PRESS DIGEST- Financial Times - Sept 27
Sept 27 The following are the top stories in the Financial Times. Reuters has not verified these stories and does not vouch for their accuracy.
SINGAPORE May 16 Singapore-listed commodity firms Olam International Ltd, Noble Group Ltd and Wilmar International Ltd are cutting capital expenditure, making more selective acquisitions and seeking partnerships to weather volatile markets.
While the more cautious approach could lead to slower earnings growth, investors are likely to welcome the leaner balance sheets and reduced funding risk as China's demand for commodities from iron ore to palm oil weakens.
"It seems like commodity companies are pursuing a more asset-light strategy," said James Koh, an analyst at Maybank Kim Eng. "The industry as a whole has over-expanded over the last few years and as a result, they are pulling back a little in terms of capex investment."
Wilmar -- the worst performing stock on the Straits Times Index last year -- has businesses in palm plantations, soybean crushing and cooking oil, as well as sugar milling and refining. Noble and Olam have expanded to owning assets but their core strength is being middlemen between commodity producers and customers.
Olam will nearly halve its planned capital expenditure over the next three years after short-seller Muddy Waters attacked its debt-fuelled acquisitions. Its share and bond prices tumbled but have since recovered.
Olam reported a 10 percent rise in third-quarter net profit, helped by its food staples and packaged food business.
Noble, which has agriculture, energy and metal businesses, said it may buy minority stakes rather than make full acquisitions of assets. It recently announced a joint venture with Wilmar to develop palm plantations in Papua.
Noble's spending on investments hit $1.4 billion in 2011 -- a 47 percent jump from 2009 -- but fell to $824 million last year.
"Our total committed capex for this year and next year is around $500 million ... which is significantly less than we have had through the last few years, as we bring the investment and build-up of our agricultural assets to completion," Noble chief executive Yusuf Alireza said in a conference call.
Noble posted a 62 percent fall in first-quarter net profit on Tuesday, weighed down by a loss in its agriculture segment. Its overall net profit margin dropped to 0.18 percent from 0.48 percent a year earlier.
Wilmar reported a 23 percent rise in first-quarter net profit on May 8, lifted by improved margins in soybean crushing and flour milling, but it warned the bird flu outbreak in China would affect animal feed consumption in the short term.
Wilmar chief executive Kuok Khoon Hong told a briefing that crushing margins in China may weaken in the next few months due to the arrival of a large quantity of soybeans that were previously delayed by port congestion in Brazil.
From the 2009 to 2012 fiscal years, Wilmar's capital expenditure jumped 63 percent to $1.7 billion. The company expects its spending to fall to around $1 billion this year but said it would still make acquisitions if they were attractive.
Last month, Wilmar bought 27.5 percent of Cosumar S.A., the third-largest sugar producer in Africa, for around $263 million. Raw sugar futures hit a 34-month low this week as data showed surging production in Brazil.
Shares of Noble and Wilmar have lagged the nearly 9 percent gain in the broader Straits Times Index so far this year.
But Olam's shares, which were hit by the Muddy Waters attack, are up almost 17 percent after Singapore state investor Temasek Holdings became its biggest shareholder and it shifted to a slower growth path. (Editing by Stephen Coates)
TOKYO, Sept 27 Japan's Nikkei share average dropped to a 7-1/2-week low on Tuesday morning after U.S. shares fell, while investors cautiously await the first U.S. presidential debate between Hillary Clinton and Donald Trump.
SYDNEY, Sept 27 Uncertainty gripped Asian markets on Tuesday as investors braced for a potentially pivotal U.S. presidential debate by shunning stocks while favouring safe haven bonds and the yen.