Wilmar International

[dydx]

The just released FY10 (ended 31Dec10) full-year results announcement makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...F003C50F9/$file/Wilmar_4Q10_and_FY10_Results_Announcement.pdf?openelement [FY10 results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...F003C50F9/$file/Wilmar_4Q10_and_FY10_Results_Press_Release.pdf?openelement [Press release]

It is really scary to see the huge increases in Gross Debts to USD17.42b (from USD9.58b as at 30Dec09) and in Nett Debts to USD10.64b (from USD4.45b as at 30Dec09) as at 31Dec10. Against the Equity as at 31Dec10 of USD11.86b, Wilmar now has a Gross Gearing of 147% and Nett Gearing of 90%. As debt level is expected to increase further, is this kind of highly geared financial status sustainable?

From the P&L, for Q4, if the USD251.02m "Net gains from changes in fair value of biological assets" and USD186.74m "Other operating income" (mainly forex gains) are taken out, the reported PBT of USD428.80m will end up at a loss of USD8.96m. Which means the group's many operating busineses as a whole was not very profitable at all in Q4. This also is really scary!

[Nick]

The main reason for the decline in profitability is due the weakening oilseeds division which continues to operate at a loss. In 4Q 10, its share of results from its associates and oilseed division contributed to a US$194.3 million loss before tax. At the same time, those same division contributed US$155.6 million profit before tax in 4Q 09. The division has remained weak throughout 2H 2010 and I am not too sure when it will recover. Gearing wise, we must not exclude its US$6 billion worth of highly liquid inventories.

I believe this will explain why Wilmar is turning towards properties - it may be a good source of high margin income (development) and recurring income (leasing and rental) - to diversify itself. I don't agree with the analyst's claims that Wilmar is losing focus since the very same people are praising F&N and Keppel Corp (much smaller companies) for its diversification. Whether it will successfully pull it off, remains to be seen.

Wilmar closed at $5.18 just before the lunch break.

(Not Vested)

[Nick]

KUOK KHOON HONG (CEO) purchased 500,000 shares @ $5.1571 in open market today.

MARTUA SITORUS (COO) purchased 500,000 shares @ $5.145 in open market today.

TEO KIM YONG (ED) purchased 320,000 shares @ $5.0891 in open market today.

TEO KIM YONG (ED) purchased 700,000 shares @ $5.1823 in open market today.

[Musicwhiz]

Business Times - 14 May 2011

COMMODITY EARNINGS
Wilmar Q1 profit dips 3.7% to US$386.7m

Stronger-than-expected results come after its oilseeds and grains business returns to profit

By FELDA CHAY

PALM oil giant Wilmar International's earnings slid further in the first quarter, although the 3.7 per cent dip to US$386.7 million was less than expected after its oilseeds and grains business - which suffered losses over the last two quarters - returned to profit.

The stronger-than-anticipated results beat the US$325 million mean of four analyst estimates compiled by Bloomberg, fuelling a 5.1 per cent or 26 Singapore cent surge in its shares to S$5.35 yesterday. The counter was among the most actively traded, with 17.3 million shares changing hands.

UOB Kay Hian Research said in a note this could be 'the turning point' for Wilmar, whose shares have underperformed its peers for the past year due to concerns about its oilseeds crushing business in China.

'We are likely to review our earnings up to factor in better PBT (profit before tax) margin from its crushing division (which is the largest earning contributor, i.e. range from 30-38 per cent).

'Based on our current target price S$5.80, it's already giving an upside of 14 per cent,' noted UOB Kay Hian.

Earnings per share for the three months ended March 31, 2011 were six US cents, compared with 6.3 US cents a year earlier.

Revenue rose 41 per cent to US$9.5 billion, driven by higher agricultural commodity prices.

In a statement yesterday, Wilmar said the fall in net profit from US$401.4 million a year earlier was primarily due to a fair-value loss on embedded derivatives of its convertible bonds, which was partially offset by a profit within the sugar segment of its business that relates to pre-acquisition hedging reserves.

Excluding these, Wilmar would have recorded a 3.4 per cent jump in net profit to US$407.8 million from US$394.2 million last year.

Wilmar chief executive Kuok Khoon Hong said the group continues to be upbeat on its prospects despite a challenging operating environment in China as a result of the monetary tightening and anti-inflationary measures implemented by the Chinese government.

Last year, China asked its cooking oil suppliers to put a cap on prices as it battles to keep food price inflation in check. China accounts for 40-50 per cent of Wilmar's revenue.

Mr Kuok added: 'Asian economies will continue to see strong growth and the strength of Wilmar's integrated business model will continue to enable the group to benefit from this growth.'

The oilseeds and grains division registered a 6.9 per cent increase in turnover to US$2.3 billion from last year on higher selling prices. Sales volume, however, fell 12.9 per cent to 3.5 million tonnes for the quarter 'due to a difficult operating environment', said the company.

Unlike the last two quarters where the firm recorded losses for this segment on poor margins and less timely purchases of raw materials, the tables were turned this time round with Wilmar scoring a 5.6 per cent on-year increase in profit before tax to US$192.1 million on 'prudent hedging of raw material purchases', it said.

The group's new sugar milling division, which was set up following its acquisition of Australia sugar producer Sucrogen and Indonesia's Jawamanis Rafinasi, reported a loss before tax of US$22.7 million due to general, administrative, repair and maintenance expenses incurred during the three months.

As at March 31, Wilmar held cash and cash equivalents of US$743.7 million. Net asset value per share was US$1.93, compared with US$1.85 at end-December.

