Wilmar International 3Q21 - UOB Kay Hian 2021-11-01: Record Quarterly Profit; Above Expectation

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WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International 3Q21 - Record Quarterly Profit; Above Expectation

• Wilmar International reported 3Q21 core net profit of US$576.4m (+15% y-o-y). Results came in above expectation and the positive variance came mainly from its palm-related business.
• Contribution from Yihai Kerry Arawan (YKA) declined y-o-y in 3Q21 mainly due to the weaker soybean crushing operation compared with the strong 3Q20 while consumer packs also suffered from lower margins as YKA was unable to fully price in the surge in raw materials cost to its selling price.
• Maintain BUY.

Wilmar's 3Q21 results above expectation.

• Wilmar International (SGX:F34) reported core net profit of US$576.4m (+15.0% y-o-y, +86.8% q-o-q) for 3Q21. This is the highest 3Q core results achieved since its listing. See Wilmar's announcements. For 9M21, core net profit was US$1.31b (vs 9M20: US$1.14b). Results exceeded our expectation and the variance came mainly from the strong performance of its palm-related businesses.
• Good performance from feed & industrial products segment. Contribution from this division was mainly boosted by good manufacturing margins and strong demand for downstream tropical oils products. While soybean crushing margins improved q-o-q, these were still far below 3Q20’s and did not come as a surprise as we had previously highlighted this in our preview note.
• High palm and sugar price boosted performance of plantation and sugar milling segment. Performance of its food products segment was dragged down by the lower margins attributable to:
  1. high raw material prices that Wilmar International was not able to fully price into selling price, especially for consumer product,
  2. lower sales volume for consumer products due to high competition, and
  3. higher contributions from lower-margin products ie medium pack and bulk.

Weak performance from YKA in 3Q21.

• YKA reported weak 3Q21 core net profit of food inflation. Thus, YKA has not been able to increase its selling price to pass on the high raw material cost.

Outlook statement from Wilmar's management:

• Feed and industrial products: Manufacturing margins for downstream tropical oils products to remain resilient.
• Soybeans crushing margin: Improved and is expected to be positive for the rest of the year.
• Plantation and sugar milling: Driven by firm palm oil and sugar prices.

Re-iterate BUY on Wilmar International

• We maintain our earnings forecast business model which has delivered good results performance despite the global uncertainty in 2020 and 1H21 amid the COVID-19 pandemic.
• See
  • Wilmar's Share Price,
  • Wilmar's Target Price,
  • Wilmar's Analyst Reports,
  • Wilmar's Dividend History,
  • Wilmar's Announcements,
  • Wilmar's Latest News.
• Share price catalysts:
  • Embarking on value-enhancing M&As.
  • Better-than-expected earnings.

Leow Huay Chuen UOB Kay Hian Research | Jacquelyn Yow Hui Li UOB Kay Hian | https://research.uobkayhian.com/ 2021-11-01

SGX Stock Analyst Report BUY MAINTAIN BUY 6.400 SAME 6.400