Moody’s: Sime Plantation’s liquidity to remain weak

Moody’s Investors Service expects Sime Darby Plantation Bhd’s (Sime Plantation) liquidity to remain weak as its cash sources may be insufficient to meet scheduled debt maturities, capital spending and dividends through December this year.

The rating agency said the projected cash deficit was primarily driven by Sime Plantation’s short-term debt maturities.

“Our projected cash flow from operations (CFO) is based on the high-end of our medium-term price assumption range for crude palm oil (CPO) of RM1,900 to RM2,300 per tonne,” said Moody’s in a statement.

It said CPO prices had increased considerably in recent months.

“Thus, Sime Plantation’s projected CFO could be higher than our projections should CPO prices remain at current high levels for a sustained period.”

Sime Plantation had refinanced about 49 per cent, or RM3.9 billion, of its total debt in December last year.

Moody’s said the large debt refinancing was credit positive for Sime Plantation to improve its liquidity and extend debt maturities.

“In total, Sime Plantation refinanced its U$760 million foreign currency loans, which previously had a bullet maturity in June, with new amortising term loans.”

The company also refinanced RM800 million working capital facilitates with new term loans, which have longer maturities.

Sime Plantation said the new facilities offered slightly lower interest rates.

“Proforma for the refinancing, we estimate Sime Plantation’s short-term debt as a proportion of total debt declined to around 28 per cent from 77 per cent as of Sept 30 last year,” said Moody’s.