Wilmar International has reported earnings of US$923.6 million ($1.22 billion) for the 2HFY2020 ended December, 4.3% higher than the US$827.7 million reported in the corresponding period the year before.
This brings total earnings for the FY2020 to US$1.53 billion, up 18.6% from earnings of US$1.29 billion in FY2019.
According to the agribusiness group, the earnings growth was due to improved contribution except for Feed & Industrial Products for the 2HFY2020, and higher contribution across all segments for the FY2020.
For the 2HFY2020, Feed & Industrial Products saw marginally lower profits as its performance was affected by mark-to-market losses on hedging derivatives in the 4QFY2020.
According to Wilmar, the losses are set to reverse in the coming quarters.
In addition, net profit was offset by higher tax expenses and higher allocation of profit to non-controlling interests due to the 10% dilution of the group’s interest in Yihai Kerry Arawana Holdings (YKA) following its listing in October 2020.
The board has proposed a final dividend of 9 cents per share and a special dividend of 6.5 cents per share.
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Including the interim dividend of 4 cents per share, which was paid in August 2020, the total dividend for FY2020 stands at 19.5 cents, the highest given out by the group since its listing.
Revenue for the 2HFY2020 grew 24.3% y-o-y to US$27.87 billion while FY2020 revenue increased by 18.5% y-o-y to US$50.53 billion. The growth in revenues for both the full-year and half-year period were attributable to strong volume growth, firmer commodity prices as well as the consolidation of results from Goodman Fielder, one of Wilmar’s subsidiaries acquired in 2019.
Correspondingly, 2HFY2020 cost of sales was higher 25% y-o-y to US$24.80 billion, while FY2020 cost of sales increased 17.8% y-o-y to US$44.93 billion.
Gross profit for 2HFY2020 grew 19.6% y-o-y and 24.8% y-o-y to US$3.07 billion and US$5.60 billion.
Segmentally, Food Products saw 16% y-o-y growth in pre-tax profit to US$657.4 million in 2HFY2020 due to strong sales volume growth and better margins in the oil, flour and sugar businesses. The segment registered 18% y-o-y growth in overall profit to US$1.15 billion in FY2020 due to higher consumer product sales volume and recovery in volume for its medium pack and bulk products on China’s recovery in 2HFY2020.
Feed and Industrial Products saw 5% lower pre-tax profit y-o-y to US$425.1 million amid health crushing margins and volume. That said, the segment saw 26% y-o-y growth in segment profit to US$795.9 million in the FY2020 due to steady recovery in hog production in China. The tropical oils and sugar merchandising business also “performed well”, according to the group.
Plantation and Sugar Milling tripled its pre-tax profit to US$187.8 million in 2HFY2020 from US$62.2 million in 2HFY2019. The sustained prices during the year led the segment to report profit of US$104.8 million from losses of US$41.3 million in FY2019. Excluding the non-cash impairment of US$20.0 million from its sugar milling assets in India, the business broke even in FY2020.
The Others segment saw pre-tax profit of US$100.7 million in 2HFY2020 from the US$8.1 million loss in 2HFY2019 from mark-to-market gains and investment income.
Joint Ventures and Associates improved their contributions by 7% y-o-y to US$118.1 million in 2HFY2020 due to better results from the group’s investments in Asia and Africa, bringing overall share of results to US$202.2 million, 32% higher y-o-y.
The new segment classification was introduced in January 2020, which better reflects the group’s core businesses and strategy.
SEE: Green shoots emerging from the ashes of Covid-19 in palm oil sector
Previously, the group has segmented its business based on different agricultural commodities, mainly Tropical Oils, Oilseeds and Grains, Sugar and Others.
2HFY2020 earnings per share (EPS) stood at 14.5 US cents on a fully diluted basis, from EPS of 14.0 US cents.
EPS for FY2020 stood at 24.1 US cents from 20.4 US cents a year ago.
As at end-December 2020, cash and cash equivalents stood at US$2.58 billion.
“The improved performance of the group once again demonstrated the resilience of the integrated business model that we have developed over the year,” says Wilmar’s chairman and CEO, Kuok Khoon Hong.
“We are continuing to build, especially in China, more integrated plants in new locations and develop new high growth and complementary businesses like central kitchen, soy sauce, vinegar and yeast,” he shares.
“This will widen our range of food product offerings and help us reduce manufacturing, distribution and marketing costs. We believe our business model will help us achieve long term sustainable growth even though our results might fluctuate from time to time.”
“To demonstrate our belief in our business model, and the prospects of our business, in FY2020, we bought back about S$190 million of Wilmar shares, the second highest buyback consideration on the Singapore Exchange during the year,” he adds.
Looking ahead, Kuok believes demand for the group’s Food Products will “continue to be strong, as [it has] gained a reputation for being a producer of high quality and healthy food products”.
“We also expect the Feed & Industrial Products segment to remain satisfactory on the back of continued strong recovery of hog farming in China and positive manufacturing margins. Oil Palm Plantation and Sugar Milling segment will benefit from higher palm oil and sugar prices,” he says.
Shares in Wilmar closed 6 cents lower or 1.1% down at $5.51 on Feb 22.
