Shayne Heffernan strong buy Wilmar International, posted a remarkable 14 percent rise in its second-quarter net profit on Friday on the back of strong margins in its core palm oil businesses.

The firm, which generated more than half of its revenue from China, is expected to benefit further from the removal of an edible oil price cap in the world’s most populous country, which the government had put in place to curb inflation.

Wilmar International Limited announced an interim cash dividend of SGD0.03 per share. The dividend is payable on September 14, 2011. The Company also announced cessation as Chief Financial Officer of Heng Hang Song Francis, on September 30, 2011, to pursue personal interests.

Wilmar International Limited is an investment holding company engaged in the provision of management services to its subsidiaries.

It operates in five segments: palm and laurics comprises the merchandising and processing of palm oil and laurics related products; oilseeds and grains segment comprises the merchandising and processing of a range of edible oils, oilseeds and grains from the crushing, further processing and refining of soybean, as well as other oilseeds and grains; consumer products segment comprises packaging and sales of consumer pack edible oils, rice, flour and grains; plantation and palm oil mills segment comprises oil palm cultivation and milling, and others segment includes the manufacturing and distribution of fertilizer products and ship-chartering services.

Wilmar, which owns palm oil plantations in Indonesia and Malaysia as well as sugar operations in Australia, said it “remains positive on its prospects, despite a challenging operating environment in China and uncertainties in the global economy.”

The company has strongly recovered from two quarters of poor results in the second half of 2010 after the firm accumulated total pre-tax losses of more than $200 million from its oilseeds and grains business in that period.

The strong earnings came after rival Bunge, one of the world’s top processors of agricultural products, reported better than expected second quarter results which came from foreign exchange gains that offset weaker-than-expected margins.

Giant US agribusiness and trading firm Cargill, another Wilmar rival, reported a 7 percent fall in earnings in its fiscal fourth quarter ending May, hit by volatile energy markets and weaker risk management and food ingredient results.

Wilmar earned $393.1 million in the three months ending June, up from $344.5 million a year ago and just slightly below average estimates of $396 million from four analysts surveyed by Reuters. Its revenue climbed 56.2 percent to $10.6 billion. Pre-tax profit margins from its palm and laurics merchandising and processing, which generated more than half of its revenue, climbed 24 percent to $31.7 per ton.

But margins from the merchandising and processing of oilseeds and grains fell 12 percent to $28.0 per ton in the June quarter from $31.9 per ton a year ago due to “poor crush margins from the high import of beans by the industry.” Wilmar’s palm oil plantations in Indonesia and Malaysia supply around 10 percent of the demand of its refineries, while logistical and regulatory issues are preventing the company from expanding its plantation area.

Diversification into sugar and expansion of its flour business in Indonesia are expected to help the company, which has a market value of around $27 billion. Shares of Wilmar have fallen by more than 9 percent since the beginning of the year.

	Company	Industry	Sector	S&P 500
Return on Assets (TTM)	4.84	9.50	7.34	7.09
Return on Assets – 5 Yr. Avg.	7.54	9.30	8.82	6.39
Return on Investment (TTM)	9.95	15.48	11.20	9.27
Return on Investment – 5 Yr. Avg.	13.87	16.44	14.01	8.46
Return on Equity (TTM)	11.03	25.32	20.36	24.80
Return on Equity – 5 Yr. Avg.	15.67	27.52	23.78	20.63

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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Petchada Kingwattanakul

Business Development Director

Heffernan Capital Management

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Posted by Shayne Heffernan on Aug 13th, 2011and filed underAgriculture, Asia, Commodities, Equities, Heffernan Capital Management, Latest News, Limelight, Markets, Palm Oil, Research, Shayne Heffernan, Soybeans.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site