Wilmar International, the world’s biggest palm-oil trader, said first-quarter profit rose 5.6% as the economic recovery boosted demand and prices.

 

Net income rose to US$401.4 million, or 6 cents a share, in the three months ended March 31 from US$380 million ($554 million), or 6 cents, a year earlier, the Singapore-based company said today in a statement. Sales increased 36% to US$6.8 billion.

 

Wilmar, the supplier of almost half of China’s cooking oil needs, benefited as the world’s third-largest economy increased imports of palm oil by 9% to 1.16 million metric tons in the quarter.

 

“Asia is still a strong growth region, and over the last four to five years, the middle income group has grown a lot,” Wilmar Executive Director Teo Kim Yeong told reporters today in Singapore. “If this region continues to grow and the recovery is coming, demand will also continue to grow.”

 

Sales rose in the quarter on higher volumes and an increase in the average selling price, the company said in a presentation to the Singapore Stock Exchange today. A lower effective tax rate and improved earnings from oilseeds and grains boosted net income, it said.

 

Crude palm oil futures in Malaysia averaged 2,569 ringgit ($1,104) a ton in the quarter, compared with 1,921 ringgit in the year-ago period and 2,339 ringgit in the previous quarter.

Wilmar could benefit from a ban on imports of Argentine soy oil by China, the world’s largest consumer, Chief Operating Officer Martua Sitorus said separately at the Singapore media conference. Argentina, the largest producer, supplies about 75% of China’s demand.

 

The ban took effect on April 1 and importers have no plans to load shipments of Argentine soybean oil in May because of quality-related barriers raised by the government, the China National Grain and Oils Information Center said on May 4.

 

“Argentina’s curbs are an opportunity for us because we have big crushing facilities” in China, Sitorus said. “If people are not allowed to import so much soybean oil from Argentina, they will import soybeans from Brazil. The Brazil price is higher so normally that impacts our crushing margin better.”

 

Brazil and Argentina are the largest producers of soybeans after the U.S. China’s consumer prices rose 2.8% in April from a year earlier, the fastest pace in 18 months, the statistics bureau said yesterday. This raised concerns the government may rein in inflation with policies that may slow economic growth.

 

In January 2008, China’s National Development and Reform Commission required the largest suppliers of staple goods to seek government approval for price increases amid inflation concerns. It started allowing price increases for dairy products and cooking oil in April that year.

 

A similar scenario is unlikely to play out again this year, Sitorus said.

 

Palm oil hit a record 4,330 ringgit a ton in March 2008. It traded at 2,505 ringgit today, down 8.1% in the past year. Soybean oil in Chicago fell 7% in the past year.

 

Wilmar shares closed 0.3% lower at $6.52 in Singapore. They’ve gained 57% in the past year.

 

Palm oil may advance in the second half as dry weather caused by El Nino pares output in Malaysia and Indonesia and the tropical commodity may rise as high as 3,200 ringgit a ton after June, Dorab Mistry, a director at trading company Godrej International, said on April 25.

 

“Malaysian production will be down and Indonesia is not as strong as everybody had thought,” Teo said today. Wilmar has 30,647 hectares under cultivation in Indonesia and 962 hectares in Malaysia.

 

The two countries account for 90% of the world’s production of palm oil.