The worst could be over for Wilmar

Its market leader status makes it difficult for competitors to operate in each region.

Wilmar International is expected to recover from the 2019 lows and perform far greater than the market expectations in 2020 based on its China operations, according to a report by DBS Group Research.

“As the market leader in each segment, Wilmar’s presence makes it difficult for competitors to operate meaningfully in each region. This gives Wilmar a solid footing to further grow its market share and earnings,” analysts William Simadiputra and Rui Wen Lim said.

In particular, its oilseeds and grains business is noted to have the largest crushing capacity in the industry. Also, if the prices of crude palm oil (CPO) continues to be strong, the company is expected to deliver better earnings than market expectations.

The company is also noted to be heading towards a more stable business model and earnings profile as it expands into producing consumer branded products.

Over half of the company’s revenue come from China as of FY 2018, with Southeast Asia and Europe accounting for 17% and around 6%, respectively. A prospective recovery from these markets could improve its earnings outlook, but this will not be unique to the firm as other processors are also vying for the same markets, the reports stated.

Wilmar’s profits plunged 52.3% in Q2, owing to the outbreak of African Swine Flu and the trade war. However, it rose 10% in the following quarter, with crushing operations performing better than expected.