Wilmar International's 2024 Earnings Miss: A Closer Look at the Numbers and the Road Ahead

Wilmar International (SGX:F34) recently reported its full-year 2024 earnings, which missed analyst expectations. The company's revenue remained flat at US$67.4 billion, while net income decreased by 23% to US$1.17 billion. Profit margin and EPS also declined to 1.7% and US$0.19, respectively. Let's dive into the numbers and explore the potential risks and opportunities for investors.



Key Takeaways:
1. Revenue missed analyst estimates by 1.4%, while EPS missed by 11%.
2. The company's shares are down 5.8% from a week ago.
3. Wilmar faces two warning signs, one of which is considered unpleasant.
4. The company's valuation is complex, and investors should consider potential risks, dividends, insider trades, and its financial condition.

Risks and Opportunities:
1. Weak China Operations: Wilmar's largest profit contributor, Yihai Kerry Arawana (YKA), has been facing weak consumer spending in China. Although there has been a sales recovery trend observed in 3Q24, the recovery is expected to be gradual, and analysts are closely monitoring the situation (UOB Kay Hian Research, 2024-11-06).
2. Lower Profit Margin: Wilmar's profit margin decreased to 1.7% in 2024, down from 2.3% in 2023. This decline can be attributed to various factors, including intense competition and thin margins in the food products segment, weak demand for refined palm oil products, and operational delays in the sugar milling segment (UOB Kay Hian Research, 2024-10-18).
3. Slow Recovery in China Operations: Despite stimulus measures introduced by the Chinese government to bolster consumer spending, the recovery in Wilmar's China operations is predicted to be gradual. This slow recovery has contributed to the company's earnings miss in 2024 and may impact its long-term growth prospects (UOB Kay Hian Research, 2024-10-18).
4. Election Uncertainty in the US: Geopolitical risks, such as election uncertainty in the US, can affect global markets and Wilmar's share price (UOB Kay Hian Research, 2024-11-06).

Despite these challenges, Wilmar International offers an attractive dividend yield of 4.5% for 2024F, which could be appealing to yield-focused investors (UOB Kay Hian Research, 2024). Additionally, the company may gain from the planned stake sale of Adani-Wilmar (AWL), which could yield a one-off gain of US$329 million (equivalent to S$0.07 per share) if completed by February 2025 (UOB Kay Hian Research, 2024).



Conclusion:
Wilmar International's earnings miss in 2024 highlights the challenges the company faces, particularly in its China operations and profit margin. However, the company's strong dividend yield and potential one-off gain from the Adani-Wilmar stake sale offer opportunities for investors. As Wilmar navigates these risks and opportunities, investors should stay informed about the company's progress and consider the potential impact on their portfolios. By doing so, they can make informed decisions about investing in Wilmar International and other companies in the agribusiness sector.