SINGAPORE (Feb 21): Wilmar International saw its earnings fall 52.9% to US$200.9 million ($271.5 million) for the 4Q18 ended December, from US$426.7 million a year ago.
The decline was due mainly to a provision for impairment on the Australian sugar milling assets. Wilmar incurred a non-operating loss of US$129.8 million during the quarter, compared to a non-operating gain of US$65.5 million a year ago.
This brings full-year earnings for FY18 to US$1.13 billion, some 5.7% lower than earnings of US$1.20 billion a year ago.
4Q18 revenue dipped 3.0% to US$11.10 billion, from US$11.45 billion a year ago.
This was mainly due to lower commodity prices, even as the group continued to report growth in sales volume for all segments.
Gross profit fell 8.8% to US$975.1 million, from US$1.07 billion a year ago.
Core net profit decreased by 10.3% to US$334.7 million, mainly due to the African swine fever outbreak in China affecting the group’s Oilseeds and Grains segment, coupled with weaker commodity prices that impacted the upstream operations in Sugar Milling and Palm Plantation.
For 4Q18, higher effective interest rates and deposits which was seen throughout the year led finance income to increase by 53.4% to US$123.2 million, while finance cost increased by 65.6% to US$233.0 million.
Share of results of joint ventures and associates increased by 37% to US$152.8 million in 4Q18, on the back of stronger contributions from the group’s investments in China, Europe and Vietnam.
Earnings per share (EPS) fell % to 3.2 US cents for 4Q18, compared to EPS of 6.7 US cents in 4Q17.
As at end December, cash and cash equivalents stood at US$1.60 billion.
Wilmar has recommended a final dividend of 7 cents per share for the period, unchanged from a year ago.
Together with an interim dividend of 3.5 cents paid earlier, this brings total dividends for FY18 to 10.5 cents – 5% higher than total dividends of 10 cents a year ago.
“The group performed well in 2018 even though we were affected by low palm oil and sugar prices in our upstream operations and volatile soybeans market created by the US/China trade tensions,” says Kuok Khoon Hong, chairman and CEO of Wilmar.
"In all indications, I don't think the US or China wants to continue the trade war," Kuok says, noting that officials on both sides have met and discussions likely continue for a while. In either case, he does not expect significant impact on soybean prices as there is a supply glut globally – partly a result of the trade war, partly demand have fell due to the African swine flu in China.
“The group’s success in its strategy to develop more stable downstream processing and branded consumer products enabled us to achieve growth and maintain profit in this challenging operating environment,” he adds.
Moving forward, Kuok says Tropical Oils should continue to do well in 2019 with the recent recovery of crude palm oil prices and satisfactory margins in downstream processing, while the group’s other businesses are also expected to perform favourably.
The group indicates that crush margins are expected to take a hit in the first quarter this year amid the swine flu outbreak in China and the Brazillian soy that were bought at high prices. But things are expected to improve in the next quarter as prices of soy have since fallen.
Kuok reiterates the group's focus on its consumer business in China. The sector made up about 70% of net profit last year, with half of its China profit coming from its consumer business.
The group is also expecting a possible listing in China, which Kuok plans to sell 10% to 20% of the business through the IPO. China International Capital Corporation is handling the listing.
RHB speculated earlier this year that a 10% float of its China's operation at 20 times FY2018 earnings would raise US$1.3 billion. Kuok hints at the possibility of a special dividend post-listing. RHB projects the dividend could be in the region of 11 cents a share.
Despite a slower Chinese economy, Kuok says that he does not expect consumption of staple food to fall. The group is the largest edible oil refiner, rice and flour miller in China. It has the largest market share for China's branded consumer pack oils, rice and flour.
“Looking ahead, we are reasonably optimistic that performance for FY2019 will be satisfactory,” says Kuok.
Shares in Wilmar closed 4 cents higher, or up 1.2%, at $3.39 on Thursday.
– with additional reporting by Trinity Chua
