MARC has affirmed the ratings of Premium Nutrients Berhad’s (Premium Nutrients) RM85 million Murabahah Underwritten Notes Issuance Facility/Islamic Medium Term Notes (MUNIF/IMTN) at MARC-2ID/AID. The affirmation reflects the Premium Nutrients Group’s competitive position as an integrated producer of specialty fats; its diversified customer base and the structural features in the issue structure. The ratings are, however, moderated by the Group’s thin profit margin and susceptibility to the cyclical developments of raw material prices and higher energy cost, which have directly affected its working capital requirement.

Premium Nutrients is principally involved in processing of palm oil’s fresh fruit bunches (FFB) and palm kernel (PK) into commodity products (non-specialty fats), as well as the production of specialty fats targeted at the food industry. In FY2005, sales mix of specialty and non-specialty fats stood at 60:40. About 90% of its specialty fats products are exported to overseas market, while 80% of its non-specialty fats are sold in the local market. The Group’s overseas markets are serviced by its established network of agents. Besides its ability to cater to specific needs of its customers, the Group has established a good reputation as supplier of specialty fats products supported by its integrated operations and strong R & D capability. Currently, the Group operates three plants located in Pasir Gudang (Johor), Kulai (Johor) and Kakinada (India).

Based on the unaudited results of FY2005, revenue of Premium Nutrients rose 11.1% to RM448.07 million (FY2004: RM403.27 million); attributed to the growing demand for palm oil products during the year. In tandem with the revenue growth, pre-tax profit increased by 28.1% to RM7.67 million despite the high feedstock price coupled with higher financing cost, and to a certain extent, the operational losses incurred by its Malaysian subsidiary, namely Malim Sawit Sdn Bhd. Operational cash flow was noted to have strengthened, hence improvement in the cash flow protection measures. The Group’s debt leverage stood at 1.05 times(x) as at end of 2005; comprising of MUNIF/IMTN facility which constituted approximately 50% of the Group’s total borrowings. A maximum debt to equity ratrio of 1.5x has been imposed under the issue structure.