RAM Ratings upgrades Malayan Cement’s sukuk to AA1

RAM Ratings, February 13, 2025

RAM Ratings has upgraded the long-term rating of Malayan Cement Berhad’s (Malayan Cement or the Company) RM5.0 billion Sukuk Murabahah Programme (2022/2052) to AA1 from AA3. Concurrently, we have revised its outlook back to Stable from Positive. Its short-term rating remains at P1. 

The upgrade reflects the Company’s significantly stronger than expected financial profile, underpinned by robust demand for cement and concrete products, favourable pricing and enhanced operational efficiencies. These factors bolstered the Company’s credit metrics, aligning them with the higher rating.

Anchored by five integrated cement plants, four grinding stations and a comprehensive logistics network, Malayan Cement remains Malaysia’s largest cement producer, commanding an approximately 65% market share in Peninsular Malaysia. The Company benefits from integration with YTL Corporation Berhad (YTL Corp) – its ultimate parent – leveraging on synergies with the latter’s infrastructure, construction and property development businesses. 

These factors contributed to markedly improved financial results in FY June 2024, seeing Malayan Cement’s top line grow 18% y-o-y to RM4.4 bil and operating profit before depreciation, interest and tax (OPBDIT) surge 58% y-o-y to RM938.8 mil. This positive momentum carried into 1Q FY June 2025, with revenue remaining steady at RM1.2 bil as strong aggregates and concrete sales (+29.3% y-o-y) offset weaker cement sales volumes. Reflecting enhanced operational efficiencies and lower production costs, OPBDIT rose 17.1% y-o-y to RM297.8 mil.

Disciplined capital management and strong earnings accretion led to a significantly stronger balance sheet in fiscal 2024, with total debt reducing to RM3.0 bil as at end-September 2024 (end-June 2024: RM3.2 bil; end-June 2023: RM3.8 bil) and gearing accordingly easing to 0.47 times (end-June 2024: 0.50 times; end-June 2023: 0.64 times). Annualised funds from operations (FFO) debt coverage for 1Q fiscal 2025 stayed sound at 0.34 times (fiscal 2024: 0.34 times; fiscal 2023: 0.16 times), driven by deleveraging amid strong revenue generation. Our sensitised analysis, which assumes annual debt repayment of RM500 mil, indicates that Malayan Cement’s gearing will stay below 0.50 times, with FFO debt coverage increasing to 0.50 times, supporting the rating upgrade.

Looking ahead, Malayan Cement’s performance is anticipated to remain robust, underpinned by Malaysia’s active pipeline of infrastructure projects, urbanisation trends and growing industrial developments. Stabilised input costs, particularly coal prices, will keep the Company’s average selling prices and bottom line stable. 

The issue ratings also benefit from an uplift afforded by parental support under RAM’s methodology for group rating links assessment. This reflects RAM’s view that Malayan Cement benefits from a ‘strong’ relationship with YTL Corp (rated AA1/Positive by RAM). The Company’s significant contribution to YTL Cement’s performance (FY June 2024 revenue: 82%; profit before tax: 81%) and YTL Cement’s role within YTL Corp’s Cement and Building Materials segment – the second largest after the Utilities segment – underscore this view.