How Did The Tropical Oils Business Segment Of Wilmar International Limited Fare In 2016?

Wilmar International Limited (SGX: F34) is a large company in many ways.

It is a leading agri-business group in Asia, one of the largest oil palm plantation companies listed in Singapore, and is also one of the largest companies in our local stock market given that it is a component of the Straits Times Index (SGX: ^STI).

Currently, Wilmar has three main operational segments: Tropical Oils, Oilseeds and Grains, and Sugar. It also has a fourth segment called “Others.”

The company recently announced its 2016 full year results. Given the number of different segments that Wilmar has, I thought it would be useful for investors to take a separate look at the performance of each of the three operational segments. In this article, I will have a quick review of the Tropical Oils segment’s business performance in 2016.

Note: A review of the Oilseeds and Grains and Sugar businesses have been published. They can be found here and here.

According to Wilmar’s 2015 annual report, the Tropical Oils segment involves the company’s oil palm plantation and milling activities. It also includes the “processing, merchandising, branding and distribution of palm oil and laurics related products including oleochemical and biodiesel.”

The following table shows the revenue and profit numbers that the Tropical Oils segment delivered for the fourth quarter and the whole of 2016 and 2015:

Wilmar tropical oils segment revenue and profit
Source: Wilmar 2016 results announcement

Both revenue and profit before tax for the segment came in stronger in 2016, with the former up by 8% and the latter up by 40%. The growth seen in the year was driven primarily by rising crude palm oil (CPO) prices since the second quarter of 2016.

Here’s a table showing some production numbers for the Tropical Oils segment in 2015 and 2016:

Wilmar tropical oils segment production table
Source: Wilmar 2016 results announcement

One thing worth pointing out is that the company’s planted area and mature area harvested were both more or less unchanged in 2016 when compared to 2015. But, the company’s FFB (fresh fruit bunches) production had declined by 15% – this was mainly due to the El Nino weather phenomenon. With lower FFB production, Wilmar’s mill production volume also fell.

In 2016, the Tropical Oils segment accounted for 40.7% of Wilmar’s total revenue and 53% of profit before tax.

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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.