KUALA LUMPUR, Oct 20 — Malaysian Rating Corporation Bhd (MARC) has affirmed Sime Darby Plantation Bhd’s corporate credit rating at AAA with a stable outlook, as well as AAIS with stable outlook rating for the company’s perpetual subordinated sukuk programme of up to RM3 billion.

In a statement today, the rating agency said Sime Darby Plantation’s sizeable, geographically-diversified and integrated palm oil operations remained key rating drivers.

"The rating also benefits from a one-notch uplift for implicit support from its parent Permodalan Nasional Bhd, a government-linked investment company. Sime Darby Plantation’s exposure to crude palm oil (CPO) price movement that leads to cash flow volatility remains a moderating factor.

"Given the group’s commitment to spend an average of RM800 million per annum on replanting, the decline in cash flow generation from lower CPO prices in recent years has weighed on its ability to reduce its debt obligations from internally generated funds,” it said.

Sime Darby Plantation had instead relied on proceeds from land disposals to pare down its borrowings; following some delays, land parcel sales totalling RM438 million were completed by the first half (H1) of this year, MARC said.

"Sime Darby Plantation’s adjusted borrowings were lower at RM8.7 billion (H1 2019: RM8.9 billion), translating to a debt-to-equity ratio of 0.55 times. On completion of the full disposal of land parcels with the proceeds utilised to reduce borrowings, group leverage is expected to improve to about 0.52 times,” it added. — Bernama