[RAM] RAM Ratings affirms Batu Kawan's sukuk at AA1/Stable

RAM Ratings has affirmed the AA₁/Stable rating of Batu Kawan Berhad’s (BKB or the Group) RM1.0 bil Islamic Medium-Term Notes Programme (2022/2043), reflecting the Group’s consistently strong business fundamentals that largely mirrors that of Kuala Lumpur Kepong Berhad (KLK, AA1/Stable issue ratings) which contributes more than 95% of its consolidated revenue and operating profit before depreciation, interest and tax.

The Group’s integrated plantation business are managed under KLK, while BKB itself oversees the industrial chemical business. As one of Malaysia’s largest plantation groups, BKB benefits from diversified and integrated operations that underpin stable earnings despite volatility in the midstream and downstream segments and fluctuating crude palm oil (CPO) prices. Operational resilience is supported by enhanced agronomic practices and ongoing cost efficiencies, despite adverse weather conditions.

The ratings also factor in expectations for a medium-term recovery in BKB’s financial metrics back to RAM’s rating thresholds. This recovery is expected to be underpinned by tapering capital expenditure, a slower pace of acquisitions and improved performance in the oleochemical segment. Notably, BKB reported strong results for the 9M FY Sep 2025, with revenue and pre-tax profit rising 11.2% and 23.0% y-o-y to RM19.05 bil and RM1.29 bil, respectively. These gains were driven by increased contributions from the plantation segment, supported by favourable CPO and palm kernel prices, which offset weaker downstream performance. However, we note that the Group’s capacity to take on additional debt is constrained at the current rating level, unless supported by stronger operating cash flow.

As at end-June 2025, BKB’s gearing ratio was 0.81 times, exceeding our projection, mainly due to short-term borrowings raised by KLK to finance increased working capital for manufacturing segment. Net-of-cash credit metrics remain within expectations. Funds from operations (FFO) debt coverage and FFO net debt coverage were stable at 0.23 times and 0.31 times in 9M FY Sep 2025, supported by stronger earnings.


Analytical contact
Chew Wei Li
(603) 2708 8301
weili@ram.com.my

Thong Mun Wai
(603) 2708 8255
munwai@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my