Wilmar posts highest Q1 net profit on record

• Wilmar International Ltd (SGX: F34) share price opened 1.7% higher on Friday (30 April 2021)
• This comes after the food producer saw net profit double year-on-year to US$450 million in the first quarter of 2021
• The group is ‘cautiously optimistic’ that it will ‘perform satisfactorily’ for the rest of the year
• Analysts see a 14% upside on the blue-chip stock in the next 12 months
• Buy and sell Wilmar shares with an IG account

Wilmar share price: what’s the latest?

Wilmar International shares opened 1.7% higher at S$5.39 on Friday (30 April 2021), after posting its first quarter 2021 results.

The food producer recorded its highest first quarter results since listing, as net profit doubled year-on-year to US$450.2 million, up from US$224.1 million in Q1 2020.

All core segments reported growth in both revenue and profits for Q1 2021 ‘on the back of strong performance across all its core businesses’, the group said. Core profit for the quarter improved year-on-year by 38.3% to US$423.7 million from US$306.4 million in Q1 2020.

Results for the quarter were further aided by a reversal of mark-to-market losses on hedging derivatives recorded in the last quarter of 2020. In addition, good manufacturing margins were recognised in the Feed & Industrial Products segment.

Profit for the Plantation & Sugar Milling segment also came in higher for the quarter, supported by stronger commodity prices in the quarter and the capitalisation of maintenance costs during the sugar milling off-season.

China, the group’s key market, has shown strong recovery from the Covid-19 pandemic and lockdowns of the previous year. ‘This enabled more people to dine out during the quarter, resulting in stronger demand for food products from the Hotel/Restaurant/Catering (HORECA) and food processing industries,’ it said.

As of 31 March 2021, shareholders’ funds increased to US$19.2 billion mainly on the back of profits recognised during the quarter, with net gearing increasing marginally to 0.74x, up from 0.72x recorded on 31 Dec 2020.

Although the group said it generated strong operating cash flows for the quarter, overall cash flow from operating activities for Q1 2021 was lower at US$96.4 million due to higher commodity prices driving an increase in working capital requirements. Consequently, net debt increased to US$14.11 billion as at 31 March 2021.

What’s the outlook for the rest of 2021?

The palm oil producer expects the sustained high palm oil price to continue benefiting its Oil Palm Plantation business in the coming months, although it will also have an impact on manufacturing margins.

It also forecast that earnings in the Feed & Industrial Products segment will likely be lower due to lower crush margins. However, higher sugar prices will benefit the sugar milling business.

With regard to recent developments in India and Myanmar, where Wilmar is a provider of essential food products, the company says that operations in those markets ‘have not experienced significant disruptions’ and that it will ‘continue to monitor these situations closely’.

‘Whilst the pace of economic recovery around the world from the pandemic is uneven, we are cautiously optimistic that we will perform satisfactorily for the rest of the year,’ it concluded.

In terms of stock outlook, Wilmar currently has a consensus rating of ‘outperform’ alongside an average 12-month target price of S$6, based on the latest SGX StockFacts data. The target price represents an upside of 14%.

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