Wilmar’s Indonesia Case Could Expose PPB To RM600 Million Worst-Case Loss
KUALA LUMPUR, PPB Group Bhd could face a potential financial exposure of up to RM600 million in a worst-case scenario if its associate Wilmar International Ltd fails in its appeal before Indonesia’s Supreme Court over alleged misconduct linked to palm oil export permits. Managing director Lim Soon Huat said the figure, equivalent to about 45 sen per PPB share, represents the group’s share of Wilmar’s US$729 million (RM3.1 billion) security deposit with Indonesia’s Attorney General’s Office (AGO). “However, this is only a worst-case scenario. We remain confident that the Supreme Court ruling will be more favourable,” Lim said at PPB’s first-half results briefing on Wednesday, adding that the group has not made any financial provisions for the matter. Despite the legal overhang, Lim assured that PPB’s dividend policy remains unaffected. The group declared an interim dividend of 12 sen for the second quarter ended June 30, 2025 (2QFY2025), unchanged from a year earlier, supported by a net cash balance of RM1.3 billion. “Beyond dividends from Wilmar, we also receive cash from other investments. After accounting for capital and operational requirements, we are confident of continuing to deliver consistent shareholder returns,” he said. Lim also noted that Wilmar’s operations in China and India are expected to remain profitable and supportive of future payouts. Wilmar is PPB’s largest profit contributor, delivering RM992 million to PPB’s FY2024 profit before tax of RM1.33 billion. However, in 2QFY2025, Wilmar’s contribution fell 19% to RM197 million, in line with its lower net profit of US$251 million compared with US$277 million a year earlier. PPB holds an 18.8% stake in Wilmar. On concerns about exposure to Indonesia, Lim dismissed speculation that PPB may scale back operations following recent legal uncertainty and social unrest. “Instead of pulling out, we are expanding further in Indonesia, not only in business but also in infrastructure and distribution. Wilmar remains one of the strongest consumer products players, with cooking oil, rice and sugar under its portfolio,” he said, describing the ongoing case as a temporary setback against a broader economic slowdown. Wilmar, along with two other palm oil companies, was implicated in a 2022 graft case involving export permits. While the Central Jakarta Court acquitted all parties earlier this year, prosecutors have appealed after several judges involved in the acquittal were arrested on bribery allegations. In June, Wilmar confirmed that it placed 11.8 trillion rupiah (US$729 million or RM3.1 billion) with the AGO as a security deposit, which will be returned if the company is cleared but could be forfeited in part or full if the appeal is unsuccessful. Kenanga Research said the development increases PPB’s risk premium and may weigh on sentiment until the case is resolved. The research house has lowered its target price for PPB from RM15.00 to RM10.50 and downgraded the stock to a ‘market perform’ call. PPB shares, which recently slipped below RM10 for the first time in over 16 years, rebounded at mid-day trading on Wednesday, rising 27 sen or 2.99% to RM9.31, valuing the company at RM13.24 billion.
