Wilmar International

[Choon]

Just to add a little on commodities companies processing their core products. During my course of work we do sell some machines to produce consumer products which these companies purchase.

Lets talk about palm oil producers, such as mewah, intercontinental oil & fats etc. (i know wilmar does not have a consumer production plant in malaysia but they have many labs with pilot consumer production machines to allow their end user to test the suitability of their palm oil but they do have plants for edible oil production), one of the consumer products is condensed / evaporated milk which uses quite a bit of palm oil & sugar (used to be tax free in malaysia).

The reason they want to venture to consumer products is because of higher margins instead of just selling palm oil (last few years CPO prices were at a record low). But with all consumer products there are alot of other cost such as marketing, provisions for product recall etc.

Wilmar's determination to move towards higher value-added products nearer to the consumer-end - as early as 2013.

"We believe that the future of our Palm & Laurics business lies in
higher value-added and higher-margin downstream products.
We are particularly pleased with the record US$855.7m pretax
profit achieved by our Palm & Laurics division in FY2013,
not because of the quantum of improvement (11% up from
FY2012 pretax profit), but more because of the structural shift
in the quality of the earnings, which were achieved in the face
of generally low palm prices and critically, through increased
contributions from high value-added downstream products."