Wilmar International Limited’s Latest Earnings: A Solid Start to 2017

Yesterday, Wilmar International Limited (SGX: F34) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As Asia’s leading agribusiness group, Wilmar is engaged in a variety of businesses. According to its corporate profile, the company has 500 manufacturing facilities and a distribution network which spans some 50 countries. These businesses are divided into four main business segments: Tropical Oils, Oilseeds and Grains, Sugar, and Others.

Financial highlights

Here’s a rundown on some of Wilmar’s financial figures for the first quarter:

1. Revenue rose 17.4% year-on-year to US$10.6 billion.

2. Net profit soared 51% to US$361.6 million.

3. Earnings per share (EPS) was US$0.057, or 50% higher than a year ago.

4. Cash flow from operations was a negative US$22.3 million and capital expenditure was US$163.8 million. This led to negative free cash flow of $186.1 million, a sharp decline from the free cash flow of US$1.18 billion seen a year ago.

5. As of 31 March 2017, Wilmar had US$1.94 billion in cash and equivalents and US$17.4 billion in borrowings.

Wilmar recorded good sales growth and even better profit growth. But, the agribusiness giant generated negative free cash flow and maintained a balance sheet with net debt.

Operational highlights

Wilmar’s revenue rose across the board. The biggest sales growth came from the Tropical Oils segment, which saw its plantation and manufacturing revenue grow 63.3% and 32.1%, respectively, compared to a year ago. The segment benefited from higher crude palm oil (CPO) prices, which led to a 20% year-on-year increase in pre-tax profit.

Revenue growth at the Sugar segment was also strong with milling sales growing 46.7% while merchandising, refining, and consumer products increased by 61% year-on-year. However, the segment’s pre-tax loss widened from US$18.1 million a year ago to US$34.5 million.

The oilseed and grains segment was mixed, with manufacturing revenue gaining 14.5%. Consumer products revenue declined 18.7% to offset the increase. The bottom-line performance was good however, as there was a 27% jump.

Wilmar’s chairman and chief executive officer, Kuok Khoon Hong, provided the following statement on the company’s performance and future:

“The Group has shown strong results in the first quarter, particularly from our Tropical Oils and Oilseeds & Grains segments. We expect our Flour business to continue its growth, while volume for Consumer Products is expected to recover from the seasonal reduction in 1Q2017. Although lower CPO prices will impact our Plantation and Palm Oil Mills operations, we believe that this will be partially offset by anticipated higher palm oil production.

Recent volatility in sugar prices is expected to impact our Sugar operations. Overall, we are cautiously optimistic that the next quarter’s performance will be satisfactory.

We also wish to announce that the Group is carrying out an internal restructuring of its China operations with the possibility of a separate listing. As the proposed listing is still at evaluation stage, shareholders are advised to exercise caution in trading their shares. There is no certainty or assurance as at the date of this announcement that the listing proposal will be carried out.”

At its closing stock price of $3.43 yesterday, Wilmar traded at around 14.1 times trailing earnings and had a dividend yield of around 1.9%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.