MARC has affirmed Boustead Plantations Berhad’s (formerly known as Kuala Sidim Berhad) long term ratings under Tranche 1 and 2 at A+(BG) and A- respectively. Meanwhile the short term ratings of Tranche 1 and 2 are reaffirmed at MARC-1(BG) and MARC-2 respectively. The reaffirmation of the Tranche 1 rating reflects the unconditional and irrevocable guarantee by Southern Bank Berhad (SBB), while the Tranche 2 rating is underpinned by the Group’s sizeable land bank and manageable debt leverage. The moderating factors to the company’s standalone rating include lower key performance indicators attributed to the young age profile of its palm oil planting and vulnerability to cyclical developments in the palm oil industry.

Boustead Plantations is principally involved in the cultivation and processing of palm oil, natural rubber, bulking of edible oil and agriculture research and advisory services. Palm oil plantings remain the Group’s primary crop, accounting for 99% of its total planted area while the remainder consists of forestry, rubber and coconut plantings.

In 2004, despite lower average yield per mature hectare and CPO production, Boustead Plantations’ revenue nonetheless marginally rose by 1.8% to RM369.7 million attributable to the strong CPO price in 2004 which averaged RM1,616/MT. Based on the six months results ended 30 June 2005,
Boustead Plantations registered a pre-tax profit of RM17.6 million on the back of RM175.2 million in revenue. At the operating level, Boustead Plantations recorded a profit of RM16.4 million which was 17.6% lower than the previous year’s corresponding period due mainly to the lower average selling price of RM1,388/MT, cyclical factor in crop production as well as higher production expenditure particularly fertilizer cost. Nonetheless, crop yield is expected to improve in the second half of 2005 based on the seasonal factor.

Moving ahead, the gradual shift of the palms profile into prime age category would somewhat provide the Group with steady if not rising yields. In anticipation of higher FFB production over the next few years, the Group plans to build two new mills in Sabah. As at the end 2005, Boustead Plantations owned seven palm oil mills with a combined processing capacity of 280 MT/hr operating at full capacities.

In fiscal year 2004, Boustead Plantations’ debt leverage increased to 0.51 times due to distribution of dividend amounting to RM313.8 million. Nonetheless, debt to equity ratio improved to 0.49 times as at 30 June 2005 due to the partial repayment of Tranche 1 medium term notes amounting to RM10.0 million.