15 August 2012

Wilmar Price - Back to 3 Years Ago

Wilmar International, a company with a wide range of diversified portfolio in agriculture sectors, mainly consists of palm oil, sugar mining, oil crushing, and had slipped to 3 year low. Chairman and CEO Kuok Khoon Hong said short-term prospects were difficult even though Wilmar was well positioned to benefit from growth in demand for agricultural commodities, especially in Asia and emerging markets like Africa. 

As you can see from the chart (source from Maybank Kim Eng) below, it is coming back near to its lowest price level during financial crisis on year 2008. 

Souce from Maybank KE. Wilmar 5 Year Chart

Let us look in detailed the financial result which I derived from its presentation slide.

The Oilseeds & Grains sector suffered a big loss as compared to a gain a year ago. You can see a US$40M loss compared to US$129.4M gain from the graph below. The company said that 2Q12 volumes for flour and rice recorded significant growth but offset by lower sales volume in soybeans due to the difficult operating environment. Crush margin during 2Q12 was extremely poor and this was exacerbated by losses from the depreciation of Renminbi against US dollar, resulting in a pretax loss. Nevertheless, losses in the Oilseeds and Grains segment are reduced sequentially as compared to 1Q12. Overall, the demand for the Group’s products remain strong, leading to a healthy growth in volume for 1H12.

Besides that, Sugar sector also experienced a jump of losses to US$60.3M from US$7.1M a year ago, particularly from Sugar Milling subsector. Milling season in Australia normally commences in May/June. Customary to engage in maintenance prior to the start of the milling season. The losses are expected in the first half of the year. Nonetheless, pretax losses increased as wet weather in Australia delayed the crushing season and resulted in lower sugar production. Higher maintenance costs were also incurred from the acquisition of Proserpine late 2011 as well as additional maintenance performed during wet weather stops.

Not only that, other segment and its associates also suffered the losses/drop in profit respectively. 

Cash flow wise, the company increased the bank borrowings to US$2.7B from US$1.9B in first half a year ago. Net cash flow stood at -US$174M. However the cash conversion days are still quite stable, at 87 days (70 inventory turnover days + 29 trade receiveables turnover days - 12 trade payables turnover days).

Gearing wise, the company debt/equity ratio increased to 0.93x compared to 0.79x six month ago. Interest coverage ratio reduced to 5.7x from 9.2x six month ago. It indicated that the company borrowed more cash to cushion itself from current bad business environment.

ROE for 6 month was 5.6%, implied annualized ROE of 11.2%. The NAV of the company was US$2.09 with fully diluted EPS US$0.058. The company declared S$0.02 dividend payable on 7 September 2012.

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