yields, through dry weather in
Indonesia and Malaysia. We reckon Wilmar’s CPO refining business will have to compete harder for raw materials. This could hurt margins,"

On the flip side, Wilmar stands to benefit from higher soybean crushing margins as El Nino will bring ample rainfall to key soybean-producing regions in the Americas.

"Higher soybean supply would lower international soybean prices. As such, Wilmar’s soybean-crushing business has the potential to profit from cheaper feedstock," said the report.

El Nino will have a mixed effect on its sugar business, which might enjoy higher crushing margins but suffer from lower volumes.

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