DBS has downgraded Wilmar International to a “hold” rating due to a potential US$720 million provision that the company may need to make. This decision was made despite the bank’s expectation of an earnings recovery for Wilmar starting from FY2026. The potential provision is related to Wilmar’s investment in a subsidiary, and DBS believes that this could impact the company’s financial performance in the short term.
DBS had previously expected Wilmar to report a strong earnings recovery in FY2025, driven by the recovery of the palm oil and sugar sectors. However, with the potential provision, the bank now expects Wilmar’s earnings to be affected, at least in the short term. The provision is expected to be made in relation to Wilmar’s investment in a subsidiary, which has been experiencing difficulties.
Despite this, DBS still expects Wilmar to report an earnings recovery starting from FY2026, driven by the expected improvement in the palm oil and sugar sectors. The bank believes that Wilmar’s diversified business model and strong management team will help the company to navigate the challenges and achieve a recovery in earnings.
The downgrade to a “hold” rating is a cautionary measure, as DBS wants to see how Wilmar manages the potential provision and its impact on the company’s financial performance. The bank will be monitoring Wilmar’s progress closely and may reconsider its rating if the company is able to manage the provision effectively and achieve a strong earnings recovery.
Overall, while DBS is cautious about Wilmar’s short-term prospects due to the potential provision, it still expects the company to report an earnings recovery starting from FY2026. The “hold” rating is a temporary measure, and the bank may reconsider its rating if Wilmar is able to navigate the challenges and achieve a strong recovery in earnings.
It is worth noting that the potential provision of US$720 million is significant, and it could have a material impact on Wilmar’s financial performance. However, DBS believes that Wilmar has a strong balance sheet and a diversified business model, which will help the company to manage the provision and achieve a recovery in earnings.
In conclusion, DBS has downgraded Wilmar International to a “hold” rating due to a potential US$720 million provision, but still expects the company to report an earnings recovery starting from FY2026. The bank will be monitoring Wilmar’s progress closely and may reconsider its rating if the company is able to manage the provision effectively and achieve a strong earnings recovery.