Wilmar International Ltd: Earnings improved q/q, in line with our estimates
- Wilmar reported a 4Q24 core net profit of USD350m (-47.5% y/y, +67.8% q/q), largely in line with our estimates but missing consensus expectations
- The food products division's profit before tax (PBT) helped offset weaker performance in the commodities processing division in 2024
- Wilmar proposed a final dividend of 10 Scts/share, totaling 16 Scts/share for 2024 (2023: 17 Scts/share), offering a 5% dividend yield
- We maintain a BUY rating with a target price (TP) of SGD3.80, as we believe earnings have room to improve further this year
What’s New
Wilmar reported a 4Q24 core net profit of USD350m (-47.5% y/y, +67.8% q/q) in line with our estimates. FY24 core net profit reached USD1.16bn (-25.7% y/y), in line with DBS' estimate of USD1.13bn (-26% y/y), but missing Bloomberg consensus estimates of USD1.27bn (-17% y/y). FY24 Profit before tax (PBT) reached USD1.7bn (-10.8% y/y), driven by higher food products PBT of USD502m (+70.3% y/y), which helped offset weaknesses in other divisions, primarily the commodities processing unit. Wilmar’s stellar Food Products division performance was mainly boosted by a pre-tax gain of USD100m from a share swap exercise with its China associates and joint venture Luhua in 2H24, on top of strong sales volume performance (+7.8% y/y in 2H24). Excluding the share swap gain, Food Products PBT would still have registered a robust ~35% y/y growth. Wilmar has proposed a final dividend of 10 Scts/share, and together with the interim paid, equates to 16 Scts/ share for FY24 (FY23: 17 Scts/share), implying a 5% dividend yield.
Our View
We see room for earnings improvement in FY25, driven by positive tropical oil division outlook. Despite being still below consensus expectation, Wilmar managed to recover its earnings performance in 4Q24, mainly due to higher sales volume across divisions, which helped improve efficiency and profitability. We forecast earnings to grow by 35.5% y/y to USD1.5bn in FY25F, supported by steady palm oil prices and better refining margin trends. We maintain our BUY rating with a target price (TP) of SGD3.80, on an earnings improvement outlook, while FY24 weakness is well priced in. We peg our TP to a FY25F PE of 12.1x, in line with its 5-year average PE multiple of 11.8x.
Segmental discussion
Food Products: Pre-tax gain from associates' share swap and better sales volume drove positive PBT performance.
- Food products PBT reached USD502m (+70% y/y), mainly driven by a pre-tax gain of USD100m from the share swap exercise with its China associates and joint venture Luhua in 2H24, in addition to stronger sales volume, especially in 2H24.
- Overall sales volume increased by 33m MT (+7.6% y/y), resulting in revenue of USD28bn (+2% y/y) for FY24.
Feed and Industrial Products: Challenges in the tropical oil division persisted in 2024.
- The segment's PBT reached USD829m (-10% y/y), affected by challenging conditions in the tropical oil processing divisions.
- Oilseeds crushing volume improved in 2H24 to 15.7m MT (+31% y/y), despite weaker crushing margins in 2024.
Plantation and Sugar Milling
- The division's PBT reached USD269m (-46% y/y), but note that FY23's PBT included a USD230m gain on the disposal of the Moroccan associate (Cosumar). Excluding this gain, PBT remained flat y/y.
- The division also benefited from a higher palm oil price trend.
Balance sheet
- ROE declined to 5.8% in FY24 from 7.6% in the previous year, mainly due to weaker earnings performance
- Meanwhile, the net debt to equity ratio reached 0.94x in FY24 (FY23: 0.88x), due to higher working capital requirements for commodities, mainly palm oil stockholdings, in preparation for the upcoming 2025 Chinese New Year
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