Overview of Wilmar International and Market Position
Wilmar International operates across the entire value chain of the agricultural commodity business – from origination and processing to merchandising and manufacturing a wide range of branded consumer products. The company is listed under the GICS sector Consumer Staples and is traded under the Bloomberg ticker WIL SP. At a share price of S\$3.21, it has a market capitalization of S\$20,039.2 million (approximately US\$14,965.8 million). The stock has seen a 52-week trading range between S\$2.99 and S\$3.55 and maintains a 5% dividend yield with a total dividend for 2024 of S\$0.16 per share, though this is 6% lower compared to 2023.
Detailed Analysis of the 2H24 Performance
The most recent 2H24 results for Wilmar International were in line with UOB Kay Hian’s expectations, albeit slightly below consensus estimates. The report highlighted several divisions with mixed performance:
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Total Revenue & Profitability: The reported total revenue for the half-year period stood at US\$36,444 million – depicting a modest 0.3% year-on-year increase. Pre-tax profit (PBT) was US\$1,003 million, marking a 35.2% half-on-half growth, though it registered a 20.3% decline year-on-year. Net profit was US\$590 million (a 1.7% increase hoh but down 39.4% year-on-year). Core net profit, excluding a net loss of US\$22.8 million from a share swap exercise with its China associates and joint ventures (Luhua), was US\$581 million.
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Divisional Performance:
- Food Products: This division saw improved earnings both half-on-half and year-on-year as a result of higher sales volumes in consumer and medium pack/bulk products. Earnings were further boosted by a lucrative US\$100 million pre-tax gain from the Luhua share swap exercise.
- Feed and Industrial Products: Despite an increase in sales volume, this segment experienced declining earnings due to weaker sugar merchandising activities combined with lower crushing margins in the oilseeds division.
- Plantations & Sugar Milling: The performance here was mixed; while palm oil prices supported higher earnings hoh and year-on-year, these gains were partially offset by lower fresh fruit bunch (FFB) production and weaker sugar milling performance. The division also saw operating margin improvement in China driven by high sugar prices and white sugar premiums.
Overall, the improvements in food products and margin contributions from China and sugar milling were not sufficient to overcome the declines seen in feed, industrial products, and the impact of a diluted overall net profit. The full-year core net profit for 2024 reached US\$1.19 billion, which was approximately 10% below consensus expectations.
Yihai Kerry Arawana (YKA) – A Detailed Look
Yihai Kerry Arawana (YKA), a key subsidiary of Wilmar and accounting for 60-70% of the group’s net profit, recorded notable improvements during 2H24. Its net profit recovered significantly with a 28% half-on-half increase to Rmb1,405 million, although it was down by 25% on a year-on-year basis. For the whole of 2024, YKA’s net profit adjusted to Rmb2,502 million, representing a 12% decline from the previous year.
The recovery was primarily fueled by expanded catering and food service channels, enhanced efficiency in flour operations, and rising feed ingredient prices. However, slower retail consumption and stiffer competition continue to weigh on the overall performance. In 2024, YKA’s revenue declined slightly from Rmb251.5 million to Rmb238.9 million, a 5.0% decrease, while net profit contracted by 12.1% from Rmb2.85 million to Rmb2.5 million.
Legal and Stock Impact Considerations
One of the major elements influencing short-term sentiment is the ongoing investigation into the 2021-22 palm oil fraud allegations in Indonesia. Although no formal charges have been filed against Wilmar International and its five subsidiaries, the case involves allegations of crude palm oil (CPO) price manipulation via the export system. The Indonesian Public Prosecutor has proposed a hefty penalty of Rp11.891 trillion (approximately US\$732 million). Wilmar has continually stated that they are not directly involved in the corruption, emphasizing their strict compliance with regulations. However, due to the ongoing investigation, some short-term pressure on the share price is expected despite minimal impact anticipated on the overall operations.
Management Outlook and Strategic Guidance
Management remains cautiously optimistic about the year ahead with a strategic focus on further market share growth in the food products segment, leveraged by Wilmar’s strong reputation for quality and healthy food. They highlighted the following key points:
- Anticipated further market share gains, especially in China where the group’s performance could benefit from a surprise recovery.
- While palm oil refining continues to be challenging, there is cautious optimism about the oilseeds division owing to the expected record soybean crop production in Brazil in 2025.
- The group is confident that, assuming no unforeseen circumstances, 2025 results will be satisfactory.
Valuation, SOTP Analysis & Recommendation
UOB Kay Hian has maintained a HOLD recommendation on Wilmar International with a target price of S\$3.18. The valuation is anchored on 2025F EPS and utilizes a Sum-Of-The-Parts (SOTP) analysis. The valuation framework involves applying a PE of 17x for food products, and 11x for both feeds & industrial products and plantations & sugar mills respectively. The SOTP valuation breaks down as follows:
- Food Ingredient: 27x PE generating S\$0.84 per share.
- Feed & Oils & Fats: 11x PE generating S\$1.58 per share.
- Plantations & Sugar Milling: 11x PE generating S\$0.45 per share.
- Associates & JV: 6x PE generating S\$0.31 per share.
This brings the total value in the SOTP valuation to S\$3.18 per share. Despite some earnings headwinds, potential upside catalysts include a greater recovery in the China market and possible new strategic investors in AWL that could provide enhanced distribution channels and capabilities in new markets such as India.
Comprehensive Financial Overview
The report provides a detailed breakdown of Wilmar International’s key financials over recent years and 2025F-2026F forecasts:
- Profit & Loss Highlights:
- Net turnover remained almost flat between 2023 (US\$67,155.3 million) and 2024 (US\$67,379.1 million) but is expected to rise to US\$76,650.3 million in 2025F and US\$83,582.1 million in 2026F.
- EBITDA showed a modest improvement to US\$3,528.6 million in 2024 with further growth anticipated in the coming years.
- Net profit (adjusted) fell to US\$1,169.8 million in 2024, with expectations of recovery to US\$1,578.2 million in 2025F and US\$1,864.1 million in 2026F.
- EPS figures mirrored these
