Wilmar International Limited’s Latest Earnings: What Investors Should Know

Wilmar International Limited (SGX: F34) reported its second-quarter earnings for its fiscal year ending 31 December 2015 yesterday evening. The reporting period was for 1 April 2015 to 30 June 2015.

As Asia’s leading agribusiness group, Wilmar is engaged in a variety of businesses. According to its corporate profile, the company has 450 manufacturing facilities and a distribution network which covers around 50 countries.

Wilmar had made changes to its business-segment reporting in the first quarter of 2015. Now, it has four main business segments: Tropical oils (Plantation and Manufacturing), Oilseeds and Grains (Manufacturing and Consumer Products), Sugar (Merchandising, Manufacturing and Consumer Products), and Others.

To learn more about Wilmar, go here.

Financial highlights

The following’s a quick take on Wilmar’s latest financial figures:

  1. For the second-quarter of 2015, Wilmar’s revenue fell by 11.7% year-on-year to US$9.28 billion.
  2. Despite the fall in revenue, quarterly net profit managed to increase by a good 18.2% to US$201.8 million from a year ago.
  3. As a result, earnings per share (EPS) came in with an 18.5% increase from US$0.027 in the second-quarter of 2014 to US$0.032 in the reporting quarter.
  4. For the second-quarter of 2015, cash flow from operations was a negative US$213.5 million with capital expenditures clocking in at US$201.4 million. This gave Wilmar negative free cash flow of US$414.9 million. This is down from the negative free cash flow of US$276.4 million seen a year ago (cash flow from operations of US$8.6 million and capital expenditures of US$285 million).
  5. As of 30 June 2015, Wilmar had US$1.99 billion in cash and equivalents and US$22.5 billion in borrowings. This is a slight improvement from a year ago when the selfsame figures were US$2.24 billion and US$24.3 billion, respectively.

In summary, Wilmar saw its bottom-line increase despite a fall in revenue.

The conglomerate also generated negative free cash flow for the quarter. It may not be nice to see negative free cash flow, but it’s worth pointing out that in the grander scheme of things, the agribusiness firm had generated US$1.2 billion in positive free cash flow for the first six months of 2015. Given that Wilmar maintains a sizable amount of debt on its balance sheet, we should continue to keep an eye on its ability to generate free cash flow.

Wilmar’s board of directors declared an interim dividend of S$0.025 per share for the reporting quarter. This is up 25% from a year ago.

Operational highlights

Quarterly revenue for Wilmar fell mainly due to weaker sales from its tropical oils segment which saw its plantation and manufacturing revenue drop 12.8% and 26.5% year-on-year, respectively. Lower crude palm oil (CPO) prices had weighed heavily on the segment, which led to 15% lower pre-tax profit compared to the same quarter a year ago.

On the other hand, the oilseed and grains segment picked up the slack by posting a 179% year-on-year improvement in pre-tax profit to US$115.9 million. This strong performance had helped to offset pre-tax profit weaknesses in both the tropical oil (as mentioned earlier) and sugar segments to help Wilmar post growth in overall pre-tax profit.

For a future outlook, this is what Wilmar’s Chairman and Chief Executive Officer, Kuok Khoon Hong, had to say:

“In spite of tough conditions and lower CPO prices, the Group achieved satisfactory results in 2Q2015 [second quarter of 2015]. The Group expects crushing margins in China to remain positive for the rest of the year and for Consumer Products to continue its strong performance.

For the second half of 2015, refining margins are expected to be maintained for the Tropical Oils business with increased palm production and demand arising from lower CPO prices, though Plantation and Palm Oil Mill performances will continue to be affected by the softer CPO prices. Overall, we are cautiously optimistic that 2H2015 [second half of 2015] performance will be satisfactory.”

Foolish summary

At its closing price yesterday of S$3.17, Wilmar traded at around 11.8 times its trailing earnings and offers a trailing dividend yield of around 2.5%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.