I HAVE been turning up regularly for the quarterly results briefings of plantation giant Wilmar International for over a year now. The briefing sounds more like a management seminar actually. The boss, Mr Kuok Khoon Hong, is remarkable for his candour.He can be relied upon to give a liberal sampling of folksy advice, along with serious replies to the tough questions posed to him on his business. And like banker Wee Cho Yaw, he is confident enough to give the harsh truth if the need arises.
He didn’t disappoint today either. At the end of a brief presentation on his firm’s third quarter results, he dropped a bombshell that some banks were threatening to pull credit lines to his firm.
Now this is unusual.
Wilmar is the third most valuable firm on the Singapore Exchange with a market value of $17.3 billion. For the first nine months of this year, it has earned a profit of $1.16 billion – a sum not to be sniffed at, by any standards.
Yet, it is a sign of the times that even the most robust firm is feeling the chill from the financial crisis which has been confronting banks and causing them to trim their lines to even their best customers.
Still, it was strange to find that analysts scarcely touched on the issue, even though it was obvious that management was waiting for some one to pop the all-important question on the firm’s credit positions. For the horde of bankers in the crowd, the wait must have been exasperating. They were sent there to fish for information but they refused to pop the question for fear that they would betray their uneasiness to management.
I was quite contented to sit back and watch the drama unfold.
It was finally left to a CLSA analyst to ask – to everyone’s relief – which were the banks pulling the lines on Wilmar and why? You could also feel the air of anticipation as Mr Kuok directed the question to his CFO Francis Heng who thanked the analyst for asking the question.
He then offered the information which the bankers were eagerly awaiting – that one bank had withdrawn its credit line because its top management had decided to stop commodities financing.
Another bank – Fortis – was still in the position to provide funding but its costs of funds had shot up since its rescue by the Belgian and Dutch government last month. Executive director Chua Phuay Hee was quick to point out that Wilmar had US$1 billion of cash in the bank, and would be paying part of it out as dividend.
Given the difficulties of putting it in banks, he reckoned the money is safer with shareholders – to laughter from the audience.
And Mr Kuok summed up by noting that while the firm performed better in a volatile market, “it doesn’t mean we can’t swim in still water”.
It is a tacit acknowledgement of the pressures which other plantation firms must be facing from their own bankers. You must be wondering why I am recounting all of these in my entry today.
By laying out his cards upfront, Mr Kuok has shrewdly shown to the bankers scared silly by the global credit crisis that it is business as usual for some firms after all.
There is no General Motors or even General Electric situation here. And being transparent in a difficult situation helps. It will nip any suspicion in the bud. I am sure other firms must be encountering similar intense scrutiny from their bankers. They should follow his lead.
Just give a candid update of the firm’s funding position and available lines of credit.
There is nothing worse than a pack of panicking bankers hounding an otherwise healthy company to its grave.