Flagging commodities demand casts shadow on Wilmar’s 2016 prospects

Potential weather disruptions are a big threat.

According to a report by OCBC, the flagging overall commodities sector is the only blemish on Wilmar International’s otherwise hopeful 2016 outlook. Wilmar noted that potential weather disruptions to both supply and demand might prove to be a challenge in the medium-term.

The company is reportedly still upbeat about the agricultural sector, however, due to the burgeoning middle class in Asia. Further, Wilmar says that it’s keeping an eye out for bargain buys that would strengthen its product range and value proposition.

Meanwhile, expectations for the company’s other segments are bright. Its Tropical Oils’ refining and downstream product margins are expected to improve on back of Indonesia’s biodiesel mandate, its Plantations margins are similarly expected to taper due to the recent CPO price hike, and its Sugar milling segment is expected to benefit from the recent sugar price surge caused by the anticipated sugar deficit in 2016. Its Oilseeds and Grains segment is also expected to continue performing satisfactorily.

Wilmar also believes that its investment in financial and human resources in various undertakings in Africa will pay off well, with ROIs likely shooting past 20% in the medium to long-term. Currently, the company is investing in long-gestation projects such as plantations and manufacturing plants, and establishing branded consumer products.

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