[MARC] MARC Ratings affirms FGV’S AA-IS rating with stable outlook

MARC Ratings has affirmed its rating of AA-IS on FGV Holdings Berhad’s (FGV) Sukuk Murabahah Programme of up to RM3.0 billion. The outlook on the rating is stable. The current outstanding under the rated programme stood at RM1.3 billion as at end-October 2025.

The rating affirmation reflects FGV’s sizeable and integrated palm oil operations, improved production metrics from accelerated replanting, and healthy balance sheet. These strengths are moderated by the higher cost structure from FGV’s profit-sharing arrangement with FELDA, and exposure to crude palm oil (CPO) price volatility. The land lease termination risk has been largely mitigated following the privatisation of the group in August this year. MARC Ratings maintains a one-notch uplift on the rating given FGV’s strong operational and financial linkages with FELDA. The group’s privatisation strengthens the strategic alignment between the authority and its commercial arm FGV, which sources and processes fresh fruit bunches (FFB) from settlers and its leased estates, and integrates downstream edible oils, oleochemicals, and biodiesel operations. FGV plays a central role in FELDA’s socioeconomic development mandate for settlers.

In 2024, FGV contributed 15.1% and 3.7% of Malaysia’s and global CPO production. In 1H2025, CPO output was steady at 1.3 million MT (1H2024: 1.3 million MT) with an oil extraction rate of 20.03%, above the national average of 19.24%. FGV sources FFB from FELDA settlers (42.0%), third-party estates (28.8%), and its own leased land (29.2%). Accelerated replanting improved the oil palm age to 13.2 years, supporting a 13% y-o-y rise in overall FFB yield to 7.50 MT/ha in 1H2025. FGV recorded a full year FFB yield of 15.56 MT/ha in 2024. Its five-year replanting plan through 2028 targets 54,616 ha — or 17.0% — of planted area, with an annual spending of around RM154.0 million to sustain long-term yield improvements. Upstream and downstream operations contributed RM738.9 million and RM7.3 billion in revenue, providing diversified revenue streams and incremental profit margins. Earnings remain sensitive to CPO price movements due to a larger proportion of spot-based sales compared to its peers.

FGV has 324,336 ha of cultivated land, mostly under FELDA leases, with a structurally higher cost base from lease payments and FFB profit-sharing. 1H2025 revenue rose by 7.6% to RM10.8 billion, driven by higher CPO prices and FFB intake. Pre-tax profit increased by 53.5% to RM292.3 million as production costs declined by 6.9% on higher productivity and lower aggregated field upkeep costs. Operating cash flow was weaker, although this was due to working capital seasonality. Borrowings increased to RM4.3 billion, mainly to fund working capital needs and the RM2.0 billion planned capex over the next two years, with a manageable debt-to-equity ratio of 0.57x. Liquidity remains adequate at RM1.5 billion, comprising cash and bank balances, to support upstream and downstream expansion.

Near-term earnings and cash flow will track CPO prices and production metrics, with 2H2025 performance likely to benefit from the seasonally strong FFB output typically seen in the third quarter. FGV’s exposure to price and input cost volatility, as well as land lease risk, is partly mitigated by its large scale of operations, diversified revenue streams, FELDA support, and prudent liquidity and debt management.

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