[Musicwhiz]

The Straits Times
Nov 10, 2011
Wilmar's profits clobbered by US$
US$121m loss in gains blamed on investments and foreign exchange

By Goh Eng Yeow SENIOR CORRESPONDENT

PLANTATION giant Wilmar International is the latest Singapore-listed company to have its bottom line battered by the resurgent American dollar.

The company said yesterday that it would have recorded an eye-popping 156.5 per cent jump in third-quarter net profit to US$442.4 million (S$567 million) if not for a huge exceptional loss of US$121.3 million caused by hits from foreign exchange and investments.

Wilmar still managed to post net profit of US$321 million for the three months to Sept 30, up 24 per cent compared with the same period last year.

Revenue was up 68.6 per cent to US$13.09 billion, driven by higher sales volume and prices of agricultural commodities as well as contribution from its sugar business.

Earnings per share rose from 4.1 US cents to 5 US cents, while net tangible assets per share went up to US$1.31 from US$1.17.

Wilmar also gave a breakdown of the exceptional loss. It included a pre-tax loss of US$75.9 million due to inter-company loans to subsidiaries as the US dollar strengthened towards the end of the third quarter, and a US$71 million hit from investment securities, following the decline in global equity markets.

Chairman Kuok Khoon Hong was positive despite the uncertainties gripping the global economy.

'Favourable industry-specific trends and developments are expected to further benefit the group. Plantations and palm oil mills and sugar will gain from firm palm oil and sugar price,' he said in a statement.

The company's consumer products division would also enjoy improving margins from the lifting of price increase restrictions in China and lower feedstock costs, he added.

The only blot on the horizon is the challenging operating environment faced by the oilseeds and grains division, with 'crush' margins staying under pressure.

But investors, who had chased the company's share price sharply higher in the past four weeks after a sell-off early last month sent it plunging to a two-year low, were in no mood to celebrate.

They bailed out yesterday, sending the stock down by nearly 5 per cent at one point before it closed 4.11 per cent down at $5.36, with 19.1 million shares changing hands.

'Investors who may have bought the shares hoping for a stronger-than-expected third-quarter performance may be disappointed,' noted CIMB Investment Bank's senior regional analyst, Ms Ivy Ng.

Some investors might also have an issue with the losses encountered by Wilmar on its realised and unrealised investment securities, she added.

Nevertheless, Ms Ng expects Wilmar to deliver better performance this quarter due to recent changes in the export duty structure in Indonesia, where it owns huge plantations and runs significant downstream operations.

But OCBC Investment Research analyst Carey Wong noted that while third-quarter revenues had been driven by higher sales volume and prices of agricultural commodities, costs had also risen sharply. This resulted in the group's gross margins easing to 8.2 per cent from 9.3 per cent in the second quarter.

'Even excluding exceptional items, core earnings only met 72 per cent of our full-year forecast,' he added, cutting his call to 'sell', as he believed that there might be more downside risks.

engyeow@sph.com.sg

[dydx]

This is crazy! An additional USD5.0b worth of borrowing capacity via issuing new medium term notes - including perpetual notes!! - that DBS Bank is prepared to arrange for Wilmar.....
http://info.sgx.com/webcoranncatth.nsf/V...40034573B/$file/WIL_MTN_28Dec11.pdf?openelement

It is so easy to borrow more money under a MTN programme - no need to define the loan purpose(s) and source(s) of repayment, or subject to the governance of specific financial or other covenants or seperate loan agreements with lenders. It could just become out of control!

[wee]

This is crazy! An additional USD5.0b worth of borrowing capacity via issuing new medium term notes - including perpetual notes!! - that DBS Bank is prepared to arrange for Wilmar.....
http://info.sgx.com/webcoranncatth.nsf/V...40034573B/$file/WIL_MTN_28Dec11.pdf?openelement

It is so easy to borrow more money under a MTN programme - no need to define the loan purpose(s) and source(s) of repayment, or subject to the governance of specific financial or other covenants or seperate loan agreements with lenders. It could just become out of control!

Hi Dydx

Just curious - why did you say that this is "crazy" and "out of control"?

Thanks
Wee

[dydx]

Just curious - why did you say that this is "crazy" and "out of control"?

When a supposedly well-managed and conservative bank or lender decides to volunteer and put up its good name to arrange a humongous notes issuing facility - in this case for a cool USD5.0b! - for a large corporate, and on very loose and flexible terms and conditions, without defining the purpose(s) and source(s) of repayment of the proposed financing, to me is an example of all things having gone over-board and away from normal conservative principles/guidelines governing prudent and responsible lending/borrowing/business dealings. And this should apply to Wilmar as well.

[wee]

Noted. thanks.

Just curious - why did you say that this is "crazy" and "out of control"?

When a supposedly well-managed and conservative bank or lender decides to volunteer and put up its good name to arrange a humongous notes issuing facility - in this case for a cool USD5.0b! - for a large corporate, and on very loose and flexible terms and conditions, without defining the purpose(s) and source(s) of repayment of the proposed financing, to me is an example of all things having gone over-board and away from normal conservative principles/guidelines governing prudent and responsible lending/borrowing/business dealings. And this should apply to Wilmar as well.

[corydorus]

Just curious - why did you say that this is "crazy" and "out of control"?

When a supposedly well-managed and conservative bank or lender decides to volunteer and put up its good name to arrange a humongous notes issuing facility - in this case for a cool USD5.0b! - for a large corporate, and on very loose and flexible terms and conditions, without defining the purpose(s) and source(s) of repayment of the proposed financing, to me is an example of all things having gone over-board and away from normal conservative principles/guidelines governing prudent and responsible lending/borrowing/business dealings. And this should apply to Wilmar as well.

Where the money will comes from actually ? I doubt any significant from the bank itself. It will be good to know so as to avoid the "Atomic bomb" ?