Wilmar's FY2018 profits dropped 5.7% to US$1.13b

It blamed the African swine fever outbreak in China and weaker commodity prices.

Wilmar International ended 2018 on a dismal note after its profits dropped 5.7% YoY to US$1.13b from US$1.19b, an announcement revealed. However, revenue inched up 2.1% YoY from US$43.57b to US$44.49b.

In Q4, profits crashed 52.9% YoY to US$200.9m from US$426.7m in 2017, whilst revenue slipped 3% YoY from US$11.45b to US$11.1b, according to its financial statement.

Also read: Wilmar Q3 profits jumped 18.2% to US$434.91m

It attributed its weak profit performance to the African swine fever outbreak in China which affected the firm’s oilseeds and grains segment as well as weaker commodity prices that impacted the upstream operations in Sugar Milling and Palm Plantation.
On the other hand, the increase in FY2018 revenue was attributed to higher sales volume recorded across all segments. Although this was partially offset by lower commodity prices during the year.

“With the continued depressed sugar prices, the Group decided to adopt a conservative approach and made a provision for impairment totalling US$138.6m on its goodwill and sugar milling assets in Australia, even though the milling operations have been generating positive cashflows since acquisition,” the firm explained.

Its tropical oils business segment reported a 37% increase in pretax profit to US$546.1m in FY18 from US$397.5m in 2017 driven by better performance in the manufacturing and merchandising businesses. Lower commodity prices benefited its downstream businesses through lower feedstock costs. However, this improvement was partially offset by weaker contributions from the plantation business due to lower palm oil prices.

Meanwhile, the Oilseeds & Grains segment registered a 20% YoY improvement in pre-tax profit to US$875m in FY18 from US$727.2m on the back of stronger performance from consumer products as well as good crush margins and volume during the year. Wilmar noted that profit in Q4 was lower at US$115.2m from US$206.4m due to weaker crush margins that were impacted by lower meal demand, caused by the African swine fever outbreak in China.

The sugar business sector recorded a pre-tax loss of US$123m in FY18, extending its US$24.6m loss in 2017, mainly due to an impairment loss of US$138.6m recognised in 4Q2018 relating to the milling operations in Australia.

“The sugar results were further impacted by losses from the Group’s newly acquired Indian subsidiary, Shree Renuka Sugars Limited (SRSL), whose crushing activities only commenced in late October,” Wilmar added. “These losses were mitigated by stronger performance in the merchandising business during the year.”

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Wilmar’s CEO and chairman Kuok Khoon Hong said that the firm remains reasonably optimistic that performance for FY19 will be satisfactory, given the recent recovery of crude palm oil prices and satisfactory margin in downstream processing.

“Crush margins for Q1 2019 will be adversely impacted by the sharp decline in meal demand from the outbreak of African swine fever in China and the sharp drop in Brazilian soybean basis, but this is expected to improve in Q2 2019,” he said in a statement.

Wilmar also revealed that the firm has converted its China holding company into a joint-stock company, with a view to a possible separate listing in China in 2019.