[MARC] MARC Ratings affirms SD Guthrie’s ratings; assigns preliminary ratings on proposed Sukuk Wakalah Programme

MARC Ratings has affirmed its corporate credit rating on SD Guthrie Berhad at AAA. In addition, the rating on SD Guthrie’s existing Perpetual Subordinated Sukuk Programme has been affirmed at AAIS. Concurrently, the rating agency has assigned preliminary ratings of AAAIS to SD Guthrie’s proposed Senior Islamic Medium-Term Notes (Senior Sukuk Wakalah), and AAIS to the proposed Subordinated Perpetual Islamic Notes (Perpetual Sukuk Wakalah) under a Sukuk Wakalah Programme with a combined limit of RM5.0 billion. All ratings carry a stable outlook. The ratings on the perpetual subordinated sukuk issuances are in line with MARC Ratings’ methodology on notching principles of subordinated and hybrid instruments.

SD Guthrie, one of the world’s largest integrated palm oil producers, has a strong track record in navigating the cyclicality of the plantation sector. The group maintains significant upstream operations in Malaysia, Indonesia, Papua New Guinea and the Solomon Islands, and has established downstream operations in Malaysia, Indonesia, Papua New Guinea, the United Kingdom, Netherlands, South Africa and Thailand. These operational strengths are supported by a disciplined approach to capital management, afforded through stable and sizeable operating cash flows from its diversified operations. The group’s financial strength would enable it to embark on new ventures, currently involving the development of several industrial estates, in view of its strategy to further diversify income streams.

Notwithstanding SD Guthrie’s credit rating benefitting from the likelihood of parental support from Permodalan Nasional Berhad, MARC Ratings now places SD Guthrie’s standalone rating at AAA, reflecting the group’s strengthening capital structure, stability in earnings, and strong economic prospects from its diversification strategy. This view is underscored by SD Guthrie’s venture into two new verticals, industrial development and renewable energy, leveraging its vast urbanised landbank. The group has entered into several memorandums of understanding with property players to develop industrial estates on its land in Negeri Sembilan, Perak, Selangor and Johor. This has so far resulted in a joint-venture agreement with Eco World Development Group Berhad and the state-owned NS Corporation, to develop an integrated industrial park in Bukit Pelandok, Negeri Sembilan.

SD Guthrie remains one of the world’s largest oil palm plantation owners by hectarage, spanning 564,916 ha across Malaysia (51.9%), Indonesia (32.1%), and Papua New Guinea and the Solomon Islands (16.0%) as at end-June 2025. Its sustained profitability track record through commodity price cycles can be attributed to its entrenched and integrated operations, from planting material development and cultivation, to milling and refinery activities. Its vertically integrated operations support cost efficiency and margin capture.

In 1H2025, SD Guthrie recorded steady fresh fruit bunch production of 4.29 million MT, with yield improving to 9.12 MT/ha, supported by favourable weather and ongoing estate rehabilitation efforts. The group’s tree maturity profile remains healthy, with 33.4% of trees being in the prime-yielding ages through having an average replanting rate of 4% annually. Upstream profitability doubled during the period, driven by higher yields and a stronger average crude palm oil realised price of RM4,339/MT.

Downstream performance was weighed down by margin compression and lower demand in Asia-Pacific and Europe. Nevertheless, the 10-percentage point import duty reduction implemented in India in May 2025 is expected to support some demand recovery. The group operates 11 refineries with a total processing capacity of 3.99 million MT annually, with its European operations remaining fully committed, supported by increasing demand for EU Deforestation Regulation-compliant products.

Group revenue rose by 7.3% y-o-y to RM10.0 billion in 1H2025. Operating profit improved, returning to its five-year (2020-2024) average of around 16%. Consolidated borrowings of RM7.6 billion as at end-1H2025 translated into an adjusted debt-to-equity ratio of 0.37x after taking into account the equity credit on the outstanding perpetual sukuk. Upon full amortisation of the equity credit on the first call date of the perpetual sukuk in March 2026, the rating agency expects the group’s leverage to broadly remain around 0.40x. Proceeds from the proposed RM5.0 billion sukuk programme by end-2025 could be used to refinance its outstanding perpetual sukuk.

Liquidity remains strong, with RM557.0 million in cash and RM3.5 billion in unutilised credit facilities as at end-June 2025, comfortably covering RM2.4 billion in short-term borrowings and term loans instalments falling due within a year. Moreover, the group’s financial flexibility is bolstered by its sizeable unencumbered landbank, providing an avenue to raise liquidity.

Chong Wat Son, +603-2717 2929/ watson@marc.com.my
Vanessa Leong, +603-2717 2931/ xinyue@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my