Wilmar

Wilmar’s 2Q10 net profit fell by 15% yoy to US$344.5m in 2Q10 despite the revenue growth of 18% to US$6.8b. This was mainly due to a negative change in valuation of US$41.7m for CBs but partially offset by a net income from other investments of US$6.2m. Excluding non-operating items, net profit grew 13% to US$380.3m. However, there was refining margin compression in the merchandising & processing div, mainly from tighter CPO supply. Consumer products did exceptionally well from higher ASPs.

Plantation & Mills was affected by lower production yields, which is consistent with other plantation stocks. Looking ahead, Willmar plans a major expansion into sugar with the proposed acquisition of Sucrogen Ltd and the development of sugar production in Indonesia. We expect it will contribute positively to the bottomline in the long term. With strong balance sheet and net gearing ratio of 0.45x, Willmar has declared an interim dividend of S$0.032 per share.

The stock currently trades at 16.3x FY10 and 14.5x FY11 PER. The Co will be conducting its results briefing this afternoon over the lunch break.