Asia CPO sector outlook positive - Moody’s

26 June 2008 05:38  [Source: ICIS news]

SINGAPORE (ICIS news)--Credit ratings agency Moody’s assigned on Thursday a positive rating outlook for Asia Pacific’s palm oil industry over the next 12 to 18 months citing continued high prices for crude palm oil (CPO).

The rapid rise and continued high prices for CPO over the past 18 months strengthened balance sheets of Asian palm-oil producers, who responded by buying more plantations and increased planting of Greenfield properties, the statement said.

“Most firms are more inclined to focus on organic growth, delay downstream biodiesel projects and to avoid new purchases amid higher asset prices”, said Peter Choy, Vice President and senior credit officer at Moody’s, said.

However, the positive outlook for the sector might not necessarily translate into upgrades for companies as the market is at a cyclical peak and some firms were still integrating earlier expansions, he added.

“Recent regulatory changes may have a negative impact on biodiesel prospects, but such output accounts for a negligible share of companies’ earnings” Wonnie Chu, a Moody’s analyst, said.

She added that the reduction in India’s import duty on CPO should support demand from Malaysian and Indonesian producers.

Agribusiness group, Wilmar International, posted first quarter profits reaching historical highs last month on the back of higher CPO prices supporting the bottom line.

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By: Bohan Loh
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