Wilmar has capacity to invest up to $3.7 bil on acquisitions
Written by Bloomberg
Friday, 08 November 2013 19:57
Wilmar International, the largest palm-oil trader, has capacity to spend US$2 billion to US$3 billion ($3.7 billion) on acquisitions and is interested in sugar businesses in Myanmar and Brazil including plantations, mills and refineries.
Wilmar has looked at companies including Indian producer Shree Renuka Sugars in recent years without proceeding, Chief Executive Officer Kuok Khoon Hong said today in Singapore.
“We want to be very careful on what we buy,” Kuok said.
The company is in talks to buy a majority stake in Shree Renuka, which is seeking to reduce its debt burden, the Business Standard newspaper reported on Nov. 4, without citing anyone.
Wilmar, based in Singapore, has announced deals valued at US$3.1 billion since 2010, including its US$1.54 billion offer for Australia’s Sucrogen Ltd. that gave it a foothold in the global sugar trade, according to data compiled by Bloomberg. The latest major acquisition, of a 27.5% stake in Morocco’s sole sugar supplier Cosumar SA, was announced in April.
Sugar is the “next leg of growth,” Wei Bin, a Maybank Kim Eng Holdings Ltd. analyst, said in a note. “Wilmar will deploy more resources to higher return areas going forward to improve group return-on-asset. One of the beneficiaries is sugar, which is expected to contribute 17% to the group profit before tax.”
Sugar prices are below output costs for some producers, boding well for longer-term prices, Kuok, who is also chairman of the company, told reporters today.
The trader fell 2% to $3.38 by the Singapore close, valuing the company at $22 billion.
Wilmar yesterday reported a 2.5% increase in third- quarter profit to US$416 million as sugar and consumer-product volumes rose. Pretax profit at its sugar operations rose 49% to US$151.2 million on favorable weather in Australia.
While it agreed in February to buy 54% of Noble Group Ltd.’s palm unit, the deal was called off as conditions weren’t satisfied. The two companies still plan to continue with a proposed partnership “by leveraging on their strengths” in Papua, Indonesia, they said in July in a joint statement.