Wilmar International - UOB Kay Hian 2022-11-01: Potential Third Year Of Record-High Earnings

• Wilmar International (SGX:F34) is on track for a third consecutive year of record-high profit in 2022. We make no changes to our assumptions on the seasonally weaker 4Q earnings.
• The tropical oil segment may see lower margins in 4Q22, but this could be partly mitigated by the recovery in soybean crushing margins in China. The food products segment will be driven by higher sales volume with marginal q-o-q recovery in margins as raw material costs could soften slightly.
• - Read this at SGinvestors.io -

What's new from Wilmar's analyst briefing

• Based on our revised earnings in our earlier note: Wilmar International - UOB Kay Hian 2022-11-01: 3Q22 Record Quarterly Profit; Way Above Expectation, we are expecting Wilmar to report a core net profit of US$450m-460m for 4Q22. It is a norm with 4Q profit to come in lower than 3Q due to seasonal factors.
• - Read this at SGinvestors.io -
• Medium pack and bulk: We expect strong sales volume from this sub-segment since Wilmar‘s factories are still allowed to operate in most of the cities being locked down by the Chinese government.
• Feed and Industrial Products: This segment is likely to be weaker in 4Q22 than in 3Q22 due to lower palm processing margins.
  1. Tropical oil: Margin could narrow q-o-q in 4Q22 but should still remain healthy. It should be able to maintain sales volume, as there will not be any large disruptions to Malaysia’s and Indonesia’s palm oil production in 4Q22.
  2. Oilseeds & Grains: Soybean crushing margin is currently positive, and we expect better sales volume on the back of rising hog prices which would lead to a recovery of animal feed demand. In addition, we believe Wilmar has sufficient soybean in stock to crush, and will be able to take advantage of the current positive margin.
• Plantation & Sugar Mill: Forward selling and high sugar price will support this segment’s performance:
  1. Palm oil: Earnings supported by forward selling that committed at higher prices.
  2. Sugar: Supported by good sugar ASP. The current disruption caused by the Queensland flood on total production from Australia is marginal.

Healthy margin for tropical oil.

• Read more at SGinvestors.io.

Leow Huey Chuen UOB Kay Hian Research | Jacquelyn Yow Hui Li UOB Kay Hian | https://research.uobkayhian.com/ 2022-11-01 SGinvestors.io

---