Important Differences between Wilmar International and Golden Agri-Resources That Investors Have To Know

If we were to talk about major players within the palm oil industry, it’ll be tough not to mention both Wilmar International (SGX: F34) and Golden Agri-Resources (SGX: E5H).

Both are large vertically integrated palm oil outfits. That would mean that they are not only oil palm plantation owners – they also deal with the entire value chain within the palm oil industry, such as the extraction of Crude Palm Oil (CPO) from the oil palm fruits and the refining and processing of CPO into consumer products like cooking oil. Both also have sizeable market capitalisations (S$20.6 billion for Wilmar; S$7.32 billion for Golden Agri-Resources) and are also components of the Straits Times Index (SGX: ^STI).

Given their outward similarities, what exactly are their key differences?

1. Business focus

Although Golden Agri is predominantly focused on the palm oil industry, Wilmar has since diversified into other oilseeds, grains, and also sugar. It may surprise some, but Wilmar is now actually one of the largest sugar producers in the world after it had spent a number of years rolling-up many leading sugar producers in Brazil, Australia and Indonesia.

In fact, both companies’ vision for themselves can illustrate the difference in their business focus quite clearly. For Golden Agri-Resources, it’s “to become the largest integrated and most profitable palm-based consumer company.” Wilmar on the other hand, strives to be Asia’s leading agribusiness group.

2. Geographic diversity

The second key difference between the two companies has to do with their geographical diversity. Golden Agri-Resources obtains most of its revenue and profit from Indonesia. Wilmar on the other hand, derives half of its revenue from China alone with the rest of the world (comprising South East Asia, India, Europe, Africa, Australia, New Zealand, and more) making up the other part.

Given the business-scale Wilmar has created in China over the decade, it might be extremely hard for Golden Agri-Resources to ever catch up in the Middle Kingdom even if the latter wanted to.

Foolish Summary

For investors choosing between the two, it might be worthwhile looking at the future of the two companies as well. The prospects for Golden Agri-Resources would probably come from geographic expansion by bringing its palm oil products into other markets. Wilmar on the other hand, is not restricted to just the palm oil industry. Therefore, its growth might come from an increase in its product base, in particular, bringing in new products and services into its key markets in India and China.

If both companies stay true to their current vision over the next decade, Golden Agri-Resources would still be an oil palm giant, albeit a giant with a possibly bigger frame. Wilmar on the other hand, might become a totally different company as there’s so much more within the world of agribusiness to explore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim own shares in Wilmar International.