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&rsquo 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.

 

&ldquo 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,&rdquo 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).

 

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&rsquo 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&rsquo 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.

The counter remains one of the most actively traded in terms of volume with 12.9 million shares transacted

 

SHARES of Wilmar International : F34 +7.01% surged on Friday (Sep 27) to reach a near five-month high on brisk trading activity.

 

At 11.12 am, the agribusiness counter rose S$0.28 or 8.9 per cent to S$3.42 after 11.2 million securities changed hands. This is higher than the stock&rsquo s average volume of 4.5 million securities.

 

The last time the counter had reached such levels was in April, when it traded above S$3.40.

 

By 11.37 am, it had eased slightly to S$3.38, but it was still up S$0.24 or 7.6 per cent. It was still one of the most actively traded counters in terms of volume, with 12.9 million shares transacted.

 

Shares of Wilmar closed on Friday at S$3.36, up S$0.22 or 7 per cent.

 

No married deals were recorded, ShareInvestor data indicated.

 

In August, Wilmar reported that its net profit for the first half ended Jun 30 was US$579.6 million, up 5.2 per cent from US$550.9 million in the year-ago period.

 

Excluding losses from non-operating items, net profit would have been US$606.3 million, up 5 per cent year on year from US$577.2 million.

 

The group declared an interim dividend of S$0.06 per share, which it maintained from last year. It was paid out on Aug 29.

 

Revenue for the first half, however, slid 4.9 per cent to US$30.9 billion, from US$32.5 billion, as commodity prices decreased.

 

The decline was cushioned by higher sales volume over the period.

 

Adani Wilmar

Bloomberg earlier reported that Adani Enterprises and Wilmar are expected to start the sale of a minority stake in their consumer joint venture Adani Wilmar as early as October to abide by shareholding regulations, according to people familiar with the matter.

 

The majority owners of Adani Wilmar are planning to sell a roughly 13 per cent interest in the company &ndash valued at about US$736 million, based on Sep 16&rsquo s closing price.

 

Established in 1999, Adani Wilmar has 23 plants in India and sells kitchen staples for Indians, including edible oil, wheat flour, rice, pulses and sugar.