IJM Corporation Berhad’s (IJM) RM300 million of Commercial Papers/ Medium Term Notes Programme (CP/MTN) has been affirmed at MARC-1/ A+. This reflects IJM’s consistently strong financial results; the ability to sustain its competitive position domestically and internationally and the diversity of its business. The ratings are, nevertheless, moderated by the challenging operating environment prevailing in the local construction scene and the cyclical nature of the property industry; the two sectors from which IJM derived most of its earnings from.

IJM has five main divisions; namely construction, property development, manufacturing and quarrying, plantation and infrastructure projects. However, its strength lies in its construction division, being one of the stronger construction companies in the industry. Despite the weakened sentiment in the domestic construction industry, IJM’s outstanding order book stood at RM2.77 billion as at July 2005 of which 61% are domestic contracts. For FY2005, the division’s construction revenue decreased to RM898.2 million from RM961.6 million in the previous financial year. The decrease was mainly affected by fewer mega projects available locally since the Government has reduced its development expenditure. Furthermore the industry has been affected by the increasing prices of construction materials. Despite the drop in revenue, the group’s construction business is supported by its firm footing in India, vide several sizeable construction contracts.

The group’s property development division has improved significantly in the past five years and is currently the second highest contributor to the group’s bottom line. This was due to the improved performance of its properties in Penang, Klang Valley, Johor, Sabah and Sarawak as well as the sale of non-strategic landed property assets. Going forward, gross development value to be launched in the next two years amounts to RM2.54 billion. IJM has also made headway in India’s property development market with its maiden project, Raintree Park-Kukatpally and also a newly secured integrated township project in Andhra Pradesh worth RM599 million.

IJM’s manufacturing and quarrying division’s revenue surged threefold to RM451.8 million in FY2005 from RM150.5 million in FY2003. The substantial increase was due to the acquisition of an additional 32.4% equity in Industrial Concrete Products Berhad (ICP) making it a subsidiary of the group.

The plantation division spearheaded by IJM’s associate company, IJM Plantations Berhad benefited from the above average CPO prices during the latest financial year. However despite higher revenue recorded in FY2005, the division contributed less profit to the group due to the rising trend of fertilisers and fuel oil costs.

IJM’s off-shore ventures’ contribution turned negative in FY2005 reporting a loss of RM2.7 million. The main factor causing the losses were the low initial traffic volumes registered in Swarna Tollway and Rewa Tollway in India. The lacklustre performance was attributed to the gestation period normally observed in new highways. IJM also has stakes in other ventures in China, Argentina, Vietnam and Chile. The geographical diversity, however, exposes IJM to political and local currency risks in the countries in which it operates.

IJM’s financial profile nevertheless remains strong with stable margins, low debt leverage and adequate debt servicing capacity.