IOI Corporation Issuer Summary

Report date: 2026-05-16
Issuer: IOI Corporation Berhad
Ticker: IOIMK
Relevant bond reference: IOI Investment (L) Berhad US$300 million 3.375% guaranteed notes due 2031
Data cut-off: 2026-05-16. The latest official recurring financial disclosure confirmed for this report is the interim report for the financial period ended 31 December 2025, released on 2026-02-24.

1. Business Snapshot and Recent Developments

IOI Corporation Berhad (“IOI”) is a Malaysia-based integrated palm oil and oils-and-fats processing group. The company is listed on the Bursa Malaysia Main Market, and its core operations are divided into two main segments: Plantation and Resource-Based Manufacturing. Plantation covers oil palm cultivation, seed production, fruit bunch harvesting and milling. Resource-Based Manufacturing covers refining, oleochemicals, specialty oils and fats, food ingredients, and non-CPO-based products. For bond investors, the key point is not to view IOI simply as a plantation company, but to analyse together the upstream business, which is exposed to CPO prices and yields; the downstream processing business, which is exposed to competition and raw material prices; and the US dollar bond issuance structure guaranteed by IOI itself.

The foreign-currency bond mainly referenced in this report is the 2031 US dollar bond issued by IOI Investment (L) Berhad and guaranteed by IOI Corporation Berhad. This is not a bond issued directly by IOI itself, but because it benefits from a guarantee by IOI Corporation Berhad, the credit analysis is centred on IOI’s consolidated business, financial profile and liquidity. At the same time, specific terms such as the Labuan issuer, guarantee, unsecured and unsubordinated status, covenants, early redemption and cross-default should be checked by reviewing the Pricing Supplement together with the Offering Circular. This report is limited to the extent confirmable from public information. As live bond price, yield and spread data have not been checked at this stage, this report does not assess relative value or whether the bond is cheap or expensive.

FY2025 was a year of earnings recovery for IOI. Annual Report 2025 shows FY2025 revenue of RM11.33 billion, up from RM9.60 billion in FY2024. The company’s annual highlights also show Profit Before Interest and Tax of RM1.70 billion and Net Profit Attributable to Owners of the Parent of RM1.52 billion, improving from RM1.54 billion and RM1.11 billion, respectively, in FY2024. The company’s Q4 FY2025 Summary Presentation shows full-year FY2025 PBT of RM1,877.5 million and Underlying PBT, excluding non-core items, of RM1,616.3 million, with the latter up 17% year on year. This indicates that higher CPO and PK prices and improved Plantation earnings absorbed a substantial part of the margin weakness in Resource-Based Manufacturing.

As of 2026-05-16, the latest official financial results were 1H FY2026 results for the period ended 31 December 2025, released on 2026-02-24. In 1H FY2026, revenue was RM6,061.9 million, up 7% year on year; operating profit was RM846.9 million, up 22%; Profit Before Interest and Tax was RM1,066.7 million, up 17%; PBT was RM1,137.2 million, up 10%; and profit attributable to owners of the parent was RM897.9 million, up 9%. For Q2 on a standalone basis, the increase in net profit appears large because foreign-exchange translation gains on foreign-currency borrowings reversed from losses in the previous year. For credit analysis, however, it is necessary to distinguish between underlying earnings excluding foreign-exchange translation gains and losses, Plantation productivity, downstream processing margins, and the relationship between cash and borrowings.

In one sentence, IOI is a leading listed Malaysian palm oil group that pursues both the scale, yield and cost management of its plantation assets and value-added downstream processing. It is not a credit stabilised by end-consumer demand in the way a branded food company may be, nor is it a credit that is as purely linked to a single commodity as a mining or oil company. Plantation is strongly affected by CPO and PK prices, weather, labour and tree age profile, while Resource-Based Manufacturing is affected by competition in global oleochemical, refining and specialty oils-and-fats markets, trade policy, customer inventories and raw material prices. Therefore, IOI’s credit analysis should assess not only whether CPO prices are high or low, but also the earnings mix between upstream and downstream operations, foreign exchange, interest rates and hedging, ESG regulation and traceability, and the legal protection of the guaranteed bond.

Strategically, the company has set out a Five-Year Strategic Roadmap for 2025-2029, emphasising higher value added in sustainable palm products and oils-and-fats ingredients, expansion of the product portfolio, operational-efficiency improvements and sustainability initiatives. In Plantation, the company is progressing with replanting, a rising proportion of young mature palms, mechanisation, digitalisation and partial diversification into higher-value crops such as coconuts. In Resource-Based Manufacturing, while refining and commodity sales face competitive pressure, the company’s policy is to focus on higher-value-added products and customer relationships in oleochemicals and specialty fats. This direction could improve earnings quality over the long term, but it should not be taken as evidence of credit improvement in advance, because the company remains exposed in the short term to capex, regulatory-compliance costs, raw material prices and demand volatility.

