February 21, 2019 / 10:50 AM / 10 months ago

UPDATE 2-After sugar blow hits profit, shares, Wilmar CEO targets sweet spot in sector

* Q4 net profit $200.9 mln vs $426.7 mln year earlier

* Q4 core net profit $334.7 ml vs $373 mln year earlier

* Incurs $138.6 mln provision for impairment in sugar segment

* Shares fall more than 4 pct; CEO vows more sugar investments (Recasts with share slide, CEO comment from results briefing)

By Aradhana Aravindan

SINGAPORE, Feb 22 (Reuters) - Wilmar International Ltd shares fell more than 4 percent on Friday after the Singapore-listed commodity trader said its quarterly net profit halved, mainly due to a provision linked its Australian sugar assets.

Reporting October-December earnings late on Thursday, Wilmar made a provision for a $138.6 million impairment on its goodwill and sugar milling assets in Australia, citing ongoing depressed sugar prices, in the fourth quarter.

The company, which counts U.S. agricultural trader Archer Daniels Midland Co among its biggest shareholders, said net profit slid to $200.9 million in fourth quarter, down from $426.7 million in the same period a year earlier.

But while other traders plan to pull out of the sugar business, plagued by oversupply and price declines, Wilmar’s chairman and chief executive Kuok Khoon Hong said on Friday the commodity house planned to grow in the sector.

“We are still expanding in our sugar business,” the billionaire said at a results briefing on Friday. “To me, the best time to expand in a business is during the most difficult time.”

Wilmar swung to a pre-tax quarterly loss of $114.1 million in its sugar business.

Last year, Wilmar bought the sugar trading book of rival Bunge.

Meanwhile last month Singaporean commodity trader Olam International said it would exit sugar as part of a six-year strategic plan, saying it saw long-term structural declines in consumption of the sweetener.

Kuok said he expected sugar demand to still grow over the long-term, albeit at a slower pace, but he noted there will also be fewer players.

Wilmar has been developing a business model that encompasses the entire value chain of the agricultural commodity business. Its businesses include oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, as well as rice and flour milling.

Wilmar’s core net profit, which excludes non-operating items, dropped to $334.7 million from $373 million a year earlier. It said the decrease was due to the African swine fever outbreak in China, along with weaker commodity prices.

For 2018 as whole, Wilmar’s net profit fell nearly 6 percent to $1.13 billion, missing an analysts’ average estimate of $1.2 billion, according to Refinitiv data.

But the company said it was “reasonably optimistic” that performance for 2019 will be satisfactory. (Reporting by Aradhana Aravindan; Editing by Kenneth Maxwell and Tom Hogue)

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