Wilmar kept at &lsquo overweight&rsquo by Barclays with price target of $3.60

SINGAPORE (Aug 6): Barclays Capital says Wilmar International&rsquo s 2Q earnings exceeded its expectations, but it expressed disappointment with the sugar merchandising and processing segment, where despite a 37% jump y-o-y in sales volume, revenue growth was only 9.5%.

Barclays cites higher crude palm oil (CPO) prices as a major driver for earnings upside, saying &ldquo this together with better margins in the downstream business and accelerated normalisation of the oilseed business, could increase our base case valuation.&rdquo On the flip side, lower CPO prices and the continued depressed profitability of the oilseed business are key downsides.

The research house also notes that operating cash flow turned positive in 1H15 compared with the previous year, and gearing stayed at a healthy level of 0.77x.

It concludes, &ldquo Wilmar is our best idea in the soft commodity sector given its resilient balance sheet, scale in the midstream and downstream oilseeds business, and well diversified palm oil business.&rdquo

Barclays has an &ldquo overweight&rdquo rating on the stock, with a price target of $3.60.

SINGAPORE (Aug 5): Wilmar  International, the agribusiness group, posted an 18% increase in net  profit  to US$201.8 million ($279.4) for the 2Q ended June.

Wilmar says the higher net profit in the quarter reflected a strong performance from Oilseeds & Grains compared to a year ago. However, Tropical Oils turned in a lower profit due to lower crude palm oil (CPO) prices while Sugar saw weaker performances amidst tougher operating conditions.

Oilseeds & Grains saw pretax profit surge to US$115.9 million  from US$41.5 million. The strong growth was driven by improved crushing margins, higher volume crushed and continued robust performance in Consumer Products.

Tropical Oils posted a 15% drop in pretax profit to US$176.0 million in 2Q2015 mainly due to lower CPO prices. Sales volume from Tropical Oils Manufacturing also declined 6% to 5.6 million metric tonnes in 2Q2015.

Revenue  for the quarter declined 12% to US$9.28 billion, mainly due to lower  commodity prices.

For 1H, net profit came in 33.2% higher at US$443.0 million or 6.9 US cents per  share.

The board has proposed an interim  dividend  0.25 cents per share, payable on Aug 26, 2015.

&ldquo The Group expects crushing margins in China to remain positive for the rest of the year and for Consumer Products to continue its strong performance. For the second half of 2015, refining margins are expected to be maintained for the Tropical Oils business with increased palm production and demand arising from lower CPO prices, though Plantation and Palm Oil Mill performances will continue to be affected by the softer CPO prices,&rdquo says CEO and Chairman Kuok Khoon Hong in its outlook.

Wilmar rose 0.6% to close at $3.17.

Wilmar' s Q2 profit up 18.8% on strong demand for oilseeds, grains