WILMAR INTERNATIONAL LIMITED 4Q2010 RESULTS BRIEFING 1 23 FEBRUARY - - PDF document

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WILMAR INTERNATIONAL LIMITED 4Q2010 RESULTS BRIEFING

23 FEBRUARY 2011

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IMPORTANT NOTICE

Information in this presentation may contain projections and forward looking statements that reflect the Company’s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the Company’s assumptions are correct. Actual results may differ materially from those projected. This presentation does not constitute or form part of any opinion on any advice to sell, or any solicitation of any offer to purchase or subscribe for, any shares nor shall it or any part of it nor the fact of its presentation form the basis of, or be relied upon in connection with, any contract or investment decision.

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PRESENTATION OVERVIEW

• 4Q10 Financial Performance
• Risk Management
• Business Update
• Questions & Answers

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Results Overview

• 25%

4.9 Earnings per share in US cents

(fully diluted)

319 9,089 4Q10 US$m 31% Revenue

• 28%

Net profit vs 4Q09

• 25%

20.7 Earnings per share in US cents

(fully diluted)

1,324 30,378 FY10 US$m 27% Revenue

• 30%

Net profit vs FY09

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Revenue

Revenue US$’million Volume ‘million MT

30,378 23,885 9,089 6,916 39.1 34.7 10.5 9.8

5,000 10,000 15,000 20,000 25,000 30,000 35,000 4Q09 4Q10 FY09 FY10 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Volume

• Strong revenue

growth

• revenue up 31% for

4Q10 and up 27% for FY10 on increased sales volume and higher commodities prices

• Volume growth for

all business segments

442.0 318.6 1,882.0 1,324.0

400 800 1,200 1,600 2,000 4Q09 4Q10 FY09 FY10

6 US$’million

Net Profit

• 4Q10 vs 4Q09
• Net profit down 28%
• Lower profit due to loss

in Oilseeds & Grains

• 4Q10 benefited from

biological assets revaluation gains of US$251m

• FY10 vs FY09
• Net profit down 30%
• weaker margins for most

business segments

• FY10 benefited from

biological assets revaluation gains while FY09 benefited from exceptional gains from sale of new shares in Wilmar China Ltd

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Profit Before Tax by Business Segment

US$' million 4Q10 4Q09 ∆ FY10 FY09 ∆ Merchandising & Processing (14.1) 293.3 n.m. 704.6 1,299.7 -46%

Palm & laurics 159.1 147.5 8% 587.1 692.8

• 15%

Oilseeds & grains (173.2) 145.8 n.m. 117.5 606.9

• 81%

Consumer Products 37.5 56.3

• 33%

149.8 225.3

• 33%

Plantations & Palm Oil Mills 380.6 122.2 212% 635.8 396.9 60% Others 60.4 20.4 196% 188.5 84.0 125% Associates (21.1) 14.0 n.m. 38.1 46.2

• 18%

Unallocated income/(expenses) (14.4) 11.0 n.m. (72.7) 242.3 n.m. Total 428.8 517.1

• 17%

1,644.2 2,294.4

• 28%
• Merchandising & Processing – Palm &

Laurics saw higher sales volume in 4Q10 and respectable margins due to timely purchases of raw materials and more contribution from value-added products. Oilseeds and Grains registered losses in 4Q10, despite strong volume growth, due to challenging operating environment

• Consumer Products – Higher sales volume

in 4Q10 but margins lower due to rising feedstock prices and price increase restriction subsequent to a selling price increase in mid-Oct 2010

• Plantation & Palm Oil Mills – 4Q10 included fair

value gains from biological assets. Excluding the gains, 4Q10 profit increased 23% over 4Q09 due to higher realised prices

• Others – Higher shipping profits and higher income

from other investments

• Associates – Weaker performance in 4Q10 due to

losses generated by associates in China

• Unallocated income/(expenses) – 4Q10 recorded a

fair value loss of US$0.7m on CBs compared to a gain of US$18.0m in 4Q09. Share

• ption expenses increased

US$5.9m to US$10.5m in 4Q10

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Pretax Profit Breakdown by Business Segment

4Q10 4Q09 FY10 FY09 Merchandising & Processing

• 3.2%

58.0% 41.1% 63.4%

Palm & laurics 35.9% 29.2% 34.2% 33.8% Oilseeds & grains

• 39.1%

28.8% 6.9% 29.6%

Consumer Products 8.4% 11.1% 8.7% 11.0% Plantations & Palm Oil Mills 85.9% 24.1% 37.0% 19.3% Others 13.6% 4.0% 11.0% 4.1% Associates

• 4.7%

2.8% 2.2% 2.2% Total 100.0% 100.0% 100.0% 100.0%

* Excluding unallocated income/expenses

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(A) Plantations & Palm Oil Mills

