Wilmar First Quarter Results: Growth in Profit

Licuala at SunsetWilmar International (SGX: F34) released its first quarter results this morning. The agriculture business group posted a 23% year-on-year jump in quarterly profit from US$255.9m to US$315.4m despite a 3% decline in revenue from US$10.5b to US$10.2b. If non-operating items were stripped from the quarterly results, Wilmar’s profit growth would have been even more impressive, clocking in at 53% (a jump from US$205.6m to US$313.7m).

After the headline numbers, let’s take a closer look at Wilmar’s individual operating business segments.

Palm & Laurics saw volume growth of 7% to 5.53 million MT (metric ton; 1 MT is equivalent to 1,000 kg) for the quarter compared to a year ago. But, lower prices in palm products caused revenue to fall by 16% from US$5.4b to US$4.5b. That led to a 7% slide in pre-tax profit from US$235m to US$219m.

In the Oilseeds and Grains segment, sales volume for the quarter increased by 6% year-on-year to 4.67 million MT. That was accompanied by a 15% jump in revenue from US$2.69b to US$3.09b. The segment made a loss of US$52.5m in the first quarter last year, but has since swung to a profit of US$47.2m on the back of higher product prices.

Consumer Products had a healthy quarter, as its sales volume, top-line and pre-tax profit all grew from the first quarter of 2012. Sales volume was up by 10% to 1.33 million MT on the back of stronger demand. Consequently, revenue was 8% higher at US$2.04b. Pre-tax profit grew at an even faster clip at 12% from US$50.3m to US$565.m

Wilmar’s Sugar segment consists of two different businesses; Milling and Merchandising & Processing. Together, they reported a 68% year-on-year increase in revenue for the quarter to US$769m. Pre-tax losses amounted to US$13.6m, an improvement from the US$47.9m loss last year. The losses were attributed to maintenances for the Milling plants that are normally carried out in the first two quarters of the year, a result of the seasonal nature of the business.

Commenting on the future outlook of the company, Chairman and Chief Executive Officer Mr Kuok Khoon Hong said: “With our resilient integrated business model and new businesses developed in the last few years, we are reasonably confident that we will overcome the difficult environment expected for the rest of the year.

Whilst palm oil price is likely to remain low, affecting Plantation’s profitability, the declining price trend is expected to benefit our downstream value-added businesses. In addition, we expect stronger contributions from our new businesses. In China, the bird flu will affect meal consumption in the short term but is not expected to have a long term effect. We remain optimistic about the long term prospects of China.”

Wilmar’s shares were at $3.31 at Tuesday’s close, representing a Price-Earnings ratio of 13 and a dividend yield of 1.5% based on 2012’s annual dividends.

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