MARC Maintains JB Cocoa’s RM500 Million IMTN Rating Outlook As Negative
MARC Ratings has affirmed its rating of A+IS on JB Cocoa Sdn Bhd’s RM500.0 million Islamic Medium-Term Notes (Sukuk Wakalah) Programme with the rating outlook remaining at negative.
JB Cocoa is a wholly-owned key manufacturing subsidiary of Singapore-based JB Foods Limited, which has provided a corporate guarantee on the programme. Accordingly, the rating assessment considers the consolidated credit profile of JB Foods in view of operational and financial linkages within the group.
MARC said the negative outlook continues to reflect its view that the prevailing volatile and high cocoa bean price environment has continued to weigh on JB Foods’ group working capital requirements, leading to high borrowings. Since the price of cocoa beans began escalating in 4Q2023, JB Foods’ leverage has risen to 1.51x from around 1.0x between end-June 2024 and end-2022. Meanwhile, the rating affirmation reflects JB Foods’ defensible market position as one of the key cocoa processors globally, and its longstanding experience in the cocoa industry.
The rating agency notes that cocoa bean price has eased, from USD11,878/MT on April 19, 2024, to USD7,722/MT on September 30, 2024, but has remained considerably higher than around the USD3,000/MT level prior to the price increase. The high cocoa price resulted from the significant decline in cocoa bean production in Côte d’Ivoire and Ghana, partly attributable to adverse weather conditions; collectively, these countries have been producing around 60% of the world’s supply over the last decade. However, for the current 2024/2025 crop year (ending on September 30, 2025), anticipated conducive weather conditions are expected to boost cocoa bean production from the estimated supply of 4.33 million MT for the 2023/2024 crop year.
Over the near term, MARC said the rating outlook could be revised back to stable if pressure on borrowings to fund working capital requirements eases amid a more stable cocoa bean price environment. Conversely, if the elevated borrowings continue to rise without the group putting in place adequate balance sheet support, the rating could be lowered.
