Latest Earnings from Wilmar International Limited: Tough Road Ahead

Wilmar International Limited (SGX: F34) reported its earnings for its fiscal first-quarter ended 31 March 2016 yesterday evening.

As a quick background for context later, Wilmar International is an agricultural company that is a part of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI). The company has four main business segments now: Tropical Oils; Oilseeds and Grains; Sugar; and Others. With that let’s dive into Wilmar’s latest results.

Financial highlights

The following’s a quick summary of some of the latest financial figures from Wilmar:

  1. Wilmar recorded revenue of US$9.0 billion in the reporting quarter, a 4.3% decline year-on-year.
  2. Despite the fall in revenue, profit attributable to shareholders managed to increase by 3.2% to US$239.4 million.
  3. Earnings per share (EPS) followed, climbing by 5.6% from 3.6 US cents in the first-quarter of 2015 to 3.8 US cents in the reporting quarter.
  4. In the first-quarter of 2016, cash flow from operations came in at US$1.33 billion and capital expenditure stood at US$154.3 million, resulting in positive free cash flow of US$1.18 billion. This is a decline from the free cash flow of US$1.61 billion recorded during the same period for the previous year (US$1.87 billion in cash flow from operations and US$256.1 million in capex).
  5. As of 31 March 2016, Wilmar had US$3.72 billion in cash and equivalents and total debt of US$15.3 billion. This is an improvement from the same period the year before when Wilmar had a net debt position of US$14.2 billion (US$7.8 billion in cash and equivalents and borrowings of US$22.0 billion).

In summary, Wilmar saw its top-line and free cash flow slip over the past year, but recorded profit growth and saw its balance sheet improve.

Operational highlights

Wilmar’s Tropical Oils segment, which includes its plantations and manufacturing activities, saw an 8% increase in pretax profit to US$149.3 million for the reporting quarter. The improvement was due to a better performance from the downstream operations of Wilmar, which benefited from lower commodity prices.

That said, the production yield for its plantations business was hurt by the El Nino weather effect, falling by 5% to 4.3 metric tons (MT) per hectare. Sales volume for the Tropical Oils segment remained flat at 5.6 million MT when compared to a year ago.

Next, the Oilseeds and Grains segment saw its pretax profit rise by 2% to US$168.8 million. This was on the back of 13% increases in sales volumes for both the manufacturing and consumer products sub-segments. Wilmar also saw favorable margin growth in the consumer products sub-segment and continued improvements in its rice and flour operations.

The Sugar business reported a significantly smaller pretax loss of US$18.2 million in the reporting quarter, compared with a loss of US$68.0 million in the same quarter the previous year. This was on the back of an 8% improvement in sales volume to 2.0 million MT. Losses were seen primarily due to seasonal plant maintenance during the first half of the year.


Regarding Wilmar’s outlook, here’s what Kuok Khoon Hong, the company’s chairman and chief executive, had to say in the earnings release:

“We expect the recent improvements in CPO prices to benefit our Plantation business. However, margins in the downstream business are expected to be lower due to higher feedstock costs. Consumer Products will continue to achieve healthy growth although crush margins are expected to come under pressure as a result of excessive soybean arrivals into China in the coming months and amidst volatile markets. Recent volatility in sugar prices will also have an effect on our Sugar operations. Operating conditions in the second quarter are expected to be challenging,”

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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 owns shares in Wilmar International.