UPDATE: Wilmar reports 4Q18 net profit drops 53 percent on Australia sugar impairment

Singapore two-dollar bills

This article was originally published on Thursday, 21 February 2019 at 18:40 SGT; it has since been updated.

Wilmar reported on Thursday its fourth quarter net profit dropped 52.9 percent on-year to US$200.9 million, mainly on a provision for impairment on the Australian sugar milling assets.

“With the continued depressed sugar prices, the group decided to adopt a conservative approach and made a provision for impairment totaling US$138.6 million on its goodwill and sugar milling assets in Australia, even though the milling operations have been generating positive cashflows since acquisition,” the agribusiness company said.

The sugar segment, including milling, merchandising, refining and consumer products, posted a fourth-quarter pre-tax loss of US$114.1 million, swinging from a year-earlier profit of US$41.4 million, mainly on the impairment, it said. For the full-year, the sugar segment posted a pre-tax loss of US$123.0 million, wider than the US$24.6 million loss a year earlier.

Wilmar added the sugar segment was also hit by losses from its newly acquired Indian subsidiary, Shree Renuka Sugars (SRSL), which only started crushing activities in late October.

African swine fever outbreak hits oilseeds and grains

Core net profit for the quarter was down 10.3 percent on-year at US$334.7 million, Wilmar said. That was mainly due to the African swine fever outbreak in China, which affected the Oilseeds and Grains segment, coupled with weaker commodity prices impacting the upstream operations in the Sugar Milling and Palm Plantation segments, the agribusiness company said.

Revenue for the quarter ended 31 December fell 3.0 percent on-year to US$11.10 billion as lower commodity prices were partially offset by higher sales volume, it said in a filing to SGX after the market close on Thursday.

For the full year, Wilmar posted net profit of US$1.13 billion, down 5.7 percent on-year, on revenue of US$44.50 billion, up 2.1 percent on-year.

Core net profit for the full year was up 27.4 percent at US$1.30 billion, it said.

For the full year, net profit had been forecast at around US$1.20 billion on revenue of US$43.14 billion, based on the average of five analyst forecasts. The range of net profit forecasts was US$1.10 billion to US$1.28 billion, while revenue was forecast in a range of US$40.64 billion to US$45.16 billion.

“The group achieved better operating performance in all core segments, except the Palm Plantation and Sugar Milling businesses which were affected by low palm oil and sugar prices,” Wilmar said.

Wilmar proposed a final dividend of 7 Singapore cents a share, bringing the year’s total dividend to 10.5 Singapore cents.

Kuok Khoon Hong, chairman and CEO of Wilmar said, was positive on the full year performance, even with low palm oil and sugar prices and the volatility in soybeans due to U.S.-China trade tensions.

“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,” Kuok said.

Tropical Oils sees improvement

The Tropical Oils segment saw pre-tax profit improve by 30 percent on-year to US$134.1 million in the fourth quarter, and by 37 percent on-year to US$546.1 million for the full year, on a better performance from the manufacturing and merchandising businesses, it said.

“Lower commodity prices benefited our downstream businesses through lower feedstock costs. However, this improvement was partially offset by weaker contributions from the plantation business due to lower palm oil prices,” Wilmar said.

The Oilseeds & Grains segment reported pre-tax profit for the fourth quarter dropped to US$115.2 million from US$206.4 million in the year-earlier quarter, on lower crush margins due to lower meal demand due to the swine fever outbreak, Wilmar said.

For the full year, the segment’s pre-tax profit rose 20 percent on-year to US$875.0 million, it said.

“With the recent recovery of crude palm oil prices and satisfactory margin in downstream processing, Tropical Oils should continue to do well
in 2019,” Kuok said in the statement, adding that the crush margins in the first quarter would be hit by the drop in meal demand, but that was expected to improve in the second quarter.


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