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11-11-2010, 06:12 AM
(This post was last modified: 23-10-2013, 02:19 PM by CityFarmer.)
Was Wilmar overly hyped in the first place? Not vested.
Nov 11, 2010
Wilmar drops $2.36b in market value
Staggering fall comes after surprise 60.3% plunge in Q3 profits
By Goh Eng Yeow, Senior Correspondent
PLANTATIONS giant Wilmar International had a staggering $2.36 billion shaved off its market value yesterday following an unexpected 60.3 per cent drop in third-quarter profit.
The profit shrinkage to US$259.48 million (S$333.95 million) - which came despite a 23.3 per cent jump in revenues to US$7.76 billion - sent analysts scrambling to rush out reports expressing disappointment after their earlier glowing comments on its prospects proved illusory.
And traders lost no time in selling off the stock, which had climbed 15 per cent in the past six weeks. This knocked Wilmar's share price down 37 cents to $6.51 - a 5.5 per cent fall - on a heavy volume of 37.34 million shares.
Putting a positive spin on the company's latest financials, Wilmar's chairman and chief executive Kuok Khoon Hong said that 'despite the weak third-quarter performance, the group remains positive on its long-term prospects'.
The company will continue to leverage on its well-established presence in markets like China, India and Indonesia, and invest in existing and new businesses.
Among analysts, though, the big question is whether Wilmar's weak third-quarter performance is a one-off, or flags a potentially more serious problem. The consensus is that the firm's full-year earnings estimates may drop by about 10 per cent, as a result of the weaker quarter.
A US$37.1 million quarterly loss in its oilseeds and grain division, from a profit of US$193.1 million last time, is seen as the chief reason for Wilmar's profit slide.
Also hurting performance were weaker margins in most business segments and the fact that the company had benefited from an exceptional gain from the sale of new shares in Wilmar China in the third quarter of last year.
According to a report from Morgan Stanley analyst Conrad Werner, this division in Wilmar buys soya beans and crushes them into end-products such as soya bean meals and oil products for sale.
Because of the huge quantities of soya bean involved, the timing of the raw materials purchase is critical.
'Wilmar also hedges its exposure, sometimes taking opportunistic positions. This quarter, the timing of the purchases clearly did not work in the company's favour,' said Mr Werner.
'Assuming Wilmar can get back on track in the fourth quarter and hit the consensus estimate in that quarter, then consensus EPS (earnings per share) would come down by only 10 per cent in 2010. 2011 could be impacted by less,' he said.
One concern among investors, he noted, was the lack of earnings visibility in the purchasing element of Wilmar's business model. This worry has come to the fore, following the loss recorded in the oilseeds and grain division.
For the quarter, Wilmar's earnings per share fell 59.8 per cent to 4.1 US cents, while net tangible asset per share rose to US$1.18 from US$1.08.
engyeow@sph.com.sg
Nov 11, 2010
Wilmar drops $2.36b in market value
Staggering fall comes after surprise 60.3% plunge in Q3 profits
By Goh Eng Yeow, Senior Correspondent
PLANTATIONS giant Wilmar International had a staggering $2.36 billion shaved off its market value yesterday following an unexpected 60.3 per cent drop in third-quarter profit.
The profit shrinkage to US$259.48 million (S$333.95 million) - which came despite a 23.3 per cent jump in revenues to US$7.76 billion - sent analysts scrambling to rush out reports expressing disappointment after their earlier glowing comments on its prospects proved illusory.
And traders lost no time in selling off the stock, which had climbed 15 per cent in the past six weeks. This knocked Wilmar's share price down 37 cents to $6.51 - a 5.5 per cent fall - on a heavy volume of 37.34 million shares.
Putting a positive spin on the company's latest financials, Wilmar's chairman and chief executive Kuok Khoon Hong said that 'despite the weak third-quarter performance, the group remains positive on its long-term prospects'.
The company will continue to leverage on its well-established presence in markets like China, India and Indonesia, and invest in existing and new businesses.
Among analysts, though, the big question is whether Wilmar's weak third-quarter performance is a one-off, or flags a potentially more serious problem. The consensus is that the firm's full-year earnings estimates may drop by about 10 per cent, as a result of the weaker quarter.
A US$37.1 million quarterly loss in its oilseeds and grain division, from a profit of US$193.1 million last time, is seen as the chief reason for Wilmar's profit slide.
Also hurting performance were weaker margins in most business segments and the fact that the company had benefited from an exceptional gain from the sale of new shares in Wilmar China in the third quarter of last year.
According to a report from Morgan Stanley analyst Conrad Werner, this division in Wilmar buys soya beans and crushes them into end-products such as soya bean meals and oil products for sale.
Because of the huge quantities of soya bean involved, the timing of the raw materials purchase is critical.
'Wilmar also hedges its exposure, sometimes taking opportunistic positions. This quarter, the timing of the purchases clearly did not work in the company's favour,' said Mr Werner.
'Assuming Wilmar can get back on track in the fourth quarter and hit the consensus estimate in that quarter, then consensus EPS (earnings per share) would come down by only 10 per cent in 2010. 2011 could be impacted by less,' he said.
One concern among investors, he noted, was the lack of earnings visibility in the purchasing element of Wilmar's business model. This worry has come to the fore, following the loss recorded in the oilseeds and grain division.
For the quarter, Wilmar's earnings per share fell 59.8 per cent to 4.1 US cents, while net tangible asset per share rose to US$1.18 from US$1.08.
engyeow@sph.com.sg
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