● Strong growth in Oilseeds and Grains was driven by good crush margins and strong manufacturing sales. Sugar was impacted by an impairment loss of US$30.6 mn on Australian refinery business as well as the timing of the sugar sale.
● Chairman and CEO of Wilmar, Kuok KH, expects crush utilisation to remain high in 1Q18 and is the most bullish on its flour business in the near term and rice business in the medium term.
● The listing of China operations is on track, with management targeting a listing by mid-2019. Management noted that higher-thanexpected dividend payout in FY17 was partly due to the expectation of the China listing coming through. We raise our 2018-19E EPS by 3-4% due to higher-margin assumptions. Maintain NEUTRAL.
Wilmar’s 9M17 core net profit below expectations
FY17 core net profit of US$1,047 mn represents 98% of consensus and our estimates, as higher contributions from Oilseeds and Grains and non-operating gains were partially offset by weakness in Tropical Oils and Sugar.
4Q17 PBT of US$104.9 mn was down 43% YoY from US$184.3 mn in 4Q16 due to lower processing margins in the downstream businesses, and lower plantation yield and CPO prices in 4Q17. Production yield was lower at 4.7MT/ha in 4Q17 vs 6.1MT/ha in 4Q16 due to poor weather conditions.
Oilseeds and grains:
4Q17 PBT of US$206.5 mn was up 16% YoY from US$177.9 mn in 4Q16, led by good crush margins and strong manufacturing sales. Soybean volume grew 28% YoY in 4Q17, while consumer products volume was flat due to the timing of CNY in 2017.
4Q17 PBT of US$41.4 mn was down 70% YoY from US$135.9 mn in 4Q16 as profit was impacted by timing of the new Australian Sugar marketing programme. In addition, there was an impairment loss of US$30.6 mn on Australian refinery assets.
Wilmar benefited from higher non-operating gains of US$87.3 mn in 4Q17, vs US$32.7 mn in 4Q16, driven by higher gains and dividend income from investment securities.
WIL expects crush utilisation to remain high in 1Q18 and is most bullish on its flour business in the near term and rice business in the medium term.
Source : Credit Suisse Asia Pacific Equity Research