US$ million 4Q10 4Q09 ∆ FY10 FY09 ∆ Revenue 497.4 326.3 52% 1,485.2 1,119.0 33% Profit before tax 380.6 122.2 212% 635.8 396.9 60% Planted area (ha) 244,965 235,799 4% 244,965 235,799 4% Mature area harvested (ha) 186,688 159,464 17% 186,688 159,464 17% FFB production (MT) 967,140 949,091 2% 3,348,891 3,213,360 4% FFB Yield (MT/ha) 5.2 6.0

• 13%

17.9 20.2

• 11%

Mill Production Crude Palm Oil (MT) 467,978 455,296 3% 1,597,890 1,575,534 1% Palm Kernel (MT) 106,744 105,691 1% 371,626 367,894 1% Extraction Rate Crude Palm Oil 20.7% 21.2%

• 2%

20.7% 20.9%

• 1%

Palm Kernel 4.7% 4.9%

• 4%

4.8% 4.9%

• 2%
• 4Q10 and FY10 pretax profit included US$251m fair value gains from biological assets
• Excluding the gains, 4Q10 pretax profit was 23% higher compared to 4Q09 due to higher

realised prices, partially offset by higher unit production costs resulting from lower yield. FY10 pretax profit was only marginally higher than FY09 as FY09 realised prices benefited from forward sales and FY10 unit production costs increased due to lower yield

• Yield dropped in 4Q10 and FY10 due to lower yield of newly matured hectarage. Wet

weather in most parts of Sumatera in 1H10 also contributed to the lower yield in FY10

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Plantation Age Profile

in hectares 31 Dec 2010 0 to 3 yrs 4-6 yrs 7 - 14 yrs 15 - 18 yrs >18 yrs Total Indonesia 41,558 68,160 38,838 18,711 16,167 183,434 Malaysia 1,926 7,292 22,398 17,107 12,808 61,531 Total planted area 43,484 75,452 61,236 35,818 28,975 244,965 % of total planted area 17.8% 30.8% 25.0% 14.6% 11.8% 100.0% Included YTD new plantings of : 5,132 Plasma Programme 121 1,812 16,748 7,708 7,741 34,130 % of planted area 0.3% 5.3% 49.1% 22.6% 22.7% 100.0% 31 Dec 2009 Indonesia 65,751 38,840 37,366 19,847 11,562 173,366 Malaysia 2,848 8,085 25,687 17,906 7,907 62,433 Total planted area 68,599 46,925 63,053 37,753 19,469 235,799 % of total planted area 29.1% 19.9% 26.7% 16.0% 8.3% 100.0% Included FY09 new plantings of : 13,380 Plasma Programme 1,047 1,624 18,131 9,484 3,461 33,747 % of planted area 3.1% 4.8% 53.7% 28.1% 10.3% 100.0% Average Age of Palm

• Weighted average age of our plantations is approximately 9 years.

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(B) Merchandising & Processing – Palm & Laurics

36.3 692.8 19,070 12,627 FY09

• 1%

8% 9% 45% ∆ 27.9 147.5 5,286 3,550 4Q09 28.2 587.1 20,820 16,821 FY10 Palm & Laurics 4Q10 ∆ Revenue (US$ million) 5,156 33% Sales volume (‘000 MT) 5,783 9% Profit before tax (US$ million) 159.1

• 15%

Profit before tax per MT (US$/MT) 27.5

• 22%
• Volume was up 9% in both 4Q10 and FY10 due to consumption growth as well as

the Group’s extensive distribution network and expanded capacities in Indonesia and Europe

• Despite the challenging operating environment, margins for 4Q10 held up due to the

timely purchases of raw materials and improved contributions from high value- added products like specialty fats, oleochemicals and biodiesel

• Margins in FY10 were affected by tighter CPO supply and the uncompetitive pricing
• f palm relative to other edible oils

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(C) Merchandising & Processing – Oilseeds & Grains

38.9 606.9 15,608 8,156 FY09 n.m. n.m. 4% 16% ∆ 32.1 145.8 4,547 2,567 4Q09 6.4 117.5 18,281 10,172 FY10 Oilseeds & Grains 4Q10 ∆ Revenue (US$ million) 2,975 25% Sales volume (‘000 MT) 4,740 17% Profit before tax (US$ million)

• 173.2
• 81%

Profit before tax per MT (US$/MT)

• 36.5
• 84%
• Sales volume in 4Q10 and FY10 increased due to expanded capacities in oilseeds

crushing, flour and rice milling

• But poor crush margins from excessive imports of soybeans by the industry and the

Group’s less timely purchases of raw materials resulted in a pretax loss of US$173.2m in 4Q10

• FY10 pretax profit was down 81% on lower margins

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(D) Consumer Products

70.6 225.3 3,191 3,898 FY09

• 42%
• 33%

14% 29% ∆ 61.9 56.3 909 1,093 4Q09 40.7 149.8 3,679 4,697 FY10 4Q10 ∆ Revenue (US$ million) 1,413 21% Sales volume (‘000 MT) 1,035 15% Profit before tax (US$ million) 37.5

