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How Did The Sugar 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 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.

I had previously reviewed the Tropical Oils and Oilseeds and Grains segments in here and here, respectively. In this article, I will have a quick review of the Sugar segment.

The Sugar segment is described in Wilmar’s 2015 annual report as being involved with “sugar milling, refining, merchandising, branding and distribution of sugar and related products.” So, it’s not a very complicated business.

Here’s a table that shows some of the important financial numbers for the Sugar segment in the fourth quarter and whole of 2016 and 2015:

Wilmar Sugar segment income statement table
Source: Wilmar 2016 results announcement

There are three key takeaways.

Firstly, both revenue and profit before tax for the Sugar segment in 2016 have outperformed 2015’s levels. These were driven primarily by better sugar prices and to a lesser extent, an improvement in sales volume.

Secondly, while the segment’s 49% increase in profit before tax in 2016 looks great, the numbers could have been even better if not for a US$33.5 million impairment charge on certain refinery assets in Australia. Without the impairment charge, the Sugar segment’s 2016 profit before tax would have been US$158.8 million, 88.5% higher than in 2015.

Lastly, the operating statistics are mixed. On the negative front, we can see that the “Commercial Cane Sugar (%)” – this measures the percentage of sugar content in sugar cane – was lower in 2016 than in 2015. On the positive side, the amount of cane crushed grew, thus increasing the asset utilisation of the Sugar segment.

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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.