Lang
PPB Group Bhd could face a financial impact of up to RM600 million (US$182.9 million) in a worst-case scenario if associate company Wilmar International Ltd loses its appeal before Indonesia's Supreme Court over alleged misconduct in palm oil export permits.
Managing director Lim Soon Huat said the amount, equivalent to about 45 sen per PPB share, represents the group's share of Wilmar's US$729 million (S$939.4 million) security deposit lodged with the Indonesian Attorney General's Office.
"But this is the worst-case scenario. We believe the judgment or decision to be handed down by Indonesia's Supreme Court will be more favourable," Lim said at the company's first-half results briefing on Wednesday, noting that PPB has not made any provisions at this stage.
Despite this potential financial commitment, Lim affirmed that PPB Group's commitment to dividends remains intact. The group declared an interim dividend of 12 sen per share for the quarter ended 30 June 2025 (second quarter of FY2025), unchanged from the previous year, backed by a net cash position of RM1.3 billion.
"In addition to dividends from Wilmar, we also have cash flow from other investments. After taking into account our capital and operational requirements, we believe we can continue to reward shareholders with attractive dividends," Lim said.
He added that Wilmar's operations in China and India are expected to remain profitable, supporting future distributions.
Wilmar remains the largest contributor to PPB Group's earnings. In FY2024, Wilmar contributed RM992 million to PPB's total pre-tax profit of RM1.33 billion.
In the second quarter of FY2025, Wilmar's contribution to PPB's earnings fell 19% to RM197 million, in line with a decline in its net profit from US$277 million in the second quarter of 2024 to US$251 million. PPB holds an 18.8% equity stake in Wilmar, making it a significant associate company.
Doubling Down on Investment in Indonesia
Lim dismissed suggestions that PPB might reconsider its investments in Indonesia amid legal uncertainty and recent social unrest, including riots that have shaken investor confidence in Southeast Asia's largest economy.
"Rather than pulling back, we are investing more in Indonesia, not just in the business itself but also in infrastructure and distribution capacity," he said, describing Wilmar as "one of the strongest companies in the consumer products space," with staples such as cooking oil, rice and sugar in its portfolio.
He described the ongoing case as a "temporary setback" amid a broader slowdown in the Indonesian economy, stressing that PPB views its investment in the country as long-term.
Wilmar, which contributes the bulk of PPB's earnings, was one of three palm oil companies implicated in a 2022 corruption case involving export permits.
Although the Central Jakarta Court acquitted Wilmar and others earlier this year, prosecutors appealed the verdict to the Supreme Court after the judges who issued the acquittal were arrested on bribery charges.
In June, Wilmar said it had handed over 11.8 trillion rupiah (US$729 million or S$939.4 million) to the Indonesian Attorney General's Office as a "security deposit" pending the Supreme Court's decision. The funds will be returned if the company is acquitted, but will be partially or fully forfeited if the ruling goes against it.
Kenanga Research warned that the development raises the risk premium for PPB Group and could weigh on the stock as long as the case remains unresolved. The brokerage cut its target price for PPB shares from RM15 to RM10.50 and downgraded the stock to "market perform".
PPB shares, which recently fell below the RM10 level — their lowest in more than 16 years — rose 27 sen or 2.99% to close at RM9.31 at midday on Wednesday, giving the group a market capitalisation of RM13.24 billion.
Source: The Star