ESG and regulation are not merely reputational issues for IOI; they are credit issues related to business continuity and funding access. In disclosures around Annual Report 2025 and Sustainability Report 2025, IOI highlights climate targets close to SBTi, certifications including RSPO/MSPO, traceability, and forest, labour and supply-chain management. In December 2025, the company also disclosed that its near-term greenhouse-gas reduction targets had been validated by SBTi. These are positive factors in relation to European deforestation regulation, customer sustainability standards, and investment restrictions imposed by banks and bond investors. However, the structural palm oil risks related to forests, land, labour, smallholders and traceability do not disappear, so regulatory compliance remains an ongoing monitoring item.

2. Industry Position and Franchise Strength

IOI’s business base lies in its integrated combination of plantation assets, milling capacity, downstream processing, global sales network and sustainability capabilities. Annual Report 2025’s Plantation review states that IOI is among the top three companies in Bursa Malaysia’s Plantation sector by market capitalisation. As of June 2025, the company had total planted area of 172,459ha, of which oil palm planted area was 167,883ha, as well as 94 estates, 15 palm oil mills, four research and development centres and a biotechnology centre. Total mill processing capacity is stated at 1,016 MT per hour on an FFB basis. These factors show that IOI is not merely an agricultural commodity trader, but an upstream asset company with land, production, processing, research and quality control.

The strength of Plantation lies first in scale and the volume of mature palms. In 2025, average mature area harvested was 138,597ha, FFB production was 2.84 million MT and FFB yield was 20.49 MT/ha. These improved from FY2024 FFB production of 2.80 million MT and FFB yield of 19.34 MT/ha. The company cites labour management, estate management, young mature palms, crop trends in Peninsular Malaysia, mechanisation and digitalisation as improvement drivers. For a plantation company, CPO prices significantly move earnings, but even at the same price level, cash flow is driven by yields, OER, labour, fertiliser, transportation and the pace of replanting. IOI’s strength is that it has shown some self-help through production volume and cost management, not only upside in periods of higher prices.

That said, plantation assets are stable fixed assets, while short-term earnings are highly volatile. The average selling price of CPO rose from RM3,856/MT in FY2024 to RM4,332/MT in FY2025, and the PK price rose from RM2,210/MT to RM3,315/MT. This price improvement was a major support for Plantation earnings. Conversely, if prices reverse, profit is prone to decline even if yield improvement continues. Improvements in FFB yield and OER support credit quality, but do not fully offset price risk. Bond investors need to monitor not only CPO prices, but also CPO cost of production, net cost of sales, OER, immature area related to replanting, labour and weather.

Resource-Based Manufacturing has a different role from Plantation. IOI describes this business as a global downstream processing operation comprising refining, oleochemicals, specialty food ingredients and non-crude palm oil sub-segments. This means processing palm oil produced or procured upstream into refined oils, oleochemicals, food ingredients and specialty fats, thereby moving the product closer to customers rather than merely selling raw material. The credit benefits are that IOI can have earnings sources that are not dependent solely on upstream prices, can differentiate itself more easily through certification, quality and low-contaminant oils, and can access global applications for specialty fats through associates such as Bunge Loders Croklaan.

On the other hand, Resource-Based Manufacturing is more exposed than Plantation to competition and customer demand. In the FY2026 Q2 presentation, the company cites competition from Indonesian producers, inventory levels and sales-margin pressure as risks to the outlook for refining and commodity sales. For oleochemicals as well, it explains that US tariffs, geopolitics, customer sentiment, industry overcapacity and raw material prices affect sales volumes and margins. In other words, the downstream business diversifies earnings, but also introduces another set of volatility factors: commodity prices, trade policy, customer inventories and regulatory compliance. This two-sided nature should not be overlooked when assessing IOI’s integrated model.

The company’s distinctiveness within the sector is its vertical integration from upstream to downstream and its placement of sustainability at the centre of business strategy. In the palm oil industry, deforestation, peatland, workers, indigenous peoples and local communities, smallholders and supply-chain traceability affect customer trading terms and the investor base. IOI foregrounds RSPO/MSPO, SBTi, climate transition, internal carbon pricing, GHG reduction, renewable energy and mechanisation, which can support sales to European, North American and multinational customers as well as funding access. However, disclosure and certification are evidence of risk mitigation, not evidence that risks have disappeared. Grievance handling, third-party audits, EUDR compliance and smallholder traceability will still need to be monitored.

Overall, IOI should not be viewed as a “high-quality and stable food consumer-goods credit”, but rather as a “general corporate credit with a strong plantation base and downstream processing capabilities, but sensitivity to commodities, regulation, trade and ESG”. The financial metrics visible from public information appear consistent with a lower-tier investment-grade credit, but the latest full text of the rating reports as of May 2026 has not been confirmed. The strength of the business base can be explained by scale, land, mature palms, mills, processing capacity, R&D, customer base and certifications. At the same time, the upper limit of credit quality is likely to be determined by CPO price volatility, thin downstream margins, foreign exchange and interest rates, ESG regulation, and capital allocation.

3. Segment Assessment

The core of IOI’s credit quality is Plantation, while downstream processing brings both earnings diversification and margin volatility. Looking at FY2025 and 1H FY2026 figures, it is clear that Plantation remains the main earnings pillar. Resource-Based Manufacturing improved materially year on year in 1H FY2026, but downstream margins were weak for FY2025 as a whole, so caution is needed before treating this business as a stable earnings source.

