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Wilmar International, Asia’s largest agribusiness and the word’s largest processor of palm oil by volume, said it was prepared to invest “hundreds of millions of dollars” in Africa in the latest vote of confidence in the continent.
The ambition highlights how Asia’s biggest commodities groups are turning to Africa for growth as they hunt for raw materials and expand beyond Asian markets driven by China’s demand for soft commodities and food.
Overcapacity in soyabean processing in China is causing concerns for commodity houses, including Wilmar, which blamed the problem for a sharp fall in quarterly profit this week.
Khoon Hong Kuok, Wilmar chairman and chief executive, said: “I’m prepared to invest hundreds of millions of dollars in Africa. The time for that continent has come,” he said at an earnings briefing in Singapore, where the company is listed.
Mr Kuok, who rarely speaks publicly, said he wanted Africa to generate “a couple of hundred million [dollars]” of net profit a year. He gave no timeframe.
This week Wilmar reported a 70 per cent fall in second-quarter net profit to S$117m. That sent Wilmar’s shares down to close 7 per cent lower at S$3.15 on Wednesday in Singapore.
Wilmar has 50,000 hectares of palm oil plantations in Ivory Coast, Uganda and Ghana. Last year it bought a 77 per cent stake in a palm oil company listed on the Ghana stock exchange and this year started work on developing palm oil plantations in Nigeria.
Mr Kuok said that most of Wilmar’s investments in coming years would be expanding further in palm oil, which is used in cooking oil, confectionery and baked goods. “The major area we are going into is Nigeria,” he said.
Mr Kuok said Chinese demand for commodities from Africa, favourable commodity prices and a shortage of land in Indonesia and Malaysia for palm oil plantations would drive Wilmar’s expansion in Africa.
“We want to do plantations, we’ll do the refining and the distribution,” he said.
Palm oil plantations and palm oil milling generated about a quarter of group pre-tax profit for Wilmar in the 2011 financial year.
Wilmar rivals Olam and GMG Global, a Chinese company majority owned by state-owned Sinochem, already have an extensive presence in Africa are also both listed in Singapore.
Olam derives 17 per cent of its sales from Africa, where its business ranges from cocoa in Cameroon to palm oil plantations in Gabon. GMG has bought land for growing rubber as part of a strategy to “secure upstream resources . . . including land banks, existing plantations and processing factories”, the company said.
Wilmar was cofounded in 1991 by Mr Kuok, a nephew of Malaysian tycoon Robert Kuok, and is the largest supplier of cooking oil in China and Vietnam. It also grows sugar in Australia.