Wilmar - OCBC Investment 2017-08-11: A Mixed Set Of Results

Wilmar - OCBC Investment 2017-08-11: A Mixed Set Of Results WILMAR INTERNATIONAL LIMITED F34.SI

Wilmar - A Mixed Set Of Results

  • Tropical Oil segment was weaker.
  • 2H expected to be better.
  • Crush margins to stay positive.

Mixed performance across segments 

  • Wilmar’s 2Q17 revenue increased 13.2% YoY to US$10.6b, driven by stronger commodity prices as well as higher sales volume from Oilseeds & Grains and Sugar. 
  • Net profit was US$60.2m vs. a loss of US$220.1m in 2Q16 due to one-off losses, while core net profit was US$37.3m. The key difference was mainly gains from investment securities on improved equity market conditions.
  • PBT was mixed across segments — Tropical Oils was down 68% YoY to US$59.5m, Sugar had a higher pretax loss of US$106.8m vs. a loss of US$78.7m last year due to seasonality factors, while Oilseeds & Grains’ PBT was US$61.1m vs. a loss of US$343.8m last year. 
  • 1H17 revenue rose 15% YoY to US$21.2b and met 48% of our FY17 estimate, while net profit of US$421.8m formed 37% of our full-year estimate, which we deem to be slightly below our forecast.

Weaker 2Q for Tropical Oils; A better 2H expected 

  • Despite better production volume, Tropical Oils segment’s merchandising and processing businesses faced a challenging environment, which resulted in lower profits and PBT margin at a low. 
  • On CPO price outlook, OCBC Treasury Research remains bearish and expects palm oil price at MYR2,250/MT for year-end. 
  • Nonetheless, the group expects this segment to perform better in 2H17, underpinned by improvements in production yields and better margins from downstream operations.

Oilseeds crush margins expected to remain positive 

  • Oilseeds & Grains segment’s positive PBT was helped by a higher crush volume and positive crush margins. But we note that the segment’s PBT was down 71% QoQ, possibly due to lower crushing margins in the quarter. The group expects crush margins to remain positive for the rest of the year. 
  • In addition, Consumer Products is also expected to improve with the seasonal peak period ahead. 
  • Separately, Sugar will still be affected by price volatility – prices are down ~30% YTD.

Higher interim dividend declared 

  • There will be an analyst briefing today. We trimmed our estimates and keep our HOLD with a slightly lower FV estimate of S$3.66 (previous: S$3.70) as the group’s long term growth story remains intact. 
  • Separately, a higher interim dividend of S$0.03/share has been declared, vs. S$0.025/share last year.

Jodie Foo OCBC Investment | http://www.ocbcresearch.com/ 2017-08-11
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 3.66 Down 3.700