MARC Ratings has affirmed its rating of AA-IS on Power Root Berhad’s RM500.0 million Islamic Medium-Term Notes (Sukuk Wakalah) Programme. The rating outlook is stable.
The affirmation reflects Power Root’s established position in the instant beverage sector, supported by an extensive sales network and stable financial performance, characterised by consistent cash flow and a healthy balance sheet. These strengths are moderated by exposure to commodity price fluctuations and margin pressures from intense competition.
Power Root remains a key player in the country’s coffee market, supported by a strong brand, diversified product portfolio, and targeted marketing. Recent launches in the financial year ended 31 March 2025 (FY2025) — Alicafé Tongkat Ali and Ginseng Hazelnut and Per’l Teh Ros Latte for Malaysia, and Ah Huat Kopi O Gao Siew Dai for Singapore — highlight its responsiveness to changing consumer preferences. Coffee-based beverages remain the group’s core business driver, contributing around 80%.
Power Root has built an extensive domestic distributorship network, including key retailers in Malaysia with whom it maintains relationships averaging 10 years. Domestic sales accounted for 63.2% of total revenue in FY2025. In the export segment, sales to the Middle East amounted to RM111.3 million (FY2024: RM122.4 million), contributing 27.2% of revenue. The slight moderation in sales in the Middle East followed the exit of a distributor in the Kingdom of Saudi Arabia (KSA). Nonetheless, exports were supported by expansion into five new countries, namely Egypt, Kenya, Ghana, Tanzania, and Mauritius. Export sales to KSA are expected to recover in FY2026 following the appointment of a new distributor in October 2025. MARC Ratings notes that the proposed revision of the sugar tax in the Middle East, particularly the United Arab Emirates and KSA — moving from a flat rate to a volumetric system based on sugar content — may have an impact on product sales. Meanwhile, Power Root’s diversified customer base, with no single customer accounting for more than 15% of annual revenue, helps mitigate client and geographic concentration risks.
The group operates two plants in Masai, Johor, with production capacities of 2.2 million cartons p.a. for premixed instant powder sachets and 3.3 million cartons p.a. for ready-to-drink beverages in FY2025. Capacities have expanded slightly from the previous year following enhanced automation processes, with the utilisation rate at approximately 75%.
In September 2025, Power Root increased its equity stake in My Liberica Coffee Sdn Bhd to 40%. Its total investment to date of RM3.0 million in the local producer, which specialises in Liberica coffee beans, aims to vertically integrate the group’s capsule coffee production and secure a stable supply of premium Liberica beans, thereby enhancing pricing control. The total capex of RM31.0 million includes that for acquisition of land in Johor for coffee cultivation and the establishment of a Liberica capsule production line by FY2026, funded through internal funds.
In FY2025, revenue remained stable at RM409.2 million (FY2024: RM409.4 million), supported by stronger domestic sales that offset weaker performance in the Middle East. Despite rising raw material costs for coffee, Power Root maintained a double-digit operating margin of 10.3%, aided by price adjustments and hedging through coffee powder forward contracts. The company implemented three rounds of product price increases during the year. For FY2026, performance is expected to benefit from export recovery to KSA and stronger domestic demand supported by government initiatives such as MyKasih. Cash flow from operations stood at RM62.6 million in FY2025.
As at end-June 2025, the group maintained a conservative leverage position, with total borrowings of RM101.2 million, translating into a debt-to-equity ratio of 0.34x. Power Root’s leverage is expected to remain low in the near term, supported by modest expansion and enhancement plans that are largely funded through internal cash flows. The group also held cash and bank balances of RM80.7 million as at end-June 2025.