Investing in commodities outfit Wilmar International (SGX: F34) will never be a boring endeavor. The company is constantly making new deals, expanding old businesses, and starting new joint ventures. In just the last two months, the company has announced a couple of new developments in its business. Let’s have a look at them and assess how they might impact the company. It’s the sweet stuff – more sugar expansion Wilmar has spent a number of years acquiring leading sugar producers in Brazil, Australia, and Indonesia. It’s now of the world’s largest sugar producers as a result. However,…
In just the last two months, the company has announced a couple of new developments in its business. Let’s have a look at them and assess how they might impact the company.
It’s the sweet stuff – more sugar expansion
Wilmar has spent a number of years acquiring leading sugar producers in Brazil, Australia, and Indonesia. It’s now of the world’s largest sugar producers as a result. However, it’s still not slowing down on its expansion plans for its sugar operations.
The company announced earlier this year that it will be making a strategic investment into Shree Renuka Sugars Ltd, an integrated sugar and ethanol company listed in India. As of 27 May 2014, Wilmar held a 27.72% stake in the US$450 million Indian sugar outfit.
The investment in Renuka should help Wilmar in expanding its sugar business into India. Wilmar’s no real stranger to operating in the country given that it already has a large palm oil operation there.
Joint venture in Africa
Just last week, Wilmar signed a 50-50 joint venture deal with Repi Soap and Detergent S. Co. to upgrade one of the latter’s existing manufacturing facilities in Ethiopia in addition to building an integrated manufacturing complex that “would house an edible oil refinery and packing plant, production plants for specialty fats, soft oils, soaps and detergents, as well as a facility for sesame seed processing.”
Repi is a state-owned enterprise in Ethiopia within the detergent industry.
Lastly, Wilmar announced this week that it will be acquiring Huntsman Corporation’s (NYSE: HUN) European commodity surfactants business.
The acquisition would give Wilmar International wider leverage in its European business. However, Huntsman Corp’s businesses have been under pressure, and the company has to divest away its commodity surfactants business to focus more on its specialty products. It will be interesting to see what Wilmar will do with the newly-acquired business.
Wilmar is a highly complicated company with many different business segments due to its numerous joint ventures and mergers.
As a result of overcapacity in crushing facilities for oilseeds and other types of profit-margin-pressure in China, Wilmar is looking for more growth opportunities outside the country in order to diversify its revenue base (China accounts for roughly half of Wilmar’s annual revenue currently). If Wilmar is successful in its multi-business, multi-markets strategy, we might see a company with future earnings that are much more stable.
At its current price of S$3.20, Wilmar is valued at 14 times trailing earnings and 1 times book value.
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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 owns Wilmar International.