Plantation is the foundation of operating profit and cash flow. FY2025 Plantation segment profit was RM1,576.5 million, up 30% from RM1,209.3 million in FY2024. The company attributes this mainly to CPO prices rising from RM3,856/MT in FY2024 to RM4,332/MT in FY2025 and PK prices rising from RM2,210/MT to RM3,315/MT. In addition to the price effect, FFB yield improved from 19.34 MT/ha to 20.49 MT/ha, which supported volume and cost absorption. From a credit perspective, because Plantation is the pillar of operating profit, improvements in prices and yields directly supported the group’s interest-payment capacity and refinancing headroom.

However, Plantation earnings are structurally exposed to price cycles. When CPO prices are high, earnings are strong and financial metrics improve, but when prices fall, the same assets become a source of earnings pressure. IOI has kept CPO cost of production under some control, with FY2025 CPO cost of production at RM2,032/MT, slightly better than RM2,050/MT in FY2024. In 1H FY2026 as well, CPO cost of production was RM1,894/MT, broadly in line with RM1,889/MT in the previous corresponding period. This supports resilience during price declines. However, cost factors including fertiliser, labour, fuel, logistics, weather, replanting costs, Sabah sales tax and windfall profit levy can deteriorate simultaneously during a price downturn.

Resource-Based Manufacturing has two implications for credit quality. First, it is a means of processing upstream CPO and PK into higher-value-added products and partly moving away from simple commodity sales. Oleochemicals, specialty fats, low-contaminant oils, food ingredients and personal-care ingredients have room to improve margins over the long term through customer relationships and quality certifications. Second, the business is exposed to downstream competition, raw material prices, customer demand and trade policy. FY2025 RBM underlying operating profit was RM149.1 million, down 49% from RM291.9 million in FY2024. This shows that downstream processing does not necessarily become strong in the same way even in a year when Plantation is strong.

RBM improved in 1H FY2026. According to the company presentation, 1H FY2026 RBM underlying operating profit was RM197.9 million, up 175% from RM72.0 million in the previous corresponding period. By sub-segment, Refinery improved from a loss in the previous corresponding period to a profit of RM41.1 million, Oleochemical recorded RM69.7 million, and associates contributed RM93.1 million. However, Oleochemical declined year on year in Q2 on a standalone basis, so the operating environment is not improving in a straight line. The company cites competition from Indonesian producers in refining and commodity sales, and US tariffs, geopolitics, customer sentiment, industry overcapacity and raw material prices in oleochemicals, as risks.

The complementary relationship between segments is one of IOI’s strengths, but it is not a complete hedge. A rise in CPO prices lifts Plantation earnings, but may act as higher raw material costs for downstream processing. A fall in CPO prices may lower raw material costs downstream, but depresses Plantation earnings. Foreign exchange has similarly mixed effects, affecting export competitiveness, foreign-currency revenue, foreign-currency borrowings, raw material procurement and derivative valuations in different directions. Therefore, IOI’s segment assessment should avoid both the simplification that “a strong upstream business makes the whole group stable” and the simplification that “the presence of downstream operations fully offsets price volatility”.

4. Plantation Operating Metrics

To assess Plantation credit quality, it is necessary to look not only at profit amounts, but also volume, prices, costs and tree age profile. The table below summarises key operating indicators from Annual Report 2025 and the Q2 FY2026 Summary Presentation. FY2025 and earlier are full-year figures, while 1H FY2026 is the six-month cumulative figure and has not been simply annualised.

In FY2025 Plantation benefited from both prices and productivity. CPO prices were 12% higher year on year and PK prices were 50% higher. FFB production increased only 1%, but FFB yield improved 6% and CPO cost of production declined slightly. As a result, Plantation underlying profit increased 30%. From a credit perspective, the important point is that operating profit was not merely driven by valuation gains, but supported by selling prices and operating efficiency.

That said, OER and CPO production require attention. FY2025 FFB production increased, but CPO production declined from 625,127 MT in FY2024 to 616,307 MT, and CPO extraction rate also declined from 21.77% to 21.33%. This indicates that higher fruit bunch volume does not necessarily translate directly into higher CPO volume. Mature palms, young palms, replanting, weather, harvesting intervals, logistics and mill efficiency all interact. Bond investors should therefore monitor not only whether planted area is large, but also mature area, yield and OER on an ongoing basis.

In 1H FY2026, volume and costs provided support while prices were slightly lower. CPO price was RM4,198/MT, 2% lower year on year, while FFB production increased 8%, FFB yield increased 13%, CPO production increased 9%, and CPO cost of production was broadly flat. The company’s outlook cites more oil palms coming into prime harvesting age, continued productivity improvement despite accelerated replanting in Sabah, and benefits from mechanisation and digitalisation. This supports FY2026, but if price headwinds emerge from CPO prices, the Malaysian ringgit, inventories, Indonesian policy or delays in biofuel mandates, earnings upside will be constrained.

