KUALA LUMPUR (Aug 27): Moody’s Ratings has revised its outlook for SD Guthrie Bhd (KL:SDG) to positive from stable, as it affirmed the group's Baa2 issuer rating.
The outlook change reflects the ratings agency's expectation that the plantation group would maintain strong credit metrics in the next 12-18 months, underpinned by strong earnings, financial discipline and supportive palm oil market conditions.
"SDG's land monetisation strategy supports earnings diversification through industrial development while providing additional financial flexibility to fund growth initiatives and reduce debt," Moody's Ratings assistant vice-president Tay Yu Sheng said in a statement.
Moody’s forecast SD Guthrie's annual adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) to come in at RM4.3 billion to RM4.5 billion during the period, broadly in line with the RM4.4 billion the group generated in the 12 months ended June 2026.
Its forecast is based on a medium-term crude palm oil price (CPO) range of RM3,800 to RM4,200 per tonne, with prices to stay supported by Indonesia’s B50 biodiesel mandate. Potential supply constraints from El Niño-related weather conditions could provide further support.
SD Guthrie's downstream operating profit is expected to remain stable at RM510 million-RM550 million annually, not far from the RM572 million recorded for the 12 months ended June 2026. "Market volatility will continue to support earnings from the bulk and trading businesses, although soft consumer demand and high feedstock costs will constrain profitability in the differentiated market segment," it said.
However, Moody’s flagged that SD Guthrie’s liquidity is inadequate, warning that the group's cash balance as at end-June and projected operating cash flow would be insufficient to cover upcoming debt maturities, capital spending, investments as well as dividends over the next 12 to 18 months.
"Nevertheless, SD Guthrie has strong access to domestic and international bank funding, supported by its government-linked shareholders. The company also had around RM5.3 billion of uncommitted undrawn credit facilities as of June 30, 2026 to supplement its liquidity," it noted.
A rating upgrade could follow if SD Guthrie reduces its reliance on upstream earnings, which are highly susceptible to changes in CPO prices, strengthens its capital structure and maintains conservative financial policies.
It said a downgrade is unlikely given the positive outlook, though the agency could return the outlook to stable if the group is unable to roll over its short-term debt maturities or experiences a reduction in undrawn credit facilities.
The outlook could also be pressured if SD Guthrie pursues aggressive financial policies, provides significant financial support or guarantees to joint ventures, or if the group experiences sustained deterioration in its credit metrics.