MARC has affirmed the short term rating of Kumpulan Guthrie Berhad’s (Guthrie) RM150 million Underwrtitten Murabahah Commercial Papers at MARC-1ID, reflecting the Group’s position as the country’s leading plantation player cum property developer with vast land banks in Malaysia and Indonesia, its strong financial flexibility and the anticipation of improved cash flow from its plantation operations, going forward. Moderating factors to the rating include the cyclical nature of the Group’s two main businesses, namely palm oil and property development, as well as the cross-border implications, particularly the operating environment of its plantation operations in Indonesia.

Guthrie’s current paid-up capital stands at around RM1.0 billion with 72.9% of its shareholding held by the Permodalan Nasional Berhad Group. Total shareholders’ funds stood at RM4.6 billion as at 31 March 2006. The Plantation and Property Development divisions remain as core revenue drivers of the Guthrie Group, contributing 74% and 18.5% respectively to total revenue in fiscal year 2005. As at end of December 2005, the total palm oil planted area of Guthrie’s Malaysian and Indonesian plantations stood at 266,633 hectares.

Despite improved palm maturity profile and higher FFB output, turnover and operating profit of Guthrie’s plantation division declined by 0.3% and 27% to RM1.56 billion and RM334.71 million respectively in FY2005 due to lower average palm oil prices. Likewise, Guthrie’s property division registered lower operating profit of RM147.8 million on the back of RM395.1 million revenue, in line with the modest performance of the general property market. Nevertheless, the operating margin of the property division improved on account of savings from enhanced project development and successful cost management. For 1QFY2006, Guthrie recorded commendable revenue of RM422.2 million (1QFY2005; RM406.9 million) and pre-tax profit of RM154.9 million (1QFY2005; RM10.4 million); supported by higher contribution from its Indonesian plantations. The Group’s on-going consolidation exercise is expected to follow through in 2006, particularly the prospect of divesting Guthrie Corridor Expressway, as part of the consolidation and strengthening of the Group’s financial position, going forward.

Guthrie’s debt leverage ratio improved to 0.64x as at 31 March 2006. Liquidity/financial flexibility position remains sound as demonstrated by its proven access to the domestic as well as international capital markets coupled with substantial holding of attractive land banks, which can be considered for disposal if there is a need to supplement its operational cash flow. Cash and cash equivalents stood at a healthy RM699.4 million as at end-March 2006. Going forward, Guthrie’s debt servicing capacity is expected to remain strong supported by improving cash flow generation of its plantation division, driven mainly by rising output, favourable CPO prices as well as relatively lower aggregate cost of production.