Wilmar to suffer severe profit drought in December

Expect fourth quarter margins to disappoint.

Wilmar’s margins could be weak or even turn negative in December, as soybean-crushing margins remain the company’s biggest earnings swing facor.

According to Maybank Kim Eng, Wilmar won’t deliver stellar results in december due to higher-than-usual US soybean shipments to China, an 8% drop in soybean meal prices since mid-November, and a narrowing premium for China’s domestic soybean prices over the CBOT’s.

“That said, we believe Oct/Nov’s strength can lend support to decent 4Q margins, though 4Q’s margins may not be as good as 3Q’s.We believe soybean crushing in China will continue to improve. China’s monthly soybean imports are key to watch. YoY growth has been slowing to single digit since the Jun 2014 Qingdao port scandal. We think this could be blamed on tighter credit for speculative commodity traders. Longer term, though, less speculative trading should benefit real soybean crushers like Wilmar,” stated Maybank Kim Eng.

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