Wilmar International Limited (WIL) saw 2Q14 reported net profit fall 21.9% YoY (+5.5% QoQ) to US$170.7m, even as revenue inched up 0.9% YoY (+2.4% QoQ) to US$10517.7m. Although 1H revenue of US$20786.4m (+0.8%) met about 45.1% of our full-year forecast, core earnings of US$377.6m (down 32.5%) covered just 32.8%. WIL declared an interim dividend of S$0.02/share versus S$0.025 a year ago. Still, management expects to show a much better performance in 2H14. To reflect the weaker 1Q earnings, we pare our FY14 figure by 8% but left revenue untouched. Based on 12.5x blended FY14F/15F EPS, our fair value eases from S$3.36 to S$3.24. Maintain HOLD as valuations are not pricey in view of any potential M&As that may emerge.
2Q14 earnings a big miss
Wilmar International Limited (WIL) saw 2Q14 reported net profit fall 21.9% YoY (+5.5% QoQ) to US$170.7m, even as revenue inched up 0.9% YoY (+2.4% QoQ) to US$10517.7m. The main drag came from margin contraction in Palm & Laurics and losses from associates. Excluding non-operating items, core earnings fell 33.6% YoY and 24.0% QoQ to US$163.1m. Although 1H revenue of US$20786.4m (+0.8%) met about 45.1% of our full-year forecast, core earnings of US$377.6m (down 32.5%) covered just 32.8%. WIL declared an interim dividend of S$0.02/share versus S$0.025 a year ago.
Refining margins now the culprit
While Oilseeds & Grains managed to achieve positive margins in 2Q14, its Palm & Laurics division was impacted by compressed refining margins due to tighter CPO supply and excess refining capacity in the industry. Meanwhile, its Sugar milling business saw higher losses in 2Q14 due to lower volumes crushed at the start of the season; but this was compensated by higher contributions from its merchandising business and improved performance at its Australian and New Zealand refineries. While the Consumer Packs business showed a drop in revenue due to lower ASPs in China, stronger demand resulted in volume growth and lower feedstock cost also helped to boost profitability.
Still expecting a better 2H
Still, management expects to show a much better performance in 2H14. This as it expects crush margins to improve further; increased CPO supply should also improve Palm & Laurics performance although operating conditions will remain challenging. WIL further expects better contributions from its Plantations & Palm Oil Mills; Sugar will also contribute positively, barring any bad weather in the coming months. Last but not least, Consumer Products will continue to grow across all its markets, especially in developing ones like Vietnam.
Maintain HOLD with lower S$3.24 FV
To reflect the weaker 1Q earnings, we pare our FY14 figure by 8% but left revenue untouched. Based on 12.5x blended FY14F/15F EPS, our fair value eases from S$3.36 to S$3.24. Maintain HOLD as valuations are not pricey in view of any potential M&As that may emerge.
Wilmar International Limited (WIL) saw 2Q14 reported net profit fall 21.9% YoY (+5.5% QoQ) to US$170.7m, even as revenue inched up 0.9% YoY (+2.4% QoQ) to US$10517.7m. The main drag came from margin contraction in Palm & Laurics and losses from associates. Excluding non-operating items, core earnings fell 33.6% YoY and 24.0% QoQ to US$163.1m. Although 1H revenue of US$20786.4m (+0.8%) met about 45.1% of our full-year forecast, core earnings of US$377.6m (down 32.5%) covered just 32.8%. WIL declared an interim dividend of S$0.02/share versus S$0.025 a year ago.
Refining margins now the culprit
While Oilseeds & Grains managed to achieve positive margins in 2Q14, its Palm & Laurics division was impacted by compressed refining margins due to tighter CPO supply and excess refining capacity in the industry. Meanwhile, its Sugar milling business saw higher losses in 2Q14 due to lower volumes crushed at the start of the season; but this was compensated by higher contributions from its merchandising business and improved performance at its Australian and New Zealand refineries. While the Consumer Packs business showed a drop in revenue due to lower ASPs in China, stronger demand resulted in volume growth and lower feedstock cost also helped to boost profitability.
Still expecting a better 2H
Still, management expects to show a much better performance in 2H14. This as it expects crush margins to improve further; increased CPO supply should also improve Palm & Laurics performance although operating conditions will remain challenging. WIL further expects better contributions from its Plantations & Palm Oil Mills; Sugar will also contribute positively, barring any bad weather in the coming months. Last but not least, Consumer Products will continue to grow across all its markets, especially in developing ones like Vietnam.
Maintain HOLD with lower S$3.24 FV
To reflect the weaker 1Q earnings, we pare our FY14 figure by 8% but left revenue untouched. Based on 12.5x blended FY14F/15F EPS, our fair value eases from S$3.36 to S$3.24. Maintain HOLD as valuations are not pricey in view of any potential M&As that may emerge.
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