YKA's share in Wilmar's profits rose to 60%

Most of its revenues and gross profits are generated by the food products segment.

Wilmar International’s China operations, which is operated by its subsidiary Yihai Kerry Arawana (YKA), account for around 60% of the group’s profit, according to an analyst report from DBS Group Research.

YKA has generated post-tax net profit of $1.07b (RMB5.5b) in FY2018. Most of its revenues and gross profit came from its food products segment, where it sells oil, rice, flour, dried noodles, and seasonings in consumer and bulk packs. The said segment is also said to enjoy higher margins of about 12%, which is more than three times larger than that of the margin of feed ingredients & oleochemicals division.

YKA is also leveraging on China’s growing food sector. The report noted that the nation has surpassed the US as the world’s largest consumer food market, with high production of edible vegetable oil, rice and flour as well as crushed soybeans.

China is the world’s largest consumer food market. China has surpassed the US to be the world’s largest consumer food market, with high production of edible vegetable oil, rice and flour as well as crushed soybeans. Wilmar continues to position itself deeper into China’s growing food sector, leveraging on its strong suite of brands and quality products.

As of now, YKA has manufacturing bases at strategic locations across 24 provinces, autonomous regions and municipalities across China. In marketing and distributing its products, the firm makes use of distributors as well as having a direct sales model, with the former accounting for around 30% of its sales.

Furthermore, Wilmar may declare special dividends for its investors if YKA will be listed at 18x FY2020 on ChiNext. Such a move could allow the group to free up some cash as YKA will most likely become self-funded.

As of now, YKA is set to offer 542 million shares for its IPO in the Shenzhen Stock Exchange on Q4. This represents around 10% of its enlarged share capital, in a 100% primary offering.

“Besides raising proceeds to fund YKA’s capex in the next few years as Wilmar continues to grow YKA’s positioning and market leadership, the listing will also enhance public awareness of YKA’s products and operations to further entrench YKA’s China operations,” said William Simadiputra, an analyst at DBS Group Research.

The firm is planning $3.47b (RMB17.9b) in investments across 10 provinces and 12 cities where they aim to focus on R&D. About 77% of investments will come from IPO proceeds.