Latest Earnings from Wilmar International Limited: A Tough Quarter

Wilmar International Limited (SGX: F34) reported its earnings for its fiscal second-quarter (the three months ended 30 June 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 a 0.9% year-on-year increase in revenue to US$9.37 billion.
  2. Despite the higher revenue, profit attributable to shareholders decreased significantly – Wilmar’s profit of US$185 million in the second-quarter of 2015 had become a loss of US$220.2 million in the reporting quarter.
  3. Earnings per share (EPS) followed, dropping to a negative 3.5 US cents in the second-quarter of 2016.
  4. Cash flow from operations came in at a negative US$625.2 million and capital expenditure stood at US$214.3 million, resulting in a negative free cash flow of S$839.5 million. This is a decline from the negative free cash flow of US$414.9 million recorded during the same period in the previous year (a negative US$213.5 million in cash flow from operations and US$201.4 million in capex).
  5. Wilmar’s net asset value (NAV) stood at US$2.23 as of 30 June 2016, a decrease from US$2.41 a year ago.
  6. As of 30 June 2016, Wilmar had US$3.62 billion in cash and equivalents and borrowings of US$15.9 billion putting it in a net debt position of US$12.2 billion This was an improvement from the same period the year before when Wilmar had a net debt position of US$15.5 billion (US$7 billion in cash and equivalents and borrowings of US$22.5 billion).
  7. Wilmar’s board of directors has proposed an interim dividend of S$0.025 per share, the same as a year ago.

Operational highlights

Wilmar reported its first ever quarterly loss due to challenging operating conditions. The loss was largely attributed to the manufacturing business within the Oilseeds and Grains segment as it was affected by the highly volatile soybeans market.

Unfavorable weather conditions also led to a delay in sugar harvesting in Australia and accounting mark-to-market losses on sugar hedges resulted in a poorer overall performance for the Sugar segment.

The positive development for the quarter was the Tropical oils segment, which grew its quarterly revenue and pre-tax profit by 6% and 14%, respectively. The segment’s growth was driven by a “favourable performance” in the downstream businesses although the plantation operations were affected by lower production volume.

The road ahead

Kuok Khoon Hong, Wilmar’s chairman and chief executive, had the following comments in the earnings release on the company’s road ahead:

“Notwithstanding the one-time loss in 2Q2016, the Group’s integrated agribusiness model remains intact and resilient. The Group continues to execute on its stated growth strategy with emphasis on downstream businesses and focusing on high growth Asian and African markets.

Recent developments in joint ventures in Vietnam and India strengthen the long-term prospects in these countries. Barring unforeseen circumstances, the Group’s performance for the rest of the year is expected to be satisfactory.”

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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.