5. Financial Profile and Analysis

IOI’s financial profile is not currently characterised by excessive debt burden. Based on figures at end-FY2025 and end-1H FY2026, total debt is manageable relative to capital and operating profit, and cash is well above short-term borrowings. However, FY2025 operating cash flow and free cash flow declined from FY2023, and when dividends, capex, replanting, downstream investment, and foreign-exchange and derivative valuations are included, it is not possible to say simply that credit quality improved because profit increased. For IOI, what needs to be checked is not only profit margins, but whether profits convert into cash and whether borrowings can be avoided after dividends and investment.

The table below compares annual data for FY2023-FY2025 with 1H FY2026 at 31 December 2025. The main items used for the core assessment are FY2025 revenue, PBIT, PBT, Underlying PBT and profit attributable to owners of the parent, as confirmed from company materials, and 1H FY2026 income statement and balance sheet items confirmed from the company’s quarterly report. Historical operating cash flow, FCF, EBITDA and total debt use StockAnalysis/S&P Global Market Intelligence reproduced figures as supplementary data. These supplementary data are useful for cross-period comparison, but they have not been directly reconciled against the full financial statements in the official annual report PDF; therefore, they are distinguished in the table and text and remain among the unverified items.

FY2025 earnings clearly improved on a full-year basis. Revenue rose 18% year on year, PBT increased 34%, and Underlying PBT rose 17%. Net profit also increased, making accounting earnings appear strong. However, non-core items had a significant effect. The Q4 FY2025 presentation shows Underlying PBT excluding items such as foreign-exchange translation gains on foreign-currency borrowings and deposits, fair value of biological assets, derivative financial instruments, plasma receivables and PPE impairment. Credit analysis should focus on the earnings level excluding these valuation gains or losses and one-off items.

The cash-flow view of FY2025 is somewhat more cautious. Supplementary data show FY2025 operating cash flow of RM1,043m, lower than RM1,234m in FY2024 and RM2,073m in FY2023. FCF before dividends was also limited to RM356m in FY2025, below dividend payments of RM620m in the same year. These cash-flow figures have not yet been reconciled with the official statements and are not used as standalone evidence supporting the conclusion. Still, they are useful as supplementary evidence for the monitoring point that accounting profit improvement did not automatically translate into debt-reduction capacity after dividends. Taking working capital, inventories, receivables and payables, taxes, capex, replanting, investment and dividends together, IOI still has a strong balance sheet, but the quality of cash flow needs continued confirmation.

The balance sheet currently appears conservative. As of 31 December 2025, cash and cash equivalents were RM2,085.1m, long-term borrowings were RM2,334.7m, and short-term borrowings were RM843.6m. Simply deducting cash from total borrowings gives net borrowings of about RM1,093m. Relative to total assets of RM18,788.6m, total liabilities of RM5,469.0m and total equity of RM13,319.6m, borrowings are not excessive. Cash coverage of short-term borrowings is also about 2.5x, with no evident immediate pressure on short-term liquidity.

However, the existence of consolidated cash is not the same as bondholders of the guaranteed notes being able to access that cash in practice when needed. The location, currency, dividend and fund-transfer restrictions, tax, regulation, and collateral or guarantees on bank borrowings may differ across IOI itself, subsidiaries, overseas manufacturing sites, associates, Plantation and RBM. The quarterly report confirms consolidated cash, but details by legal entity and currency, unused committed lines, foreign-currency cash and hedge ratios have not been confirmed. For holders of the 2031 guaranteed notes, IOI’s consolidated credit quality is central because of the IOI guarantee, but cash location and bank lines are important for assessing actual liquidity under stress.

Interest-payment capacity currently appears sufficient. Against supplementary FY2025 EBITDA of RM1,689m, cash interest paid was RM140.5m, giving EBITDA/cash interest paid of about 12.0x. This is a supplementary calculation using StockAnalysis/S&P reproduced figures and is not a rating-agency-adjusted metric. Meanwhile, finance costs confirmed in the company’s quarterly report were RM66.5m in 1H FY2026, small relative to operating profit of RM846.9m and PBIT of RM1,066.7m. Higher interest rates or foreign-currency borrowing costs do not immediately appear likely to impair interest-payment capacity. However, in future refinancing, US dollar rates, the ringgit, the banking market, ESG investor restrictions and CPO price declines could all deteriorate at the same time, so the safety of long-dated bonds should not be assessed from current interest cover alone.

6. Structural Considerations for Bondholders

The central structural issue for IOI-related foreign-currency bonds is the separation of issuer and guarantor. According to the Pricing Supplement dated 2021-10-26, IOI Investment (L) Berhad issued US$300 million 3.375% Notes due 2031 under a US$1.5 billion Euro Medium Term Note Programme, guaranteed by IOI Corporation Berhad. Public articles describe the notes as ranking pari passu with IOI’s senior unsecured obligations and as being unconditionally and irrevocably guaranteed by IOI. Based on public information, the notes can be classified as senior unsecured guaranteed notes, but a terms review based on the full Offering Circular has not been completed. Therefore, for ordinary issuer credit analysis, the focus is on IOI Corporation’s consolidated credit quality, its payment capacity as guarantor, and the notes’ status as publicly understood senior guaranteed debt.

