Wilmar International - OCBC Investment 2022-08-08: A Strong Quarter


Wilmar International - A Strong Quarter

  • Wilmar reported record 1H22 net profit of US$1.2b.
  • Improvement across key segments.
  • An interim dividend of S$0.06 per share was declared.

Wilmar's 1H22 results beat, driven by a strong performance in 2Q22

  • Wilmar (SGX:F34)’s 1H22 revenue rose 22.3% y-o-y to US$36.1b, driven by higher commodity prices and stronger performances across its key segments. Core PATMI (excluding non-operating items) and PATMI rose 57.8% and 55.1% y-o-y to US$1.2b in 1H22, above ours and street’s forecasts.
  • Despite the headwinds from palm oil related government policies in Indonesia and lockdowns in China, Wilmar's 2Q22 PATMI came in strong at US$634.6m (+19.7% q-o-q, or ~doubled y-o-y), underscoring Wilmar’s operational synergies from its diversified and integrated business model.
  • An interim dividend of S$0.06 per share was declared (+20% y-o-y).

Food Products’ profit before tax (PBT) was boosted by one-off gains from the dilution of interest in Adani Wilmar Limited

  • For Food Products, 1H22 revenue grew 17% y-o-y to US$15.9b, boosted by a 4% growth in volume on the back of a recovery in demand from both consumer, and medium pack and bulk products. PBT rose 22% y-o-y to US$520.5m, mainly due to one-off gains of US$175.6m from the dilution of interest in Adani Wilmar Limited. PBT margin improved 1.7 ppt h-o-h to 3.3% or 2.2% (+0.6 ppt h-o-h) to 2.2% (excluding the impact of one-off) in 1H22.
  • Wilmar made further upward price adjustments to its consumer products in 2Q22 but was insufficient to offset the higher raw material costs.
  • Looking into 2H22, Wilmar's management expects the recent corrections in commodity prices to help restore some of the demand destroyed by high prices and further improve the downstream margins. Moreover, management sees limited impact of lockdowns in China on its operations given its well distributed nationwide plants in China.

Crushing margins improved in 2Q22

  • For Feed and Industrial Products, sales volume fell 5% y-o-y, due to weaker sugar and tropical oils’ sales volume. Revenue increased 26% y-o-y while PBT was up 5% for the segment in 1H22, mainly attributable to improving crushing margins and higher volume of soybean crushed, higher commodity prices as well as prudent procurement of feedstock.
  • Wilmar's management expects continued improvement in crushing margins in 3Q22.
  • Separately, Plantation and Sugar milling performed well with revenue growing 51% y-o-y while PBT was more than doubled to US$435.8m in 1H22, thanks to firm palm oil and sugar prices, as well as higher fresh fruit bunches production.
  • See

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2022-08-08
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