Wilmar

Wilmar (S$3.01) : 3Q15 results missed on commodity prices and FX headwinds

Wilmar’s 3Q15 net profit plunged 35% y/y to US$276m, hurt by losses from investment securities and unfavourable FX movements. Excluding one-off items, core net profit tumbled 16.5% y/y to US$359m. This brought 9M15 core earnings to US$815.9m or 70% of full-year consensus estimate.

Revenue fell 7.6% to US$10.65b, dragged by tropical oils (-22%) and sugar (-1%) segments, which suffered from lower crude palm oil (CPO) and sugar prices respectively.

EBITDA margin expanded by 0.7ppt to 5.4%, underpinned by wider margins from soybean crushing and consumer products in the stronger oilseeds and grains segment.

Segment analysis:
Tropical oils – Revenue fell 22% to US$4.15b on weaker CPO prices and sales volume (-2%). This, coupled with thinner refining margins led to a 46% slump in pretax profits to US$105.1m.

Oilseeds and grains – Top line grew 5% to US$4.85b, driven by a 25% growth in sales volume to 8.01m mt. Pretax profits surged 39% to US$243.6m on improved margins for soybean crushing and consumer products in China.

Sugar – Revenue dipped 1% to US$1.38b despite a strong sales volume of 4.67m mt (+34%) amid poor sugar prices. Pretax profits dived 31% to US$108.7m, undermined by a 22% depreciation in AUD, as well as weaker performance of merchandising and manufacturing business.

Bottom line was further hit by mark-to-market losses on investment securities (US$61.8m) and FX (US$47.1m) and losses from sugar associates in India.

Moving forward, management remains optimistic for FY15 as they view the satisfactory performance of the oilseeds and grains segment as sustainable, and expects the tropical oil business to improve on the group’s biodiesel mandate in Indonesia and firmer CPO prices. The sugar segment is also expected to recover given the recent surge in sugar prices.

Wilmar is currently trading at 11.7x FY15e P/E and 0.9x P/B.

Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $3.60
CLSA maintains Buy with TP of $3.53
CIMB maintains Hold, cuts TP to $3.36 from $3.40