This structure is a typical guaranteed bond used to access the US dollar market based on IOI’s consolidated credit. For bondholders, the practical repayment source is not the business cash flow of IOI Investment (L) Berhad itself, but the guarantee from IOI Corporation. Therefore, debt burden, cash generation from Plantation and RBM, consolidated liquidity and the guarantor’s legal obligations are important. The financials of IOI Properties Group and other separately listed related companies or similarly named group companies should not be confused with IOI Corporation.

The structural constraint is that, while the notes are publicly classified as senior guaranteed notes, the detailed terms have not been confirmed. Bondholders may be structurally or effectively subordinated to secured bank borrowings, local subsidiary-level debt, working-capital finance, trade finance, leases, derivative collateral and priority claims in individual jurisdictions. The public quarterly report confirms long-term borrowings, short-term borrowings, trade financing and derivative assets/liabilities, but detailed collateral, guarantee and restriction terms have not been sufficiently captured. For an investment decision, the Offering Circular’s negative pledge, cross default, change of control, restricted subsidiaries, secured debt restrictions and debt definitions should be reviewed.

For a palm oil company’s bonds, not only legal terms but also use of proceeds and capital allocation affect bondholder protection. IOI has previously returned to the foreign-currency bond market, carried out a tender offer for existing 2022 bonds and issued the 2031 notes. Market access is a credit support, but if dividends, share buybacks, M&A, downstream investment, replanting and sustainability investment increase, headroom for unsecured bondholders will narrow. Given the supplementary data showing FY2025 FCF before dividends below dividend payments, future capital allocation is an important monitoring point.

7. Capital Structure, Liquidity and Funding

IOI’s capital structure currently appears to involve low to moderate leverage. As of 31 December 2025, long-term borrowings were RM2,334.7m and short-term borrowings were RM843.6m, for total borrowings of about RM3,178.3m. Cash and cash equivalents were RM2,085.1m, giving simple net borrowings of about RM1,093.2m. Net borrowings are small relative to total equity of RM13,319.6m, leaving substantial loss-absorption capacity on the balance sheet. Short-term borrowings are about 40% of cash, so on a consolidated basis the company is not in a position where cash is insufficient for near-term short-term repayments.

For holders of the 2031 guaranteed notes, it is necessary to confirm not only consolidated cash and borrowings, but also foreign-currency liquidity, the ranking relationship with bank debt, hedging and the maturity profile. Items confirmed in this review and items remaining unconfirmed are as follows.

In terms of funding, IOI appears to combine bank borrowings, trade finance, derivatives and US dollar guaranteed notes. The quarterly report shows short-term borrowings, long-term borrowings, trade financing, forward foreign exchange contracts and commodity contracts. The USD/RM exchange rate at end-December 2025 was 4.0523, compared with 4.4585 at end-December in the previous year, indicating ringgit appreciation. The fact that translation gains on foreign-currency borrowings lifted PBT in 1H FY2026 also shows that foreign exchange directly affects IOI’s profit and loss, comprehensive income and debt valuation.

Hedges exist, but should not be viewed as complete risk elimination. The quarterly report explains that forward foreign exchange contracts are used to mitigate foreign-exchange fluctuation risk related to foreign-currency sales and purchases, and foreign-currency financial assets and liabilities. Commodity contracts are also used to manage exposure to adverse price movements in vegetable oil commodities for Plantation and Resource-Based Manufacturing. This shows the existence of a risk-management framework, but hedge ratios, tenors, accounting treatment, collateral, counterparties and liquidity impact under stress have not been confirmed in this report. In particular, because valuation gains and losses affect PBT, hedging supports credit quality but is also a source of short-term earnings volatility.

The most important unconfirmed items in liquidity assessment are undrawn committed lines and cash location. Even if consolidated cash is RM2.1bn, the practical question is which legal entity, currency and country holds that cash and how freely it can be used to service the guaranteed notes. If there are tax, regulatory or bank restrictions on fund transfers, consolidated cash alone may overstate payment capacity under stress. Conversely, if bank relationships are strong and undrawn lines are sufficient, an increase in short-term borrowings is less problematic. Public quarterly materials are not sufficient to confirm this information, so it should be checked at the next update or before any individual bond investment.

Refinancing risk appears limited in the short term, but market access needs to be monitored for a long-dated US dollar bond. The 2031 bond still has time to maturity, and there does not appear to be a large US dollar bond maturity within the next year. Nevertheless, foreign-currency bonds of palm oil companies are affected by CPO prices, ESG regulation, investor sector restrictions, US dollar rates, the Malaysian ringgit, Malaysia’s sovereign environment and the global emerging-market credit market. IOI’s current financial headroom supports refinancing, but around 2030, credibility of ESG compliance and downstream margin stability could have a larger influence on refinancing terms.

8. Rating Agency View

At the time of this report, the full text of the latest rating agency reports from Moody’s, Fitch, JCR and others has not been obtained. Among public information confirmed, there is an article stating that in October 2021 Moody’s affirmed IOI’s Baa2 issuer rating and assigned a Baa2 backed senior unsecured rating to IOI Investment (L) Berhad’s MTN programme and proposed notes. The explanation at that time stated that the notes were unconditionally and irrevocably guaranteed by IOI Corporation and ranked pari passu with IOI’s senior unsecured obligations. This indicates that IOI’s guaranteed bonds have historically been positioned in the market as lower-tier investment-grade credits, but it is not a basis for asserting the latest rating as of May 2026.

