Wilmar closes 1.4% down on corruption verdict; RHB downgrades stock to ‘sell’

[SINGAPORE] Shares of Wilmar International fell on Friday (Sep 26) after the palm oil group was found guilty of corruption, with RHB downgrading its call on the stock to “sell” from “neutral”.

The bank also trimmed its target price from S$2.75 to S$2.50 – 13.5 per cent lower than Wilmar’s Thursday closing price of S$2.89.

The mainboard-listed company on Thursday said that the Indonesian Supreme Court had overturned its acquittal in a graft case involving palm oil export permits. Wilmar was alleged to have illegally profited by obtaining these permits during a nationwide shortage of palm oil that led Indonesia to impose export controls on the commodity.

Shortly after market open, the stock dropped as much as 3.8 per cent to S$2.78 with 3.3 million shares transacted as at 9.03 am. It eventually clawed back its losses to finish Friday at S$2.85, but it was still down by 1.4 per cent or S$0.04, with 20.5 million shares having changed hands.

Noting the corruption verdict, RHB said that Wilmar’s profits would likely be dented by the forfeiture of a security deposit that the authorities had seized from the company in relation to the probe.

“While the final amount of the penalty has yet to be released, the forfeiture of the US$729 million deposit would reduce FY2025’s (forecasted) earnings by 65 per cent,” the bank said.

In May, the Indonesian authorities seized 11.8 trillion rupiah (S$928 million) from Wilmar as part of the corruption investigations. The company said that the assets were a security deposit that would have been returned if the acquittal was upheld, and forfeited if it was overturned.

RHB said it will not revise its earnings forecast for Wilmar until the full details of the penalty are released.

However, it noted that the company’s reputation will likely be damaged by the Indonesian Supreme Court’s judgment. “While Wilmar maintains its innocence, we believe this outcome will result in a negative perception of the group.”

Wilmar was initially acquitted of the corruption charges by a lower court in March.

However, the case was reopened when the judges behind the acquittal were accused of receiving bribes to clear Wilmar’s name, and arrested.

Other investigations

RHB believes that the overturning of Wilmar’s acquittal could be reflective of the Indonesian authorities’ stance towards other probes involving the group.

“We are also wary that this could signal the way the Indonesian government is leaning with respect to other ongoing rice investigations,” it added, referring to another corruption case that Wilmar is embroiled in.

That case is centred on the mislabelling of rice and the company’s alleged sale of a substandard-quality version of the commodity.

Executives of Wilmar’s wholly owned unit, rice producer Padi Indonesia Maju, were suspected of having mixed lower-grade with premium-grade rice grains and passing it off as a high-quality product.

RHB said the case is part of a wider investigation by the Indonesian police on four major rice producers, including Wilmar’s subsidiary. It noted that the executives involved were charged under the country’s consumer protection law, which carries a penalty of up to 20 years’ imprisonment and a fine of up to 10 billion rupiah.