MARC Ratings has affirmed its rating of AA-_IS on Guan Chong Berhad’s (GCB) RM800.0 million Sukuk Wakalah Programme. The rating outlook remains stable.

The rating affirmation reflects GCB’s established market position as the world’s fourth-largest cocoa grinder, supported by its geographically diversified customer base and longstanding relationships with major multinational confectionery companies. The group serves about 950 customers across more than 80 countries, including cocoa traders and confectionery manufacturers such as Barry Callebaut AG, Mars, Incorporated, and Nestlé S.A. Although the top three customers accounted for more than 23% of revenue, their long-term relationships with GCB and the group’s proven track record of reliable delivery largely mitigate customer concentration and migration risks.

Cocoa bean prices have eased considerably to an average of USD4,395/MT in June 2026 from the historical high of nearly USD12,000/MT in December 2024, as supply conditions improved. However, prices are expected to gradually trend upwards again towards the mid-USD6,000/MT range by end-2026 and to remain at this level through mid-2027 as renewed weather-driven supply concerns emerge. Prices could settle around USD4,500/MT over the longer term as supply and demand rebalance. Production expectations in West African countries for the upcoming 2026/27 crop season have declined amid forecasts of continued hot and dry weather in the region.

GCB’s revenue increased by 42.9% year-on-year to RM14.9 billion in 2025, largely reflecting the pass-through of the earlier elevated cocoa bean costs. Average selling prices of cocoa butter and cocoa powder increased by 71% and 64%, respectively, in 2025 compared with the previous year. Revenue growth was price-led, as overall sales volume declined slightly amid weaker demand from chocolate manufacturers facing elevated input costs. In 1H2026, revenue declined to RM4.42 billion following the moderation in cocoa bean prices. Nevertheless, lower bean costs provided greater room for price manoeuvring, allowing operating profit to improve by 53.2% during the period.

GCB’s leverage improved, with its gross debt-to-equity ratio declining to 1.00x as at end-June 2026 from 1.41x at end-2025, as total borrowings fell to RM2.5 billion from RM3.2 billion, tracking the lower inventory funding costs. Approximately two-thirds of GCB’s borrowings comprise short-term trade facilities used to fund cocoa bean purchases. As such, leverage remains susceptible to the renewed increases in cocoa bean prices and inventory funding requirements. Operating cash flow improved markedly to RM1.43 billion in 2025 and RM1.06 billion in 1H2026, reversing the negative cash flow recorded in 2024, during which bean purchases pushed up working capital requirements. The improvement was mainly attributable to the reduction in high-cost inventories. OPBITDA interest coverage strengthened to 5.58x in 1H2026 (2025: 2.14x). While customer orders have observably shifted from longer-term contracts towards shorter-term arrangements, some customers have reverted to longer delivery periods. Shorter order cycles would enable GCB to adjust selling prices more aptly in response to changes in cocoa bean costs, supporting margins in a volatile price environment.