Wilmar’s FY23 results came in above expectations. Excluding exceptional items, the core net profit fell 35.3% YoY to USD1.6bn, accounting for 112% and 119% of our and consensus full-year estimates. All key business segments registered weaker performance in FY23.
Food Products. FY23 PBT plunged 59.6% YoY to USD294.9mn, dragged by weaker margins as a result of high feedstock cost for the flour business during the 1H and absence of a gain on dilution of interest in Adani Wilmar Limited amounting to USD175.6mn, recognised in the previous year. Excluding the gain, this segment would have reported a drop of 46.8% YoY. Overall sales volume increased by 5.6% YoY to 30.7mn tonnes.
Feed and Industrial Products. Despite higher sales volume (+10.2% YoY), FY23 PBT fell 40.6% YoY to USD926.7mn mainly due to weaker margins for its mid and downstream operations from the tropical oils business.
Plantation and Sugar Milling. FY23 PBT decreased by 12.1% YoY to USD500.1mn mainly due to lower profit from the palm plantation business as a result of lower palm oil prices. FFB production remained flattish at 4.5mn tonnes (+0.4% YoY).
Lastly, contributions from JV & Associates increased 16.8% to USD319.8mn, premised on higher contributions from investments in Europe.
The group has proposed a final tax-exempt dividend of SGD0.110/share. This brings the total dividend to SGD0.170/share for FY23, which is similar to FY22.
Impact
FY24 and FY25 earnings forecasts are revised upward slightly by 1.9% after updating the FY23 figures.
Outlook
Management expects the tough operating conditions to continue into FY24.
Tropical oil margins are expected to remain depressed; sugar milling margins will be affected by lower sugar prices and operating conditions in China are expected to remain challenging.
Lower processing margins for mid and downstream operations have continued to impact upcoming results, in our view.
Valuation
Our SOP valuation for Wilmar is revised downward to SGD4.00/share from SGD4.58/share after incorporating FY23 key variables (earnings & net debt) and attaching a lower valuation to the respective segments to be in line with peers. Maintain BUY.
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