PPB Group Bhd faces a potential financial impact of up to RM600 million ($182.9 million) in a worst-case scenario should its associate Wilmar International Ltd lose its appeal in Indonesia’s Supreme Court over alleged misconduct in palm oil export permits.
Managing director Lim Soon Huat said the amount, which translates into about 45 sen per PPB share, represents the group’s share of Wilmar’s US$729 million ($939.4 million) security deposit placed with Indonesia’s Attorney General’s Office (AGO).
“But that is a worst-case scenario. We believe the judgement or ruling from the Supreme Court in Indonesia would be more favourable,” Lim said at the group's first-half briefing on Wednesday, noting that PPB had not made any financial provisions at this stage.
Despite the potential liability, Lim stressed that PPB’s dividend commitment remains intact.
The group declared a 12 sen interim dividend for the quarter ended June 30, 2025 (2QFY2025), unchanged from the previous year, backed by a net cash position of RM1.3 billion.
“Other than the dividend from Wilmar, we also have cash received from other investments. After considering our capital and operational requirements, we believe we can continue to reward shareholders with a decent dividend,” Lim said.
He added that Wilmar’s operations in China and India are expected to remain profitable, supporting future payouts.
Wilmar remains PPB’s key profit contributor. In FY2024, Wilmar contributed RM992 million to PPB’s total profit before tax of RM1.33 billion.
In 2QFY2025, Wilmar’s contribution to PPB fell 19% to RM197 million, in line with a lower net profit of US$251 million versus US$277 million in 2QFY2024.
See also: Nearly 151.3 mil SingPost shares done via two trades at 42.8 cents
PPB holds an 18.8% equity interest in Wilmar, making it a significant associate company.
Doubling down in Indonesia
Lim dismissed suggestions that PPB might reconsider its exposure to Indonesia in light of the legal uncertainty and recent episodes of social unrest, including riots that have unsettled investor confidence in Southeast Asia’s largest economy.
“Instead of pulling out, we are investing more in Indonesia, not just in terms of business but also in infrastructure and distribution capability,” he said, describing Wilmar as “one of the strongest players in consumer products”, with staples such as cooking oil, rice and sugar under its portfolio.
He characterised the ongoing case as a “temporary setback” amid a broader slowdown in Indonesia’s economy, emphasising that PPB views its investment in the country as long-term.
Wilmar, which contributes the bulk of PPB’s earnings, was one of three palm oil companies implicated in a 2022 graft case involving export permits.
While the Central Jakarta Court acquitted Wilmar and others earlier this year, prosecutors are appealing to the Supreme Court after judges who issued the acquittal were arrested for allegedly taking bribes.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
In June, Wilmar said it had handed over 11.8 trillion rupiah (US$729 million or $939.4 million) to the AGO as a “security deposit” pending the Supreme Court’s decision. The funds will be returned if the company is cleared but forfeited in part or full if the ruling goes against it.
Kenanga Research has warned that the development raises PPB’s risk premium and could weigh on the stock as long as the matter remains unresolved. The brokerage cut its target price for PPB from RM15 to RM10.50 and downgraded the stock to ‘market perform’.
PPB shares, which recently fell below the RM10 mark — their lowest level in more than 16 years — were up 27 sen or 2.99% at RM9.31 on Wednesday's noon market break, valuing the group at RM13.24 billion.
This story first appeared in The Edge Malaysia.
