Wilmar: announces first quarter 2016 results

Singapore / SG. (wi) Wilmar International Limited, Asia’s leading agribusiness group, registered a 3 percent increase in net profit to 239.4 million USD for the quarter ended March 31, 2016 (Q1/2016).

The higher net profit in Q1/2016 reflected steady performance from Tropical Oils and Oilseeds + Grains and an improved showing from Sugar. However, weaker contributions from joint ventures and associates as well as one-off provisions for impairment of 22.7 million USD made during the quarter resulted in lower overall core net profit. The Group’s core net profit (i.e. excluding non-operating items) declined 12 percent to 222.4 million USD in Q1/2016. Revenue declined 4 percent 9.0 billion USD due to lower commodity prices.

Business Segment Performance

Tropical Oils (Plantation, Manufacturing + Merchandising) achieved an 8 percent increase in pre-tax profit to 149.3 million USD in Q1/2016 due to improved performance from the Group’s downstream operations, which benefited from lower commodity prices. As part of a restructuring exercise in Europe, the Group also made a one-off impairment for property, plant and equipment of 11.0 million USD during the quarter. Production yield in Q1/2016, affected by the El Nino effect, declined 5 percent to 4.3 MT per hectare as production of fresh fruit bunches fell 6 percent to 902’035 metric tonnes (MT). Sales volume for Tropical Oils Manufacturing and Merchandising remained flat at 5.6 million MT in Q1/2016, supported by steady demand from the Group’s downstream businesses.

Oilseeds + Grains (Manufacturing + Consumer Products) saw pre-tax profit increase 2 percent to 168.8 million USD in Q1/2016. The increase was achieved on the back of volume and margin growth in Consumer Products and continued improvements from the Group’s rice and flour operations. This was partially offset by lower crush margins due to excessive arrival of soybeans, despite an increase in crush volume. Sales volume for Oilseeds + Grains Manufacturing registered a 13 percent increase to 5.5 million MT. Consumer Products sales volume grew 13 percent to 1.7 million MT.

Sugar (Milling, Merchandising, Refining and Consumer Products) reported a significantly smaller pre-tax loss of 18.2 million USD in Q1/2016 compared to a pre-tax loss of 68.0 million USD in 1Q2015. Losses in Sugar were primarily due to seasonal plant maintenance in the first half of the year for the Australian Milling business as the crops are only harvested in the second half of the year. The stronger performances from the Group’s merchandising business, coupled with higher sales volume from the Indonesian refineries mitigated the losses. Sales volume for Sugar increased 8 percent to 2.0 million MT.

The Others segment recorded a pre-tax profit of 12.1 million USD in Q1/2016 (1Q2015: 21.9 million USD) mainly from mark-to-market gains in investment securities as well as positive contributions from the Shipping and Fertiliser businesses. This was partially offset by the one-off impairment of 11.7 million USD on a shareholders’ loan to an associate.

Share of results of Joint Ventures + Associates declined 67 percent to 12.8 million USD in Q1/2016. This was due to lower contributions from the Group’s China associates and sugar associate in India.

Strong Balance Sheet

As at March 31, 2016, total assets stood at 35.13 billion USD while shareholders’ funds was 14.74 billion USD. Due to the adoption of new and revised accounting standards relating to biological assets, the Group’s assets and shareholders’ funds saw a downward adjustment of 752.0 million USD in Q1/2016. Net debt decreased by 1.27 billion USD to 10.54 billion USD. As a result, net gearing ratio improved to 0.72x from 0.82x in December 31, 2015. The Group generated 1.33 billion USD in net cash flow from operating activities, resulting in strong free cash flow of 1.24 billion USD.

Prospects

Kuok Khoon Hong, Chairman and CEO, said, «We expect the recent improvements in CPO prices to benefit our Plantation business. However, this will be partially offset by lower margins in our downstream businesses due to higher feedstock costs. Consumer Products will continue to achieve healthy growth although crush margins are expected to come under pressure as a result of excessive soybean arrivals into China in the coming months and amidst volatile markets. Recent volatility in sugar prices will also have an effect on our Sugar operations. Operating conditions in the second quarter are expected to be challenging».