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The Different Ways Wilmar International Limited Makes Its Money

Wilmar International Limited (SGX: F34) is a big company in a number of different ways.

It is one of the largest plantation companies in the world, one of the largest oilseeds and edible oil processors in China, and one of the largest companies in Singapore’s stock market. To the last point, Wilmar has a market capitalisation of S$20.3 billion and is one of the constituents of Singapore’s market benchmark, the Straits Times Index (SGX: STI).

I thought it’d be interesting to look at Wilmar’s different businesses given its heft. So, here’s a breakdown of the company’s pre-tax profit by business segments:

wilmar-profit-before-tax-by-business-segment
Source: Wilmar 2015 annual report

Oilseeds & Grains was the largest segment for Wilmar in 2015, accounting for 48% of pre-tax profit. This segment deals with the processing, merchandising, branding and distribution of a wide range of agricultural products (such as non palm and lauric edible oils, oilseeds, corn, and more) and consumer products such as wheat and rice noodles.

Tropical Oils was the second most important segment for Wilmar in 2015. It is where Wilmar runs its palm oil plantations and mills. There’s also the manufacturing and distribution of palm oil and laurics products such as oleochemical and biodiesel.

Sugar is up next and it contributed to 6% of Wilmar’s 2015 pre-tax profit. The name of the segment should be straight forward. This is Wilmar’s sugar-related business and it deals with sugar milling, refining, sugar products, and more.

Associates and joint ventures is simply just that – they are the various companies Wilmar has stakes in that are in businesses related to the three aforementioned segments.

Others is a tiny slice of the pie and its business activities include the manufacture and distribution of fertiliser products and the provision of ship-chartering services.

It’s clear that there are many moving parts to Wilmar’s business, but we can still draw up a few general conclusions.

First, the profitability of each segment can be volatile. For example, Tropical Oils was the biggest profit contributor in 2014, accounting for 63% of pre-tax profit; its contribution slimmed down to ‘just’ 38% in 2015.

Second, Wilmar has a diversified business, both horizontally (it’s in different commodities, such as sugar and palm oil) and vertically (it has a presence in many parts of the palm oil industry value chain, from plantations to consumer products).

Investors who are able to make sense of the different profit sources Wilmar has would be able to make more-informed investing decisions.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.