Wilmar International and its subsidiaries have placed a security deposit of 11.9 trillion rupiah ($930 million) for &ldquo corrupt actions&rdquo carried out in 2021 during a shortage of cooking oil in the Indonesian market.

 

In April, the Indonesian Attorney General&rsquo s Office (AGO) brought charges against five of Wilmar&rsquo s subsidiaries, Multimas Nabati Asahan, Multi Nabati Sulawesi, Sinar Alam Permai, Wilmar Bioenergi Indonesia and Wilmar Nabati Indonesia, for the harming of state finances, unauthorised profits and harming the business sector. The alleged actions took place during July 2021 and December 2021.

 

Later, the AGO submitted an appeal against the decision of the Central Jakarta Court to the

Indonesian Supreme Court, requesting that the subsidiaries demonstrate their belief in the Indonesian judicial system and their good faith and innocence by placing a security deposit.

 

The security deposit will be returned to the subsidiaries of Wilmar if the Indonesian Supreme Court upholds the decision of the Central Jakarta Court, but may be forfeited in full or in part if the court finds against the subsidiaries.

 

The subsidiaries have maintained that all actions taken by them were done in good faith and free from any corrupt intent.

Following Wilmar International' s 1QFY2025 ended March 31 results, analysts have largely praised the group' s good start to the year, but remain uncertain on the oncoming outlook.

 

While the team of analysts at DBS Group Research have a " buy" call at an unchanged target price (TP) of $3.80, the analysts at RHB Bank Singapore and Citi Research have both maintained their " neutral" calls, albeit at an unchanged TP of $3.00 and at a higher TP of $3.25 from $3.15 previously.

 

The team at DBS notes that Wilmar' s 1QFY2025 earnings accounted for 22% of theirs and 23% of consensus' FY2025 earnings forecast of US$1.53 billion ($1.99 billion).

 

The group' s revenue of US$16.2 billion was driven by a strong expansion in consumer products sales volume to 2.5 million metric tonnes (mt), which helped total food products sales volume reach 8.3 million mt.

 

On the other hand, feed and industrial product sales volume declined to 14.2 million mt, which the team notes was affected by the timing of sugar merchandising sales, as most volume was sold in 4QFY2024 based on customer orders.

 

They add: " Rising consumer products sales volume, along with improved soy crushing margins, supported stable consolidated margin performance for Wilmar, despite continued weakness in palm oil refining margins, as crude palm oil (CPO) prices remained at US$1,000 per mt in 1QFY2025."

 

Overall, the analysts at DBS see that while Trump' s tariffs could introduce uncertainty, Wilmar' s integrated and diversified platform should help it withstand market volatility.

 

They write: " We expect earnings to improve on the back of better margins. 1QFY2025 was a solid start, and we anticipate further improvement in soy crushing margins and palm oil prices."

 

Furthermore, they see that the diversion of soybeans from the US to South America could lead to temporary scarcity which pushes up soymeal and oil prices, ultimately leading to an opportunity for Wilmar given its strong presence in South America.

 

Meanwhile, a pullback in palm oil prices from the US$1,000 per mt level should support better palm oil refining margins.

 

" Consumer products sales volume is expected to remain strong, as domestic products are likely to be favored during a tariff war due to their affordability. Yihai Kerry' s high-quality products should also offer a strong value proposition to customers," writes the team.

 

RHB says Wilmar' s 1QFY2025 results were also in line with their estimates.

 

On the group' s food product sales volume in the period, they write: " While volumes remain relatively stable currently and raw material prices have fallen, management is wary of the weaker economic outlook affecting consumer spending and the potential downtrading of products."

 

RHB adds that while the tropical oil and oilseeds and grains units' quarterly volume declines were likely seasonal in nature, the sugar merchandising division was affected by lower raw sugar prices.

 

" Going forward, sugar prices are likely to remain weak due to weak ethanol and crude oil prices, which would affect profitability going forward. As for tropical oil and oilseeds and grains, while volumes are expected to improve this year, margins would be determined by trading margins given the volatility of soybean and CPO prices," write the RHB analysts.

 

Meanwhile, Wilmar' s management expects CPO volume output to see a high single-digit y-o-y increase in FY2025, on the back of a recovery post El-Nino.

 

The team writes: " While sugar milling margin is expected to remain weak, palm oil (PO) milling margin should improve given the higher CPO average selling price (ASP) y-o-y."

 

With this, the analysts make no changes to their earnings assumptions. They expect a mostly flat 2QFY2025 earnings, and a modest 10% y-o-y earnings growth for the FY2025.

 

Key drivers noted by them include CPO prices and fresh fruit bunches (FFB) production output, soybean crush margins, improved profitability of rice and flour business and finally, a favourable tax regime.

 

Conversely, key risks include volatilities in oilseeds earnings and a slower-than-expected recovery in vegetable oil demand.

 

Finally, Citi' s Gan Huan Wen has tweaked his FY2025 and FY2026 net profit forecasts by 2% and 3% respectively after Wilmar' s FY2024 annual report update.

 

He writes: " We have factored in 6% production growth in FY2026 from favourable weather. Wilmar believes CPO price is currently supported by Indonesia' s B40 biodiesel mandate, which is in-line with our view."

 

Wilmar International has reported a net profit of US$343.9 million ($450.30 million) for the 1QFY2025 ended March 31, up 13.5% y-o-y.

 

Core net profit for the quarter improved 4.4% y-o-y to US$343 million on the back of better performance from both Food Products and Plantation and Sugar Milling segments, as well as higher contributions from its associates and joint ventures, mainly from its investments in China, India and Southeast Asia.

 

However the group says that these were partially offset by weaker contributions from the Feed and Industrial Products segment. Operating conditions for the tropical oils business remained challenging in 1QFY2025 while crushing margins improved during the quarter.

 

The group reported a revenue growth of 3.3% y-o-y for 1QFY2025 of US$16.2 billion.

 

For the 1QFY2025, operating cash flow before working capital changes came in 47.9% y-o-y higher at US$948.5 million. Cash flows from operating activities grew 16.4% y-o-y to US$2.09 billion.

 

Wilmar' s higher profits during the quarter, coupled with lower working capital requirements, led the group to higher cash flow for the quarter.

 

The lower working capital requirements also led to a reduction in net debt to US$16.85 billion as at March 31, 2025.

 

Consequently, net gearing ratio improved to 0.83 times as of March 31, 2025.

 

On outlook, the group says that the rest of the year is expected to remain uncertain with increased volatility arising from the introduction of tariffs by the US. However, Wilmar expects the results for the rest of the year to remain satisfactory due to its diversified and resilient integrated business model which it says will help weather difficult conditions.