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The Good And Bad That Investors Should Know From Wilmar International Limited’s Latest Earnings Update

In late February, Wilmar International Limited (SGX: F34) released its 2017 full year earnings update. As a quick introduction, Wilmar is an agricultural company that operates through four main segments: Tropical Oils, Oilseeds and Grains, Sugar, and Others.

There are both positive and negative takeaways from Wilmar’s latest results that investors may want to learn about.

The positives

Firstly, the company reported growth in both revenue and net profit in 2017. For the year, Wilmar’s revenue increased by 5.9% year-on-year to US$43.8 billion while its earnings per share was up by 25.3% to US$0.193.

Secondly, the Oilseeds and Grains segment delivered a strong performance in 2017, with its profit before tax almost tripling from US$251.1 million in 2016 to US$735.0 million.

Thirdly, Wilmar’s associates and joint ventures performed well during the year too. The company’s shares of results from associates and joint ventures was US$228.3 million in 2017, up 62.1% from 2016.

Last but not least, Wilmar’s total dividend for 2017 was S$0.10 per share, 53.8% higher than 2016’s dividend of S$0.065 per share.

The negatives

Firstly, Wilmar’s Tropical Oils and Sugar segments both reported lower profits in 2017. The former saw its profit before tax fall by 38% to US$426.2 million due to weaker crush margins. The latter experienced a pre-tax loss of US$24.6 million in 2017, down from a pre-tax profit of US$125.3 million in 2016; Wilmar attributed the poor performance to the segment’s sales volume being impacted by a new marketing programme.

Secondly, the agricultural giant’s operating cash flow for 2017 was just US$386.4 million, down from US$1.12 billion in 2016, mainly due to an increase in inventories and a decrease in payables.

Lastly, the company’s net debt (total borrowings less cash and deposits) had increased from US$11.7 billion at end-2016 to US$12.6 billion at end-2017. But on a slight positive note, Wilmar’s gearing ratio (debt/equity) had improved from 0.81 to 0.79 as a result of an increase in its equity.

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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.