KUALA LUMPUR: Felda Global Ventures Holdings Bhd may be the leader in the palm oil sector by size but IOI Corporation Bhd has a stronger business profile, says Moody's.
It said IOI’s highly efficient upstream operations and integrated business model supports financial stability.
“We believe an integrated company is less exposed to CPO price cyclicality and has more stable, albeit much lower profit margins. IOI's leverage ratios exhibit more stability, helped by resilient profit margins.
"We expect Felda will maintain its production leadership position as Sime Darby's -- Malaysia's second-largest producer -- efforts to increase its CPO production through improving harvesting yields and productivity will likely be realised after 12 months," says Jacintha Poh, a Moody's Vice-President and Senior Analyst.
Felda's annual crude palm oil (CPO) production was more than three million metric tons over its last three fiscal years, a lead of more than 500,000 MT over Sime Darby Berhad and more than four times the outputs of IOI and Genting Plantations.
IOI's upstream operations are most efficient, with it consistently generating the highest fresh fruit bunch (FFB) yield among all four companies and in fiscal 2015, it achieved FFB yield of around 24 MT, versus Malaysia's industry average of around 18 MT-19 MT, added Poh.
However, Moody's expects all four companies to generate lower FFB yields over the next 6 to 12 months due to poor weather conditions.