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Latest Earnings From Wilmar International Limited

Last evening, Wilmar International Limited (SGX: F34) reported its fourth-quarter and full year earnings for 2015.

Wilmar International is an agriculture and commodity company. It has four business segments, namely, Tropical Oils, Oilseeds and Grains, Sugar, and Others.

The Tropical Oils segment is focused mainly on running palm oil plantations and manufacturing palm oil while Oilseeds and Grains consists of soybean crushing and various consumer products. Coming to the Sugar segment, it focuses on Wilmar’s sugar-related businesses such as manufacturing and consumer products. Lastly, the Other segment comprises the company’s fertilizer and shipping businesses.

With that, let’s dig into Wilmar’s latest earnings to understand how the company had performed for the quarter and year. Here are some financial and business highlights:

1) Net profit for the reporting quarter fell 16% from a year ago to US$337.2 million. This drop in profit came on the back of a 12.5% year-on-year decline in revenue from US$10.8 billion to US$9.43 billion.

2) For 2015, Wilmar’s net profit and revenue came in at US$1.06 billion and US$38.8 billion, respectively, after falling by 8.7% and 10%.

3) The agriculture outfit had earnings per share (EPS) of US$0.166 for the year, which was an 8.3% drop from 2014. For the reporting quarter, Wilmar’s EPS had slipped by 15.9% year-on-year to US$0.053.

4) Wilmar’s weaker top-line and bottom-line results for both the quarter and year were largely due to a weak performance at the Tropical Oils segment. The table below shows how each segment’s revenue and profit before tax had changed for both the year and quarter:

Wilmar segment results table
Source: Wilmar’s earnings release (click table for larger image)

5) The company said that the Tropical Oils segment had suffered in the fourth-quarter of 2015 from lower crude palm oil prices. Furthermore, weak demand – brought on by a “challenging” macro environment – had compressed profit margins at the segment’s downstream operations.

On a more positive note for the Tropical Oils segment, a 4% improvement in the production yield to 21.4 MT per hectare was seen for 2015. The company also mentioned that the benefits from the award of a bio diesel mandate in November 2015 will be “fully experienced over the course of 2016.”

Wilmar ended 2015 with an average age of 12 years for its oil palm plantations.

6) The Oilseeds and Grains segment saw a 19% uptick in sales volume to 23.6 million MT in 2015. Sales volume for Sugar also showed strong growth in 2015 – Wilmar’s sugar businesses increased their sales volume by 35% to 13.1 million MT.  The Sugar segment’s decrease in net profit in 2015 was attributed to a weaker performance from the company’s merchandising and manufacturing businesses as well as a falling Australian dollar.

Lastly, the increased profits from Associates/Joint Ventures were due to better contributions from Wilmar’s investments in India, Ukraine, and a joint venture investment in Goodman Fielder.

7) Wilmar had proposed a final dividend of S$0.055 per share, bringing the total dividend in 2015 to S$0.08. For perspective, 2014 had a final and total dividend of S$0.055 and S$0.075, respectively.

8) The agriculture outfit ended 2015 with a net debt to equity ratio of 0.78, unchanged from a year ago. Although Wilmar had managed to reduce its net debt from U$12.1 billion to US$11.8 billion, there was also a reduction in its equity. Wilmar’s net asset value per share had decreased by 1.2% from US$2.42 in 2014 to US$2.39.

9) Free cash flow in 2015 had improved from US$993 million in 2014 to US$1.07 billion.

Commenting on Wilmar’s prospects, the company’s chairman and chief executive Kuok Khoon Hong said in the earnings release:

“The Group performed satisfactorily for the full year, in spite of the challenging environment, particularly for palm oil. Healthy growth was achieved in various key business segments such as oilseeds, flour, rice, consumer products, specialty fats and sugar. In an environment where macro factors are expected to remain challenging, we believe our resilient business model and vertical integration, supported by our healthy balance sheet, will allow us to continue to do reasonably well.”

Wilmar’s shares had closed at S$3.11 yesterday. At that price, the agriculture outfit’s valued at around 13 times its latest earnings and has a trailing dividend yield of 2.6%.

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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 Esjay own shares in Wilmar.