The important point in Moody’s 2021 view was the expectation that IOI would maintain earnings, remain prudent in investment and shareholder returns, and avoid materially weakening credit metrics. Moody’s expected adjusted debt/EBITDA at the time to decline from 3.3x in FY2021 to about 2.5x over the following 12-18 months. Current public supplementary data show FY2025 total debt/EBITDA at about 1.9x and net debt/EBITDA at about 0.9x, so on a simple comparison, the debt burden does not appear heavier than at that time. However, this is a supplementary calculation using StockAnalysis/S&P reproduced figures, and rating-agency-adjusted debt, leases, associates, derivatives, pensions, guarantees, cash netting and commodity-price assumptions may differ from the simple calculations in this report. Because the latest full rating reports as of May 2026 have not been obtained, the current rating level itself is treated as an unconfirmed item.

From a rating-agency perspective, IOI’s strengths are likely to be its leading palm oil business, mature plantation assets, downstream processing capabilities, reasonable market access, and low to moderate leverage. Its constraints are likely to include CPO and PK price volatility, downstream margin competition, ESG and regulatory risk, capital allocation, foreign exchange and interest rates, and plantation tree age and replanting. The rating-agency view does not replace the analysis in this report, but it points broadly in the same direction regarding the issues that should be monitored in assessing IOI’s credit quality.

Potential downgrade-side monitoring points are: EBITDA and FCF weakening simultaneously due to price declines and downstream margin deterioration; debt-reduction capacity being consumed by dividends, M&A or capex; valuation losses on foreign-currency debt and hedges affecting capital and earnings; major ESG, labour or forest-related events affecting customers or funding access; and secured debt or subsidiary debt increasing while covenant protection for the guaranteed notes remains weak. Upgrade-side momentum would be limited to cases where Plantation becomes stable not only through prices but also through yields and costs, RBM consistently generates profits through higher value added, FCF after dividends becomes sustainably positive, and foreign-currency liquidity and debt maturities are clearly managed.

9. Credit Positioning

IOI’s credit positioning among Asian general corporates is that of an issuer with low net debt and plantation assets, but strong exposure to commodities and ESG. Compared with a pure consumer-goods company, it has weaker demand stability and brand-driven pricing power, and its earnings are affected by CPO and PK prices, yields, raw material prices and downstream margins. Compared with a pure resources company, its dependence on a single price is somewhat reduced by downstream processing, specialty fats, customer relationships, certifications and hedging. In other words, IOI sits between a “stable consumer-goods credit” and a “high-volatility commodity credit”, and is a credit that absorbs business volatility through a strong balance sheet.

In the domestic and sector context, IOI is a leading Malaysian palm oil sector company with land, mature palms, mills, processing capacity and listed-market access. This scale supports access to banks and bond markets. However, its nature differs from Malaysian utilities, telecoms and banks, which are supported by regulation, deposits or contracted revenue. If CPO prices fall, downstream competition intensifies or ESG regulation tightens, credit metrics can move relatively quickly. Public information indicates financial headroom consistent with a lower-tier investment-grade credit, but business volatility and ESG-related reputational and headline risks need to be incorporated.

The tenor risk of the 2031 US dollar bond is moderate to relatively long. The 2031 maturity will be affected not only by the latest results, but also by progress on the 2025-2029 strategic roadmap, EUDR and customer sustainability requirements, higher value added in downstream processing, the tree age profile following replanting, and the capital-market environment around 2030. Based only on current financial metrics, there is interest-payment and refinancing headroom. However, for a long-dated bond investment, the focus should be not on earnings in a good CPO-price year, but on whether borrowings can be sustained even in a weak price year.

This report does not assess market relative value. Live spread, yield, bond price and comparison data against ASEAN general corporates, Malaysian sovereign levels, and similarly rated food, agriculture and resources companies of comparable tenor have not been obtained. Qualitatively, IOI’s bonds should be viewed as credits where low leverage and the IOI parent guarantee are positives, while the required yield should reflect palm-oil-sector-specific price, ESG, regulatory and reputational risks. Buy, hold or sell should not be asserted without checking market levels.

10. Key Credit Strengths and Constraints

The first strength is the company’s leading plantation assets and production base. Total planted area of 172,459ha, oil palm planted area of 167,883ha, 94 estates, 15 mills and mill capacity of 1,016 MT/hour support IOI’s business base. The improvement in FFB yield in FY2025 and the increase in FFB production in 1H FY2026 show that earnings were not only riding on prices, but also benefited from yield and operating improvements. Plantation is exposed to price volatility, but the presence of scale and cost management supports the lower bound of profitability under the same price environment.

The second strength is low to moderate leverage and liquidity. At end-December 2025, consolidated cash was RM2.1bn, total borrowings were about RM3.2bn, and net borrowings were limited to about RM1.1bn. Total debt and net debt relative to supplementary FY2025 EBITDA also do not appear heavy. Short-term borrowings are well covered by cash, and short-term funding stress is not readily apparent. This balance-sheet headroom is the main cushion against volatility in CPO prices and downstream margins.

