• Results in line
• Mixed performance in segments
• Maintain HOLD

3Q17 Results Within Expectations

Wilmar reported a 0.4% YoY rise in revenue to US$11.1b in 3Q17, supported by increased sales from Oilseeds & Grains. Net profit fell 5.7% YoY to US$370.0m while core net profit decreased 15.9% to US$323.7m in 3Q17.

Results were within expectations; 9M17 revenue and net profit accounted for 74% and 70% of our full year estimates, respectively. The good performance in Oilseeds & Grains and strong contributions from associates were offset by weaker results in the Tropical Oils and Sugar businesses. Indeed, Oilseeds & Grains registered pre-tax profit of US$253.7m in 3Q17 (3Q16: US$248.1m), driven by higher crush volume and good crush margins.

JVs and associates also saw pre-tax profit increasing 79% to US$51.3m (3Q16: US$28.6m), mainly from the group’s associates in India, Eastern Europe and Morocco.

Tropical Oils Affected by Lower Downstream Margins

In the Tropical Oils segment, pre-tax profit in 3Q17 fell 51% YoY to US$83.1m. Plantation production yield and volume improved during the quarter, but lower processing margins affected the overall performance of the segment. As for the Sugar business, pre-tax profit declined 13% YoY to US$75.2m due to timing effect from the new Australian Sugar marketing programme, in which certain proportion of sugar produced would only be sold in the subsequent quarters. This was partly mitigated by better performance in the merchandising business.

HOLD With FV of S$3.51

On the balance sheet front, net gearing improved from 0.8x in FY16 to 0.7x in 3Q17, while the group also generated US$1.56b in net cash flow from operating activities in 9M17, resulting in free cash flow of US$1.23b. As at 3Q17, 58% of the group’s total credit facilities of US$32.3b were utilized, reflecting the ample financial cushion available for the firm.

Looking ahead, management expects the good performance in the Oilseeds & Grains segment to continue into 4Q17, with crush margins and volume likely to remain positive. Performance of the other major business segments is expected to be “satisfactory”.

We tweak our estimates and roll over our valuations to FY18 earnings, and our FV estimate eases from S$3.66 to S$3.51. Maintain HOLD.

Source: OCBC Research - 14 Nov 2017