Wilmar Q4 core net profit up 23% to US$410m on tropical oils, oilseeds

Singapore

A STRONG performance from the tropical oils manufacturing business and improved oilseeds crush margins lifted Wilmar International's core net profit by 23 per cent to US$410 million for the fourth quarter, up from US$333 million in the same period a year earlier.

Net profit for the agri-business group was US$438 million, up 120 per cent from the same period a year earlier, due mainly to the absence of a one-off US$30.9 million impairment on Australia sugar-milling assets taken in Q4 2018.

The tropical oils division reported a 114 per cent jump in pre-tax profit to US$287 million, boosted by better downstream processing margins and merchandising activities.

This was further supported by higher contributions from the plantation business, in line with higher palm oil prices during the quarter leading to higher gains arising from changes in fair value of biological assets, Wilmar said.

The oilseeds and grains division reported a 61 per cent rise in pre-tax profit to US$185 million, driven by improved crush margins and the seasonal demand for consumer products.

The stronger results were partially offset by lower contributions from Wilmar's associates and joint ventures, while what's left of the sugar business remains loss-making.

Q4 earnings per share was 6.9 US cents, up from 3.1 cents previously.

Full-year earnings per share was 20 US cents in 2019, up from a restated 18.2 cents in 2018.

Wilmar made a net profit of US$1.29 billion in 2019, up 15 per cent from 2018.

Core net profit fell 3.5 per cent to US$1.26 billion in 2019 as overall sales volume rose by 4 per cent but lower commodity prices resulted in a 4 per cent decline in revenue to US$42.6 billion.

Full-year Ebitda (earnings before interest, taxes, depreciation and amortisation) rose 3 per cent to a record US$3.02 billion in 2019, generating cash flow of US$3.34 billion from operations.

A final dividend of S$0.095 per share has been proposed, payable on May 15. Including the interim dividend of S$0.03 per share paid in August 2019, the total dividend paid and proposed for 2019 is S$0.125 per share, the highest cash dividend declared since listing, Wilmar said.

For FY2018, total dividend was S$0.105 per share.

Citi analyst Patrick Yau said Wilmar's results were better than expected. He has a target price of S$4.30 per share, which works out to 15.7 times average earnings over a five-year cycle from 2017 to 2021.

The ratio of 15.7 times is one standard deviation above Wilmar's mean price-to-earnings ratio, due to higher expected crude palm oil prices and supportive industry conditions, Mr Yau added.

Wilmar chairman and chief executive Kuok Khoon Hong said: "We achieved a strong set of results in 2019 amid the challenging global environment. Tropical oils' performance for the coming year should benefit from higher palm oil prices, especially in our oil palm plantations.

"The current 2019 novel coronavirus outbreak has brought volatility to the commodity markets and further challenges to our operating environment, especially in China. At the moment, we do not expect major impact to our businesses as we are mainly operating in the food products industry. Nevertheless, a prolonged outbreak of Covid-19 may have a greater impact on our operations."

Mr Kuok said that the planned initial public offering of Wilmar's China business, Yihai Kerry Arawana Holdings, is undergoing the approval process and progressing within the standard time frame, "with no significant issues encountered to date".

He added: "We expect the listing to be approved this year even though it may be slightly delayed by the Covid-19 outbreak."

Net tangible asset per share was US$1.79 as at Dec 31, 2019, down from a restated US$1.83 as at Dec 31, 2018.

Wilmar shares fell two cents, or 0.49 per cent, to S$4.04 on Thursday before the results were announced.