Wilmar International - UOB Kay Hian 2022-02-23: 2021 Another Record Earnings Year; Results Beat Expectation


Wilmar International - 2021 Another Record Earnings Year; Results Beat Expectation

  • Wilmar’s 2021 core net profit came in way above our and consensus expectations, thanks to extremely strong earnings from its palm-related businesses. Having said that, food products and soybean crushing operations were affected by the high raw material costs and lower crushing margins and volumes.
  • We reckon both segments would still be impacted in 2022, but this would be fully offset by another year of strong performance from its palm operations.

Wilmar's 2021 results above expectation.

  • Wilmar International (SGX:F34) reported core net profit of US$1,110m (+52% h-o-h, +31% y-o-y) for 2H21. This brings total core net profit for 2021 to RM1,842m (+24% y-o-y), which is well above our and consensus expectations. The upside surprise mainly came from the super strong earnings from palm-related business which performed extremely well in 2H21.
  • Proposed final tax-exempt dividend of S$0.105/share. Including the interim dividend of S$0.05/share, total dividend from Wilmar for 2021 is S$0.155. This is Wilmar’s highest cash dividend since its listing, bringing a total dividend yield of 3.34% for 2021.
  • Segmental performance.
    • Palm-related operations were the star performers for 2021, as they were able to fully offset the lower earnings from Yihai Kerry Arawana (YKA).
    • Plantation & sugar milling: Profit doubled h-o-h and y-o-y on the back of firmer oil palm and sugar prices.
    • Feed & industrial products: Strong PBT growth was contributed largely by palm-related operations on the back of good refining margins and sustained demand for midstream tropical oils products, as well as steady contributions from sugar merchandising activities. However, soybean crushing margins were thin along with lower sales volume for soybean crushing activities.
    • Food products: Earnings were lower h-o-h and y-o-y, due to the high raw material cost where the high raw material costs are not able to be passed down to the end customers as most consumer products sold by Wilmar are staple foods.

Yihai Kerry Arawana (YKA)'s 2021 results.

  • YKA posted a 31% y-o-y drop in 2021 addition, there were some losses from the soybean hedging instruments.

Outlook for 2022.

  • Wilmar's management is expecting better sales volume for the food products segment from the completion of plants can also leverage on Wilmar’s central buying of raw materials to reduce cost. This would contribute to earnings once operations commence.

Maintain earnings forecasts for Wilmar pending the update from briefing.

Leow Huey Chuen UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-02-23
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