Friday, February 21, 2014

Wilmar

Wilmar: 4Q13 results were largely in line, as core net profit declined 12% to US$352.9m on relatively flat y/y revenue at US$11.6b. Core profit before tax (PBT) rose 7.1% to US$496.4m, as most key segments delivered higher profit from operations for the quarter, with the exception of Sugar, which recorded lower profits due to earlier recognition of milling profits in 3Q13. Overall volume for 4Q13 was up 2.9% to 14.4m MT, buoyed by a 26% rise in consumer products volume, taking FY13 overall volume to 53.9m MT (+9.6%). EBITDA margins inched down slightly to 6.0% from 6.3% The latest results bring full year core net profit to US$1.3b (+12%), with the robust earnings growth in Palm & Laurics, Oilseeds & Grains, Consumer Products and Sugar partially offset by weaker earnings in Plantations & Palm Oil Mills which was weighed by lower crude palm oil (CPO) prices and lower production yield. Going forward, Wilmar remains positive of its prospects, noting that the company has emerged as a stronger company in 2013, characterised by stable and diversified earnings, increased contribution from higher margin products and maturing new businesses, especially in Africa and Indochina. The group aims to continue utilizing its strong cash flows from operations to capture growth opportunities in emerging markets, increase market share in key areas of operations and make synergistic and accretive strategic investments. Fundamentals remain solid with an adjusted net gearing of 0.36x, backed by an interest coverage of 36.4x, while net cashflow rose to US$709m for FY13 from US$249m. At the current price, Wilmar trades at 1.13x P/B and 12.9x FY13 P/E. Wilmar has declared a final dividend of $0.055, taking full year payout to $0.08 (FY12: $0.05). Latest broker ratings as follows: CIMB maintains Add with TP $4.16 CS upgrades to O/p from Neutral and raises TP to $3.91 (prev. $3.73) HSBC maintains Neutral but raises TP to $3.60 (prev. $3.49) UOB Kay Hian maintains buy with TP $4.20 Key segmental breakdown summary: - Oilseeds & Grains registered a 9.8% increase in sales volume to 5.8m MT, supported by higher demand for soybean meal and flour. Crush margin was strong due to higher local meal prices and improving demand as well as tight local supply conditions resulting from delayed soybean shipments. This resulted in a pretax profit of US$115.6m in 4Q13 (+150%). - Consumer Products posted a 26% increase in sales volume to 1.9m MT, due to stronger demand for edible oils, flour and rice, and the earlier CNY season in China which buoyed sales volume. Pretax profit rose 84% to US$74.7m. - Plantations & Palm Oil Mills saw a 3% rise in pretax profit to US$200.6m, on a 3% rise in sales volume to 6.7m MT. The quarter saw higher average selling prices of CPO and palm kernel, which more than compensated for a 4.3% drop in production yield to 5.4 MT per hectare due to weather conditions and a delayed peak harvest season. - Sugar business reported a 82% decline in pretax profit to US$19.3m, as dry and favourable weather conditions resulted in a higher amount of cane crushed before 4Q13 compared to the same period in the previous year.. - The Others segment recorded a pretax loss of US$1.3m in 4Q13, from a pretax profit of US$30.9m in 4Q12, mainly due to losses in the fertiliser business from declining prices, partially offset by better performance in shipping operations.

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