MARC has affirmed Sime Darby Plantation Berhad’s (SD Plantation) corporate credit rating at AAA, and its Perpetual Subordinated Sukuk Programme (Perpetual Sukuk) of up to RM3.0 billion at AAIS. The ratings outlook is stable.

The affirmed corporate credit rating is driven by SD Plantation’s strong cash flow generating ability from its sizeable, geographically-diversified and integrated oil palm operations. The key moderating factor is the susceptibility of the group’s performance to crude palm oil (CPO) price movement, which in recent years has exerted pressure on its financial metrics. The rating benefits from a notch uplift for implicit support from parent Permodalan Nasional Berhad, a government-linked investment company that has historically extended support to the plantation company.

SD Plantation is one of the largest palm oil plantation groups globally with significant upstream operations in Malaysia, Indonesia, Papua New Guinea and Solomon Islands and sizeable downstream operations domestically and in the Netherlands, the UK, South Africa, Indonesia and Thailand, among others. The impending exit from Liberia where SD Plantation has 10,263 ha or 1.7% of total planted area of 603,146 ha is regarded as not material to the group’s operations. Given the group had faced considerable challenges in Liberia since beginning operations there, the full divestment of its loss-making Liberian operations would strengthen its focus on its key Malaysian and Indonesian plantations.