Wilmar International is expected to benefit from an increase in palm oil prices, a report by KGI Research Singapore says.
In its Oct 11 report, the KGI team expects to see an increase in palm oil prices as Indonesia plans to increase its biodiesel mandate from 35% to 40% palm oil-based fuel which could put pressure on global palm oil supplies.
This has the potential of increasing Indonesia’s biodiesel consumption to 16 million kilolitres, requiring an additional 1.5 to 1.7 million metric tonnes of palm oil, the report notes.
As such, export volumes may fall, causing global supply shortages and higher prices for consumers, the report adds.
The report further states that palm oil production in Indonesia and Malaysia have been affected by labour shortages, increasing fertiliser costs and weather conditions.
“Global palm oil production is expected to increase by 2.3 million metric tons in 2024/25, but the rise in demand for biodiesel could offset this growth, driving prices higher,” the report notes.
According to the report, palm oil prices are expected to rise further, with projections suggesting a price of around RM4,000 ($1,218.70) per metric tonne in 2025.
The report recognises that this is likely to benefit palm oil producers such as Wilmar International F34 .
Further to the report, it is stated that Wilmar International and Adani Enterprises are looking to sell a 13% stake in their joint venture (JV), Adani Wilmar, which is valued at US$736 million ($960.6 million).
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Adani Wilmar is a key consumer goods company in India, offering products such as edible oils wheat flour, rice and sugar.
Currently, the two companies hold an 88% stake in the JV collectively.
They are doing so to meet Indian regulations requiring at least 25% of shares to be held by non-founders within three years of listing, the report notes, adding that their three-year grace period ends in Feb 2025.
Wilmar International’s financial year ends on Dec 31.
The report states that total revenue of 1HFY2024 decreased 4.9% y-o-y to US$30.93 billion from US$32.54 billion, mainly due to a decrease in commodity prices, but slightly offset by higher sales volumes.
In 1HFY2024, core net profit was US$606.3 million and net profit was US$579.6 million, representing a 5% and 5.3% y-o-y increase, respectively.
The report attributes this to the improved performance in the feed and industrial products and food products segment but is partially offset by lower contributions from Wilmar International’s JV, associates and sugar milling operations.
Earnings per share (EPS) rose in 1HFY2024 to US 9.3 cents from US 8.8 cents in 1HFY2023.
As at 5.16pm, shares in Wilmar International are trading 4 cents lower or 1.20% down at $3.30.
