Analysts at RHB Bank Singapore have maintained &ldquo buy&rdquo on Wilmar International F34 0.82% with a new target price of $4.40 after raising its environmental, social and governance (ESG) score to 3.3 from 3.1 previously. 

 

The analysts believe Wilmar is one of the companies that would be well-poised to comply with the European Union Deforestation Regulation (EUDR). 

 

While there are a myriad of problems and issues in complying with the EUDR guidelines based on current regulations, RHB believes there are also numerous solutions. The Malaysian and Indonesian governments working together with the EU to find solutions is a step in the right direction, the analysts say.

 

&ldquo At the end of the day, if the EU fails to help producing countries like Indonesia and Malaysia in complying with the EUDR, it will push producers to export more of their commodities to countries with weaker environmental regulations, thereby shifting the problem to other regions,&rdquo they add.

 

A short-term solution would be to ensure that whatever is sold to the EU is produced in segregated mills and refineries and traceable to plantation. This could mean redirecting smallholder crops that are not traceable to other mills to ensure there is no mixing of crops in each plant, RHB says.

 

As smallholders manage 40% of plantation areas in Indonesia and Malaysia, the sector will only progress if they are taken care of and well updated with the changes in laws and regulations, the analysts point out. As such, continuous engagement with smallholders is essential to educate them on the importance of establishing a sustainable business, while the necessary tools must be given to the smallholders to help them to achieve these goals. 

 

&ldquo We believe the sector in general is moving in the right direction in terms of ESG standards, with more disclosure and targets being set. However, we note that there are some outliers which have yet to make any improvements to ESG disclosures as well as ESG targets,&rdquo they add.

 

Wilmar&rsquo s ESG rating is raised on the back of strengthening environmental credentials, which saw improved traceability reduced water intensity and better certification progress as well as better governance traits in the form of increased board independence and better gender inclusivity.

 

Meanwhile, RHB made no changes to its ESG ratings for Bumitama Agri P8Z 0.00% , Golden Agri-Resources E5H 0.00% and First Resources EB5 1.43% at 2.6, 2.7 and 2.5 respectively. 

On Nov 14, Wilmar International : F34 +0.27% chairman and CEO, Kuok Khoon Hong, increased his deemed interest in the global agri-business from 13.49 per cent to 13.50 per cent. This saw Longhlin Asia acquire 200,000 shares and Hong Lee Holdings buy 200,000 shares and Jaygar Holdings acquire 100,000 shares. The 500,000 shares were all acquired at an average price of S$3.58 per share.

 

Kuok has been gradually increasing his total interest in Wilmar International from 12.94 per cent in October 2022.

Between Nov 7 and 8, Wilmar International : W05 -2.24% chairman and CEO, Kuok Khoon Hong, increased his deemed interest in the global agri-business from 13.46 per cent to 13.49 per cent. This saw Longhlin Asia acquire 683,560 shares and Hong Lee Holdings acquire 683,560 shares and Jaygar Holdings acquire 341,780 shares. The 1,708,900 shares were all acquired at an average price of S$3.59 per share. Kuok has been gradually increasing his total interest in Wilmar International from 12.94 per cent in October 2022.

 

Back on Oct 26, Wilmar International reported an executive summary for its Q3FY23 (ended Sep 30). The group recorded lower core net profit of US$323.6 million for Q3FY23 compared to US$796.7 million Q3FY22. At the same time, Q3FY23 sales volumes for Asia&rsquo s leading agribusiness group was reported to grow across all business segments from Q3FY22. Food products sales volume was up 7.9 per cent and feed & industrial products rose 12.8 per cent. Within the feed & industrial products segment, sugar sales volume grew 18.3 per cent to 3.6 million tonnes. The group highlighted that Q3 saw continued strong performance from the sugar milling and merchandising businesses, and improved crushing margins arising from tightness in availability of soybean in China. However, this could not fully offset compressed refining margins from the tropical oils business, in line with industry wide trends, and weaker performance by its fertiliser operations.

 

The group noted that operating conditions in China were better in Q3FY23 and will likely remain positive for the rest of the year. Management added that sugar merchandising, milling, and refining will remain good with higher sugar prices while tropical oils refining margins will continue to normalise after exceptional conditions last year. Wilmar International has over 500 manufacturing plants and an extensive distribution network covering China, India, Indonesia and some 50 other countries and regions. The stock has ranked as Singapore&rsquo s fifteenth most traded stock this year, while also booking the ninth highest net institutional inflow across the local stock market. Kuok remains in charge of the management of the group with a particular focus on new business developments. He has extensive experience in the industry and has been involved in the grains, edible oils and oilseeds businesses since 1973.

 

Wilmar believes its sugar merchandising, milling and refining business will remain &ldquo good&rdquo till year-end on higher sugar prices.

 

SINGAPORE &ndash Wilmar International&rsquo s net profit for the third quarter ended Sept 30, 2023, fell 59 per cent to US$313.9 million (S$430.5 million), from US$766.2 million in the year-ago period.

 

Its core net profit also fell by similar margins due to compressed refining margins from the tropical oils business and weaker performance by its fertiliser operations, it said in a bourse announcement on Thursday.

 

This was partially offset by continued strong performance from its sugar milling and merchandising businesses and improved crushing margins arising from tightness in soya bean availability in China, it added.

 

Revenue in Q3 slipped by a smaller margin of 6.4 per cent, to US$17.7 billion, from US$18.9 billion in the third quarter of 2022.

 

Meanwhile, falling palm oil, oilseeds and grains prices led to lower net working capital requirements for the group and net debt fell to US$16.9 billion as at Sept 30, 2023. It was US$18.8 billion in the 2022 financial year. Net gearing ratio also improved to 0.88 times, from 0.94 in 2022.

 

Wilmar noted that operating conditions in China were better in the 2023 third quarter and believes it will likely remain positive for the rest of the year.

 

Its sugar merchandising, milling and refining business will also remain &ldquo good&rdquo with higher sugar prices, while tropical oils refining margins will continue to normalise after exceptional conditions last year, it added. &ldquo Barring unforeseen circumstances, we believe results for the rest of the year will be satisfactory,&rdquo said the company.