The third strength is downstream processing and sustainability capabilities. Resource-Based Manufacturing is exposed to competition in the short term, but it provides a route to add value to upstream raw materials through refining, oleochemicals, specialty fats and food ingredients. Within the confirmed scope, IOI discloses sustainability policies and targets including SBTi, RSPO/MSPO, GHG reduction, internal carbon pricing and EUDR compliance. These may support customer retention and funding access, and particularly for European and multinational customers, certification and traceability are often prerequisites for continued trading. However, EUDR implementation, grievance handling, certification scope and practical traceability including smallholders have not been reviewed in detail in this report, so this strength should not be overstated.

The first constraint is dependence on CPO and PK prices and Plantation yields. FY2025 earnings improvement was substantially supported by higher CPO and PK prices. If prices decline while weather, labour, fertiliser and replanting costs deteriorate at the same time, Plantation earnings can fall easily. IOI has demonstrated cost management, but it cannot fully avoid the price cycle.

The second constraint is downstream processing margin instability. FY2025 RBM underlying operating profit declined 49% year on year, and although 1H FY2026 recovered significantly, the company explicitly identifies risks in refining, commodity sales and oleochemicals, including competition, tariffs, geopolitics, overcapacity and raw material prices. Downstream processing is a strength of integration, but it also introduces constraints from competition and weak customer demand.

The third constraint is foreign exchange, interest rates and derivative valuation. In 1H FY2026, translation gains on foreign-currency borrowings lifted PBT, but a reversal would depress earnings. Forward FX and commodity contracts are used for risk management, but valuation gains and losses affect profit and loss. For US dollar bond investors, the combination of ringgit earnings, US dollar debt, hedging and foreign-currency cash is important.

The fourth constraint is ESG, regulatory and reputational risk. Palm oil companies are constantly exposed to deforestation, peatland, labour, smallholders, traceability, EUDR, RSPO and customer procurement standards. IOI’s disclosure and target-setting are positive, but the actual state of implementation, grievance handling, certification scope and third-party audits requires ongoing confirmation. A major grievance, certification suspension, import restriction or customer departure could affect sales, inventory, funding and the investor base. For a long-dated bond, this risk is more important than short-term P/L.

11. Downside Scenarios and Monitoring Triggers

The most realistic downside path is one in which CPO price declines and downstream margin pressure occur simultaneously. The deterioration sequence would be that CPO and PK prices first decline, weakening Plantation selling prices and profit. Then, in RBM, margins fail to improve because of competition, inventories, customer demand, tariffs and mismatches in raw material prices. This would lower PBIT, PBT and operating cash flow, thinning FCF after capex, replanting, sustainability investment and dividends. If cash declines and short-term borrowings increase, ratings, market access and refinancing terms are likely to deteriorate.

The second scenario is foreign-exchange and interest-rate stress. If the ringgit weakens, it affects the valuation of foreign-currency borrowings and US dollar bonds, finance costs, hedge valuations, imported raw materials and translation of overseas subsidiaries. Even where hedges exist, they are unlikely to cover the full amount for the entire period. If US dollar rates remain high and CPO prices are also weak when the 2031 bond is refinanced, funding costs could rise even with currently low net borrowings.

The third scenario is an ESG or regulatory event. Delays in EUDR compliance, insufficient traceability, grievances related to forests, land or labour, certification issues, or procurement suspension by key customers would affect not only short-term revenue, but also the funding investor base. For a long-dated bond, regulation and customer standards may tighten further by around 2030. IOI’s SBTi validation and RSPO/MSPO compliance are supportive, but bond investors should check actual grievance handling, third-party audits, supply-chain tracing and EUDR implementation.

The fourth scenario is a change in capital allocation. If growth investment in Plantation or RBM, M&A, share buybacks or higher dividends continue at a pace exceeding operating cash flow, net debt can increase. Supplementary data show that FY2025 FCF before dividends was below dividend payments. This is not immediately dangerous, but if the same capital allocation continues during a period of weak CPO prices, bondholder headroom will decline. IOI is a listed company, and the balance between shareholder returns and creditor protection needs to be monitored continuously.

Metrics to monitor include average CPO and PK prices, FFB production, FFB yield, OER, CPO cost of production, RBM underlying operating profit, Refinery and Oleochemical margins, operating cash flow, FCF after dividends, short-term borrowings, cash, undrawn committed lines, foreign-currency debt, foreign-exchange translation gains and losses, hedge valuations and the OC terms for the 2031 bond. Event-wise, FY2026 Q3 results, full-year FY2026 results, Moody’s/Fitch/JCR rating actions, EUDR implementation, RSPO/MSPO and grievance-related disclosures, and major M&A or capital-allocation policies should be checked.

12. Credit View and Monitoring Focus

Based on public information currently available, IOI can be viewed as a general corporate with adequate headroom for normal-course interest payments and refinancing, and financial flexibility consistent with a lower-tier investment-grade credit. However, the latest full text of rating reports as of May 2026 has not been confirmed, and this report does not assert the rating level itself. The direction is broadly stable, and the earnings improvement in FY2025 and 1H FY2026 is positive, but it was partly supported by CPO and PK prices, foreign-exchange translation gains and a reversal in downstream processing, so it should not be classified as structural improvement. The probability of rapid credit deterioration is not currently high, but if CPO price declines, RBM margin deterioration, foreign exchange and interest rates, ESG regulatory events and shareholder returns worsen at the same time, credit headroom could narrow relatively quickly.

