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How Profitable Are Wilmar International Limited’s Different Businesses?

Wilmar International Limited (SGX: F34) is one of the largest oil palm plantation companies in the world. It is also one of the largest companies in Singapore’s stock market right now with its market capitalisation of over S$21 billion.

The company’s business activities include oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, and the manufacture of specialty fats, oleochemicals, biodiesel, and fertiliser. It also has an interest in flour and rice milling.

In an earlier article, I had looked at the different ways Wilmar generates revenue.

I thought it would be interesting to follow up by looking at how profitable each business segment within the company is.

More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of Wilmar’s equity that they employ. In other words, I want to calculate the return on equity for each segment. (The return on equity is found by dividing each segment’s profit with its net assets, or equity.)

wilmar-business-segment-roe-table
Source: Wilmar 2015 annual report

We can see that the Sugar segment was the most profitable in 2015 in terms of the return on shareholders’ equity. Unfortunately, this segment is tiny for Wilmar as it represented only 6% of Wilmar’s total segmental profit in 2015.

The Tropical Oils segment – where Wilmar houses its palm oil-related businesses – faced a challenging year in 2015 due to low crude palm oil (CPO) prices, thereby resulting in a low single-digit return on equity.

Oilseeds and Grains is another important segment for Wilmar that has a return on equity that can be described as average at best.

By analysing the profitability of Wilmar’s different segments, investors can get a better handle on which of Wilmar’s businesses have better economic characteristics.

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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.