• 33%

Profit before tax per MT (US$/MT) 36.2

• 42%
• Volume growth for 4Q10 and FY10 was due to consumption growth in China, the

sale of new consumer products and increased market share in Indonesia and Vietnam

• Pretax profit for 4Q10 fell 33% as margins were affected by rising prices of edible oils

feedstock and price increase restriction subsequent to an increase in selling prices in mid-October 2010

• Pretax profit for FY10 fell 33% as margins weakened from the exceptional levels

achieved in 1H09, which benefited from low feedstock prices during the global financial crisis. The rising prices of feedstock since mid-FY10 further contributed to the weakness

Cashflow

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• Inventories turnover days were higher due to higher commodities prices and

increased stockholding in response to rising prices and the Group’s overall enlarged operations

• Trade receivables turnover days were higher primarily due to higher

commodities prices, especially in 4Q10. Credit policy remained unchanged

• Trade payables turnover days was unchanged at 15 days

US$ million FY10 FY09 Operating cashflow (2,319) (520) Less : Acquisition of subsidiaries (1,546)

• Capital expenditure

(1,064) (1,063) Net proceeds from bank borrowings 5,835 1,794 Others incl increase in other short term (898) (852) deposits and dividends paid

• Net cashflow

8 (642) ==== ==== Turnover days

• Inventory

70 56

• Trade Receivables

31 25

• Trade Payables

15 15

Gearing

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As at As at US$ million 31 Dec 10 31 Dec 09 Debt/Equity (x) 0.90 0.41

• Net Debt

10,637 4,445

• Shareholders' funds

11,856 10,931 Adjusted Debt/Equity (x) 0.38 0.06

• Liquid working capital *

6,095 3,764

• Adjusted Net Debt

4,543 681 Interest coverage (x) # 23.0 52.8

* Liquid working capital = Inventories (excl. consumables) + Trade receivables – Current Liabilities (excl. borrowings) # Interest coverage ratio is calculated for the year ended 31 Dec 10 and 31 Dec 09

• Net debt to equity ratio increased to 0.90x on higher borrowings to fund

expanding operations. Despite the increase in borrowings, the Group’s net gearing remains at a manageable level

• High interest coverage ratio of 23x
• Adjusted debt to equity ratio remains low at 0.38x

Funding & Liquidity

Funding & liquidity US$ million Available Utilised Balance Credit facilities :

Committed 3,770 3,312 458 Trade finance 19,841 13,340 6,501 Short term 1,007 773 234

Total credit facilities 24,618 17,425 7,193 Cash & cash equivalents 400 Total liquidity 7,593 As at 31 Dec 10

• 77% of utilised facilities were trade financing lines, backed by inventories and

receivables

• 71% of total facilities were utilised at 31 Dec 10, up from 55% at 31 Dec 09.
• US$7.6b total liquidity available at 31 Dec 10

Key Indicators

Year ended Year ended 31-Dec-10 31 Dec 09 Return on Average Equity 11.6% 18.3% Return on Average Capital Employed 9.5% 17.0% Return on Average Assets 4.6% 9.1% in US cents EPS (fully diluted) 20.7 27.4 NTA per share 116.5 108.0 NAV per share 185.3 171.0 in Singapore cents Dividends (interim & final) 5.5^ 8.0

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^ Proposed final dividend of S$0.023

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Risk Management

Risk Management

Commodities Price Risk

Risk Governance Structure

Interest Rate Risk Credit Risk Foreign Exchange Risk

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Risk Governance Structure

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Operating Units

• Merchandising (commodities price & credit risks)
• Treasury (forex and interest rate risks)
• Operation/Legal/Reputational

Executive Risk Committee (ERC)

• Comprises Executive Directors
• Monitors & improves overall effectiveness of risk

management system

• Reviews trade positions & limits

Board-level Risk Management Committee (RMC)

• Chaired by Lead Independent Director
• Oversees ERC
• Reviews overall risk management guidelines/

framework, policies & systems

• Reviews & approves enterprise risk limits/

recommends to BOD

Independent Middle Office

• Captures and

measures Group- wide risks.

• Monitors for breach

in limits.

• Circulates daily risk

exposure report to ERC.

• Risk alert to

merchandising team, ERC and/or RMC when exposure seen reaching trigger levels.

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Business Update

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Looking Forward

• Optimistic on prospects for 2011
• Wilmar will continue to leverage its well-established presence

in Asian markets and invest in existing and new businesses for growth

• Projected capital expenditure of approximately US$1b for

2011

• Demand for agri-commodities expected to remain strong
• Refining and oleochemicals should benefit from expanded

capacities

• Plantations and fertilisers should benefit from higher palm oil

prices

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Questions & Answers