MARC affirms Sime Plantation’s ‘AAA’ rating, ‘stable’ outlook

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed Sime Darby Plantation Bhd’s (Sime Plantation) corporate credit rating at “AAA”, and affirmed its perpetual subordinated sukuk programme of up to RM3 billion at “AAIS”.

In a statement yesterday, MARC said the ratings outlook was “stable”, noting that Sime Plantation benefited from a onenotch rating uplift for implicit support from major shareholder Permodalan Nasional Bhd.

“The affirmed corporate credit rating is driven by Sime Plantation’s sizeable and geographically diversified oil palm plantations that support a strong cash flowgenerating ability to provide a healthy buffer against its financial obligations,” it said.

The rating agency said Sime Plantation’s rating was moderated by susceptibility of earnings to crude palm oil (CPO) price movement, although its vertically-integrated business structure provided mitigation against the impact of CPO price volatility.

“The stable rating outlook reflects MARC’s expectations that the CPO price level would remain above RM2,000 per tonne over the near term.

“The group’s productivity will also remain supportive of its ability to balance its borrowing levels with capex (capital expenditure) requirements for its replanting and new planting activities,” it added.

With a total plantation landbank of about one million hectares, MARC said Sime Plantation’s total cultivated oil palm plantation land stood at around 603,000ha, making the group one of the world’s largest palm oil producers.

It said Sime Plantation production accounted for about four per cent of global CPO production at the end of last year.

With 98 per cent of its palm oil certified as sustainable palm oil, MARC said Sime Plantation would retain a competitive advantage as rising concerns on sustainable practices weigh on the palm oil industry.