There May Be More Than Meets The Eye With Wilmar International Ltd’s Future Potential

Wilmar International Ltd (SGX: F34) was first listed in Singapore’s stock market through a reverse takeover in 2006. Although Wilmar is still considered as an agriculture company today, its business has transformed significantly over the past decade and that transformation holds clues on what Wilmar may look like a decade from now.

From then to here

10 years ago in 2005, Wilmar’s revenue came mainly from its oil palm and soya bean operations. By 2014, Wilmar’s a multi-crop giant in agriculture with additional major business interests in other oilseeds and grains, the downstream portion of the oil palm industry dealing with consumer products (think cooking oil), and even sugar.

It’d appear that Wilmar has big ambitions within the sugar industry. The company is now one of the leading sugar producers in Brazil, Indonesia, and Australia. In addition, the firm has also created a vertically-integrated business model for the commodity, taking care of the origination, processing, and distribution. This is very similar to what Wilmar has done with oil palm.

On a tangential side note, Wilmar has an interesting link to sugar.

Robert Kuok, the uncle of Wilmar’s current chief executive Kuok Khoon Hong, had made his name and fortune (he’s one of the richest men in Southeast Asia) through the sugar industry, hence earning the nickname, the “Sugar King.” Robert Kuok continues to have a large stake in Wilmar (an 18.3% interest) through his Malaysia-based holding company, PPB Group Berhad.

Changing winds

What Wilmar has done with sugar, and the expansion of its oil palm business, is for me, a good sign of what the company will look like a decade from now: An agricultural giant that has more than just oil palm and sugar in its bag of tricks.

The company can still venture into many other types of commodities in the future and recreate its vertically-integrated model. With so many options to choose from (there’s rice, cocoa, coffee, oil, metals, and livestock, for instance), there are so many different ways for Wilmar to grow.

An example of something that Wilmar may eventually morph into would be one of the firm’s major shareholders, Archer Daniels Midland Company. Archer Daniels Midland is one of the largest processors and distributors of agricultural products globally and is not defined by just one commodity type.

Foolish Summary

Realistically, it is not possible for Wilmar to enter, compete, and gain prominence in every commodity type. But, the track record of Wilmar’s success with its oil palm and sugar business can be a good example of how its vertically-integrated business model is highly duplicable and that it is very wrong for investors to just view the company as merely an oil palm and sugar business.

There are still so many ways for Wilmar to grow and that is why there may be more than meets the eye with the firm’s future potential beyond just developments in the oil palm and sugar industry.

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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 writer Stanley Lim owns Wilmar International Limited.