[RAM] RAM Ratings affirms Golden Agri's AA2(s) issue rating

RAM Ratings has reaffirmed the AA₂(s)/Stable rating of the RM5.0 bil Islamic Medium-Term Notes (IMTN) Programme (2012/2027) issued by Golden Assets International Finance Limited, a funding conduit of Indonesia-based plantation company, Golden Agri-Resources Ltd (GAR or the Group). 

The affirmation is based on the Group’s leading business position as the world’s second largest oil palm planter and a major producer in Indonesia’s downstream cooking oil sector, underscoring a high degree of vertical integration. Complementing this is GAR’s sturdy financial metrics, driven by robust crude palm oil (CPO) prices, gradual CPO production recovery and the Group’s resilient downstream business. GAR’s CPO yield of around 4.2-4.3 MT per mature hectare compares favourably against that of large regional peers. Significant exposure to volatile CPO prices and mounting pressure from environmental and social issues moderate the issue rating. Further, GAR operates within a more challenging operating environment in Indonesia, where the regulatory framework is still evolving, and protracted negotiations with landowners and infrastructure bottlenecks are common.

As at end-June 2024, GAR’s adjusted gearing and funds from operations debt cover improved to 0.38 times and 0.31 times, respectively (end-June 2023: 0.41 times and 0.22 times), in tandem with a smaller adjusted debt load and better profitability. Steady cashflow generation, along with manageable capital expenditure and investments, is expected to support deleveraging, further enhancing the Group’s credit metrics.  

Over the period in review, both GAR’s upstream and downstream divisions demonstrated weaker profit performances in FY Dec 2023 due to normalising CPO prices (-28%), lower fresh fruit bunch (FFB) output (-5%) and elevated production costs. Resultantly, its operating profit before depreciation, interest and tax (OPBDIT) fell 54.2% to USD848.6 mil, largely in line with our expectation. Even though correspondingly lower, the Group’s profit level remains fairly healthy, especially that of its downstream business given a favourable sales mix of higher-margin products. 

In 1H FY Dec 2024, the Group’s OPBDIT grew 4.7% to USD 412 mil (1H FY Dec 2023: USD 393 mil). The better showing is largely due to an increased downstream products sales volume (+11%), which offset the impact of the continued downtrend in FFB output (-10%) – seen industry-wide owing to the effects of El Nino weather conditions – as well as GAR’s replanting activities. 

The (s) suffix attached to the IMTN rating reflects GAR’s credit risks in view of its irrevocable and unconditional undertaking to fulfil its obligations to Golden Assets to ensure principal and profit payments or any amount falling due under the RM5.0 bil programme are met.


Analytical contacts
Wong Ee Loo
(603) 3385 2521
eeloo@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my