In a filing with Bursa Malaysia yesterday, Sime Darby said SDE had on Feb 5 received a notice from the Dubai International Arbitration Centre (DIAC) that EMAS had submitted a request for arbitration against SDE which was filed on Jan 24, 2016. The amount that EMAS is seeking from the arbitration proceedings is AED41.04mil (about RM46.37mil).
KUALA LUMPUR: Fitch Ratings has assigned Sime Darby Plantation Bhd
(SDP) a long-term foreign-currency issuer default rating (IDR) of ‘BBB+’ with stable outlook and a senior unsecured rating of ‘BBB+’.
The rating agency has also removed the rating watch negative (RWN) on the US$1.5bil sukuk programme and the outstanding issuance under the programme, which were transferred to SDP from Sime Darby Bhd (Sime Darby) in May 2017, and affirmed them at ‘BBB+’.
SDP had debt of RM13.9bil at the end of the financial year to June 2016 (FY16), including inter-company debt and capital leases.
“We had expected post-restructuring debt of RM10.3bil at SDP as of FYE17, including RM2.2bil of subordinated perpetual sukuk and outstanding amounts under its US$1.5bil multi-currency sukuk programme. While SDP’s debt was higher than expected at RM11.6bil at FYE17, around RM1.5bil of inter-company loans owed by SDP have since been settled,” Fitch said in a statement dated Nov 22.
Fitch Ratings noted that SDP has been focusing on deriving more value from its certified sustainable palm oil (CSPO) output through higher sales of physical oil, which could garner price premiums of up to US$15 a tonne on average over uncertified oil.
While higher price realisations for certified sustainable products more than offset certification and implementation costs currently, the net benefit to SDP should improve with better access and more sales to higher-margin markets in Europe and the US.
In a separate statement, Sime Darby said the rating by Fitch was an affirmation of the company’s efforts to become the preferred sustainable palm oil and fats specialist and a trusted customer solutions provider by focusing on differentiated, sustainable and traceable high value products, to serve its customers’ evolving needs.
“With this in mind, SDP will be looking to explore and expand opportunities to increase its presence in other key geographical markets in Southeast Asia, the United States, Europe, Africa and the Middle East. Through these initiatives, SD Plantation targets for its downstream operations to contribute more than 20% of its profit before interest and tax (PBIT) within the next five years,” Sime Darby said.
“This news has come at an opportune time and augurs well for the prospects of our business as we enter this next phase in our journey. SDP has come very far, especially in the last 10 years. We are now equipped and ready to move ahead after the listing, to take the company to the next level,” Sime Darby Plantation executive deputy chairman & managing director Tan Sri Mohd Bakke Salleh said.
“Global demand for edible oils is driven by the growing population, especially the middle class in key consumer markets, and increased food consumption. Thus, SDP expects its market reach to grow even further over the next five years,” Mohd Bakke said.
“While it is expected that China and India will continue to drive the demand for palm oil in food consumption, palm oil demand in other countries is also expected to grow. The demand in the United States, for instance, is projected to increase significantly subsequent to the ban on transfats in June 2018,” he added.
From its current portfolio of global customers, SDP is looking forward to extend its market reach beyond the five top consuming countries, namely, Malaysia, Indonesia, India, the European Union and China. These countries account for 53.2% of the global palm oil consumption or approximately 33.2 million tonne in 2016.
Separately, Fitch Ratings has downgraded Sime Darby Bhd’s long-term foreign- and local-currency IDR to ‘BB+’ from ‘BBB+’. The outlook on the ratings is stable.
It has also downgraded Sime Darby’s senior unsecured rating to ‘BB+’ from ‘BBB+’. Simultaneously, the ratings have all been removed from RWN, which was in place since March 2, 2017.
Fitch Ratings said the resolution of the RWN on Sime Darby’s ratings and their downgrade follows shareholder and regulatory approval for the demerger of its plantation and property businesses.
These businesses, especially SDP (SDP, BBB+/Stable), were a key driver of Sime Darby’s cash flows and earnings, contributing around 70% of consolidated Ebitda in the financial year ending June 2016 (FY16).
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