Wilmar International’s Apr-Jun (Q2) net profit soared five-fold to USD 229.93 million from USD 42.87 million in Q2 2017 on the back of the oilseeds and grains divisions which recorded higher volumes and crush margins. The company’s chairman said that the US-China trade war had improved crush margins in the short term but in the long-term the dispute will not be beneficial. Wilmar is mulling an initial public offering for A-share listing in its China operation – which contributed around 60% of the agribusiness’ pretax profits – in the first half of 2019.
The group also obtained a USD 100 million loan from DBS bank with the interest linked to its performance on environmental, social and governance benchmarks. Similarly, Wilmar had earlier switched its USD 150 million loan from ING to a sustainability-linked loan in November 2017, which was a first in the palm oil industry. It also took a loan of USD 200 million from OCBC Bank whose interest rate is linked to sustainability key performance indicators.
Olam‘s net profit declined by 36% on year to USD 68.14 million in Q2 due to a decline in earnings for coffee, edible oils and peanuts. The CEO said that current markets were particularly uncertain due to the economic and political situation but that its diversified portfolio should help reduce risks.
In its recently published annual report, Cargill said it was moving towards sustainable agricultural practices and would focus on origination and processing segments in the coming year. The group has spent on technology to improve the connection of its global operations and has set up a corporate sustainability hub to focus on better use of land and water resources, fighting climate change, making farmers prosperous and cutting food wastage.
In Canada, Cargill has produced 1 million pounds of beef under its Beef Sustainability Pilot in the last quarter, double the quantity from the previous quarter. More and more farmers are registering so that they can benefit from the credit payment which is financed by the retailers and food companies involved in the project. In Indonesia, meanwhile, it opened an aquaculture innovation center to bring best practice to freshwater fish farmers. The company now has 12 such centers around the world. Finally, in Brazil, there is talk that Cargill is holding preliminary discussions with potential buyers for its Cevasa sugar and ethanol plant located in Sao Paulo.
Chinese demand for soybean combined with low sugar prices and the closure of sugar mills is encouraging Brazilian farmers to switch from growing cane to soybean. Government data shows that soybean area in Brazil increased by 2 million ha while cane area dropped by 400,000ha over the last 2 years. Brazil exported 10.2 million mt of soybean to China in July, up 46% on year as the latter slapped an import duty on US origin. A Chinese diplomat even suggested soy processing joint ventures between companies of the two nations should be set up to boost Brazil’s processed soymeal exports to China. He argued that a processing unit in Brazil would cut transportation costs and offer a more financially viable option for China.
The relationship between both countries could even be delaying the Mercosur-EU free trade deal. Although the deal has been in talks for over two decades, an EU policy paper suggested that Mercosur’s focus on strengthening trade relations with China was affecting talks with the EU.
On the other hand, some 60 cane mills have closed in just 5 years in Center South Brazil because of low sugar and ethanol prices. Sugar and ethanol mills have been encouraging the planting of soybean as a rotation crop but are worried about farmers switching completely. Some mills are even looking at paying them a premium to ensure they continue growing cane.
This summary was produced by ECRUU
