Wilmar International - DBS Research 2017-03-30: Cyclone Debbie hit Queensland's sugarcane plantations

Wilmar International - DBS Vickers 2017-03-30: Cyclone Debbie hit Queensland's sugarcane plantations WILMAR INTERNATIONAL LIMITED F34.SI

Wilmar International - Cyclone Debbie hit Queensland's sugarcane plantations

  • Wilmar’s sugar operations in Queensland, Australia hit by Tropical cyclone Debbie.
  • Wilmar’s average milling pretax in 2011-2014 accounted for only 19% of the company's sugar pretax.
  • Other impacted areas may include forward sales and damage to mills.
  • Pending management's assessment, we are leaving our forecasts, TP and rating unchanged.



What’s New 


Story 

  • According to Canegrowers.com.au media release on 29 March 2017, tropical cyclone Debbie has damaged sugarcane crops in Queensland, Australia. Sugarcane growers are assessing the damage. Hundreds of hectares of sugarcane have reportedly been flattened; with Mackay and Proserpine districts being the worst affected areas.
  • Cane-growers CEO said that some of the canes would have been uprooted and some underwater, and that the full extent of the damage to farms and crops would not be clear for a number of days.
  • We understand the Mackay and Proserpine regions produced 8.5m MT of sugarcane, out of a statewide harvest of 35m MT last year. The yields will consequently be affected for the 2017 harvest, which is due to start in less than three months.
  • According to the article, farm equipment and industry infrastructure such as the cane train network and the mills in the hardest hit cane districts will also be inspected over the coming days.

Point 

  • According to Wilmar Sugar Australia's website, the majority of the group’s mills are located within cyclone Debbie’s path. Hence, we expect a drop in Wilmar’s sugar production in FY17F.
  • Yet, Wilmar’s pretax contribution from sugar milling may not be significant. Based on the average pretax contribution between 2011 and 2014, milling pretax accounted for only 19% of the group’s total sugar pretax, with the bulk coming from merchandising. The group’s sugar pretax itself accounted for c.9.6% of overall pretax in FY16. 
  • Still, we suspect there could be some impact on the group’s forward sales market-to-market gains (losses) as a result.

Relevance 

  • Subject to assessment from Wilmar, we are leaving our forecasts unchanged. We expect insignificant earnings impact arising from this natural disaster – as mills and crops may have already been insured. However, should there be any damage to the mills, it may take some time to undertake reparations. 
  • Pending Wilmar's assessment, we maintain our forecasts, TP and rating.




Ben Santoso DBS Vickers | http://www.dbsvickers.com/ 2017-03-30
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 3.900 Same 3.900



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