MARC Ratings has revised the rating outlook on JB Cocoa Sdn Bhd’s RM500.0 million Islamic Medium-Term Notes (Sukuk Wakalah) Programme to stable from negative. The rating on the Sukuk Wakalah programme has been affirmed at A+_IS.

JB Cocoa is a wholly-owned key manufacturing subsidiary of Singapore-based JB Foods Limited. The parent company has provided a corporate guarantee on JB Cocoa’s Sukuk Wakalah programme. Accordingly, the rating assessment considers the consolidated credit profile of JB Foods in view of the operational and financial linkages within the group.

The outlook revision reflects JB Food’s ability to manage its balance sheet leverage during the period from 2024 to date, where cocoa bean prices had risen to an average of around USD7,900/MT. The increase in reliance on borrowings to fund cocoa bean purchases tapered at the end of the 15-month financial year period ended 31 March 2025 (15MFY2025), reducing the group’s consolidated debt-to-equity ratio to 0.99x. The balance sheet has since been further strengthened by a rights issue exercise amounting to RM85.9 million on 30 May 2025. The improved prospects of cocoa bean production from key producing countries, Côte d’Ivoire and Ghana, would further ease the working capital requirements and, hence, leverage, albeit remaining high. The rating affirmation considers the group’s strong market position and long track record in the global cocoa industry.

In July 2025, cocoa bean prices were trading at an average of around USD7,300/MT, down from the peak of USD11,985/MT recorded on 18 December 2024. While prices remain significantly above the 10-year average of around USD2,600/MT, the International Cocoa Organization anticipates increased production from better weather conditions in Côte d’Ivoire and Ghana, collectively producing about 60.0% of global supply, which would help ease bean prices.

Raw material concentration risk is largely mitigated through the diversification of cocoa bean sourcing beyond Côte d’Ivoire and Ghana. This provides the group with more flexibility in managing procurement amid the ongoing cost pressures. As at end-March 2025, combined grinding capacity stood at 210,000MT p.a., with its Malaysian and Indonesian plants running at about 78.7% and 77.4% of capacity. Additional grinding capacity of 30,000MT p.a. from its new facility in Côte d’Ivoire — completion of which is now targeted for end of FY2026 — is expected to be cautiously managed to align with demand amid volatile market conditions. The group aims to maintain its global market share at around 3.0%.

During FY2025, cash flow from operations turned positive at RM629.9 million (12-month period ending 31 December 2023: negative RM200.0 million), from better control of working capital and steady processing margins. On an annualised basis, cash flow and profitability metrics remained intact. Borrowings, primarily used to fund working capital, declined to RM873.1 million (end-2023: RM1.2 billion). Additional liquidity headroom is available through unutilised credit lines of RM180.0 million under the rated programme and various available facilities amounting to RM930.3 million at the group level. Looking ahead, while shorter customer order lead times may introduce some near-term operational challenges, the current situation of buyers placing smaller but more frequent orders with shorter delivery timelines will help reduce inventory holding and, hence, the need for heavy reliance on borrowings.