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

Wilmar International Limited (SGX: F34) released its fiscal third-quarter earnings report yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

As a leading Asian 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 & Manufacturing); Oilseeds & Grains (Manufacturing & Consumer Products); Sugar (Merchandising, Manufacturing & Consumer Products); and Others.

To learn more about the company, go here. If you’d like to catch up with the prior earnings report, you can hit the link here.

Financial highlights

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

  1. For the third quarter of 2015, revenue fell by 7.6% to US$10.6 billion on a year-on-year comparison.
  2. The fall in revenue led to Wilmar’s net profit decreasing by 34.7% year-on-year to US$275.9 million.
  3. Earnings per share (EPS) also saw a 34.8% decrease from US$0.066 in the third-quarter of 2014 to US$0.043 in the reporting quarter.
  4. For the third-quarter of 2015, cash flow from operations was US$1.23 billion with capital expenditures clocking in at US$166 million. The lower capex gave Wilmar positive free cash flow of US$1.07 billion.
  5. As of 30 September 2015, Wilmar had US$2.26 billion in cash and equivalents and US$21.6 billion in borrowings. This is an improvement from a year ago when the comparable figures were US$2.1 billion and US$22.3 billion, respectively.

In summary, Wilmar saw both its top-line and bottom-line fall for the quarter, but managed to generate positive free cash flow. This is a welcome improvement after recording negative free cash flow in the previous quarter. Additionally, Wilmar’s debt levels had reduced by US$700 million compared to the same quarter a year ago.

It is also worth noting that the agribusiness firm had pulled inUS$1.9 billion in positive free cash flow for the first nine months of 2015. Given that Wilmar still 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. Around US$15.1 billion of Wilmar’s debt is short-term in nature.

Operational highlights

Profit for Wilmar fell mainly due to a subdued performance from its Tropical Oils segment. Lower crude palm oil (CPO) prices had weighed heavily on the segment, which led to a 46% decline in profit before tax (PBT) compared to the same quarter a year ago. PBT for Tropical Oils in the reporting quarter came in at US$105.1 million.

The Sugar segment was not any better off. It also posted weaker PBT of US$108.7 million, down by 31%.

The Oilseed and Grains segment was a bright spot, as it picked up some slack by posting a 39% year-on-year improvement in PBT to US$243.6 million. It was not enough however, as Wilmar posted an overall PBT decline of 26% for the quarter.

As of 30 September 2015, the Group reported cash, bank and structured deposits, marketable securities, receivables and inventories of US$15.7 billion. When compared with its short-term debt obligations of US$15.1 billion, Wilmar commented that it does not foresee any problem in meeting maturing short-term debt obligations.

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

The Group expects performance of the Oilseeds & Grains segment to remain satisfactory. Refining and downstream product margins for the Tropical Oils segment should also improve with the biodiesel mandate in Indonesia. The recent increase in CPO prices will improve Plantation margins. In addition, the Group’s Sugar Milling segment will gain from the recent surge in sugar prices on the back of anticipated sugar deficit in the coming year. Overall, we remain optimistic that performance for the remainder of the year will be satisfactory.

It’d appear that Wilmar is looking at improvements in certain pockets of its business.

Foolish summary

At its closing price yesterday of S$3.05, Wilmar traded at around 12.2 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.