Wilmar likely in focus after fourth-quarter core profit fell on weaker sugar, tropical oils results

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Shares of Wilmar are likely to be in focus after the agri-business player reported its fourth-quarter profit fell.

The oilseed producer reported after the market close on Thursday that core net profit for the fourth quarter fell 23.6 percent on-year to US$373.9 million. For the full year, core net profit rose 7.3 percent to US$1.05 billion.

Wilmar said it posted a good performance in the oilseeds and grains segment and strong contributions from its joint ventures and associates in China, India and Africa. But it added, that was offset by weaker results in the tropical oils and sugar businesses.

UOB KayHian had forecast in a January note that fourth quarter core net profit would come in between US$360 million to US$380 million, making the actual figure on the high end of the band. In the January note, the brokerage noted that the results would face a high base of comparison.

But the brokerage had expected the tropical oils division would show stable palm-oil refining margins and sales volume.

That appeared to be a miss, based on the UOB KayHian forecast. The tropical oils unit reported fourth-quarter pretax profit fell 43 percent on year on lower processing margins in the downstream business, as well as lower production yield and crude palm oil prices in the quarter.

Sugar wasn’t sweet

UOB KayHian had also forecast a better quarter for sugar. But the sugar unit reported pretax profit tumbled 70 percent, which it attributed mainly on the timing effect from a new sugar marketing program in Australia over the past year which held back sales of some sugar to the first half of 2018.

Full-year net profit may have beaten at least one analyst’s forecasts.

RHB estimated in a November 2017 note that Wilmar would report full-year net profit of US$1.083 billion. On Thursday, Wilmar reported full-year net profit of US$1.22 billion, up 25.4 percent on-year.

The company’s guidance, while not enthusiastic, may offer a fillip for the stock: “Barring unforeseen circumstances, performance in 2018 is expected to be satisfactory,” Kuok Khoon Hong, chairman and CEO of Wilmar, said in the release.

The stock ended Thursday down 1.30 percent at S$3.04.

On the downside, the 52-week low of S$2.97 may offer some support. On the upside, Wednesday’s high of S$3.08 may offer initial resistance, with January’s high of S$3.24 also a likely cap.

In January, UOB KayHian had rated the stock at Buy, with a S$4.10 target price. In November, RHB rated the stock at Neutral with a S$3.33 target.

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