By Arijit Ghosh

Oct. 31 (Bloomberg) — PT Indofood Sukses Makmur, the world’s biggest instant-noodle maker, said third-quarter profit increased 33 percent as higher prices for its noodles and palm oil helped counter rising costs. The shares rose to a three- month high

Net income rose to 316.1 billion rupiah ($35 million), from 238.33 billion rupiah a year earlier, said Werianty Setiawan, head of investor relations at Jakarta-based Indofood. Sales of the company’s Indomie Rasa noodles, Bimoli cooking oil and Taj Mahal flour rose 25 percent to 7.37 trillion rupiah.

Indofood is spending $1 billion to buy a rival and double its palm oil output as record prices for the cooking ingredient cushion the company against soaring wheat costs. Nissin Food Products Co., Japan’s largest instant-noodle maker, has cut its earnings forecast 37 percent on higher wheat and vegetable oil prices. Palm oil rose to a record this week.

“The strength of crude palm oil prices should lead the company’s earnings to grow,” Hozefa Topiwalla, a Morgan Stanley analyst, said in an Oct. 22 note. Still, “Indofood is likely to witness mixed business fortunes as its core food and wheat flour businesses are likely to suffer from margin pressures.”

A 19 percent decline in interest costs for the quarter to 155.9 billion rupiah also helped boost earnings for the company.

Indofood’s earnings may improve after it yesterday completed the acquisition of PT Perusahaan Perkebunan London Sumatra Indonesia, the nation’s third-largest palm oil producer, which was announced in May. The company’s Indofood Agri Resources Ltd. unit will more than double output to 641,184 tons after it is combined with London Sumatra, compared with the 917,885 tons produced last year by Astra Agro, the country’s largest publicly traded palm oil supplier.

Palm Oil

Palm oil futures on the Malaysia Derivatives Exchange touched a record 2,920 ringgit ($874) a metric ton on Oct. 29, buoyed by increased demand in China and India and rising prices for crude oil. Crude oil’s 34 percent gain this year has lifted demand for biofuels made from vegetable oils.

Indofood, which has gained 57 percent this year in Jakarta trading, rose 3.5 percent to 2,200 rupiah, its highest since July 20. Nine of the 16 analysts whose recommendations are tracked by Bloomberg have a “buy” rating on the stock.

Indofood in September raised the price of noodles for the second time in four months, and Taufik Wiraatmadja, director of the noodles business, said further gains next year are possible.

Nissin Food , the Japanese maker of Cup O’ Noodles, said last month it would raise prices in January, citing wheat costs.

Wheat Prices

Indofood’s gross margin, the percentage the company earns after deducting costs, fell to 23.6 percent in the three month period from 25 percent in the same period a year earlier on higher raw-material costs, including wheat and palm oil.

Wheat futures on the Chicago Board of Trade, the global benchmark, touched a record $9.6175 a bushel on Sept. 28 after adverse weather this year damaged crops in the U.S., Europe and Australia.

Indofood’s third-quarter earnings were calculated from the company’s nine-month profit report.

Net income at Indofood rose to 683.3 billion rupiah, or 80 rupiah a share, in the nine months to Sept. 30, from 506.1 billion rupiah, or 59 rupiah, a year earlier, according to an e- mailed statement. That’s 86 percent of the estimated full-year profit of 795.2 billion rupiah by 16 analysts compiled by Bloomberg. Sales rose 23 percent to 19.67 trillion rupiah.

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