Credit quality is supported by leading plantation assets, Plantation earnings from FY2025 through 1H FY2026, low to moderate borrowings, cash coverage of short-term borrowings, and the long-dated US dollar bond structure with an IOI parent guarantee. IOI has shown not only earnings generation during favourable CPO price conditions, but also improvements in yield and costs. The 1H FY2026 profits in Plantation and RBM indicate that, at least as of the latest official results, the business had not weakened materially.

The constraints are sensitivity to CPO and PK prices, instability in downstream processing margins, foreign exchange, interest rates and hedge valuation, ESG and regulatory risk, and capital allocation. The supplementary data showing FY2025 FCF before dividends below dividends paid, although not yet reconciled to official statements, is a monitoring item suggesting that profit improvement may not have fully translated into debt-reduction capacity. Therefore, IOI should not be viewed as safe simply because leverage is low; it is necessary to continue checking whether FCF after dividends and investment can be maintained during a weak price cycle.

For holders of the 2031 guaranteed notes, the IOI parent guarantee is a major support, but it remains necessary to confirm publicly disclosed senior guaranteed bond protections and the ranking relationship with secured debt, subsidiary debt and trade finance. At this stage, the Pricing Supplement has been used to confirm the issuer, guarantor, amount, coupon and maturity, but detailed terms based on the full Offering Circular have not been confirmed. For individual bond investment, the negative pledge, cross default, change of control, security restrictions, tax gross-up, early redemption and governing law should be checked.

The credit view would improve if FFB yield, OER, CPO cost and RBM margins stabilise without excessive dependence on CPO prices, operating cash flow and FCF after dividends remain positive over multiple periods, and undrawn committed lines, cash location, foreign-currency hedging and debt maturities are clearly managed. Conversely, if CPO price declines, RBM competition worsens, dividends and investment expand, foreign-exchange losses emerge, and ESG regulatory events occur together, weakening net debt/EBITDA or interest-payment capacity, current credit headroom would shrink. As of 2026-05-16, official 3Q FY2026 results had not yet been checked, so the next review should prioritise those results and the full-year FY2026 outlook.

Short Summary & Conclusion

IOI Corporation Berhad is a Malaysia-based integrated palm oil and oils-and-fats processing group, combining Plantation assets with Resource-Based Manufacturing downstream processing. Earnings improved in FY2025 and 1H FY2026, and the current level of borrowings appears manageable, but credit quality is affected by CPO and PK prices, downstream margins, foreign exchange and interest rates, ESG regulation and capital allocation. The 2031 US dollar bond is issued by IOI Investment (L) Berhad and guaranteed by IOI Corporation. Based on public information, it can be classified as a senior guaranteed bond, but before individual investment, the Offering Circular’s guarantee, covenants, security restrictions, cross-default and change-of-control provisions should be reviewed.

Sources

Primary Company Sources

• IOI Group, Annual Report 2025, accessed 2026-05-16. Used to confirm the annual report landing page, financial highlights, Plantation review, Resource-Based Manufacturing review, and strategy references.
• IOI Corporation Berhad, Interim Report for the financial period ended 31 December 2025, released 2026-02-24. Used to confirm 1H FY2026 / Q2 FY2026 income statement, balance sheet, borrowings, derivatives, foreign exchange and hedge explanations.
• IOI Corporation Berhad, Q2 FY2026 Summary Presentation, accessed 2026-05-16. Used to confirm 1H FY2026 segment profits, Plantation operating statistics, RBM sub-segments, FY2026 outlook and Sustainability updates.
• IOI Corporation Berhad, Q4 FY2025 Summary Presentation, accessed 2026-05-16. Used to confirm full-year FY2025 PBT, Underlying PBT, Plantation operating statistics, RBM underlying OP and FY2026 outlook.
• IOI Group, Sustainability Report 2025 and SBTi validation media release, accessed 2026-05-16. Used to organise monitoring points related to SBTi, GHG reduction, EUDR, forests, labour and traceability.

Bond Documents And Rating Sources

• IOI Investment (L) Berhad, Pricing Supplement dated 2021-10-26 for US$300 million 3.375% Notes due 2031 guaranteed by IOI Corporation Berhad, under the US$1.5 billion Euro Medium Term Note Programme. Used to confirm issuer, guarantor, amount, coupon and maturity.
• IOI Investment (L) Berhad / IOI Corporation Berhad, Offering Circular dated 2021-10-15, public SGX prospectus-circular source identified but full covenant review not completed. Target for next review of guarantee, terms and risk factors.
• Moody’s 2021 IOI rating assignment / affirmation content via public article. Used to confirm Baa2, stable outlook, guaranteed bond positioning, and Moody’s focus on leverage, investment and shareholder returns. The latest full rating report has not been confirmed.

Secondary And Data Sources

• StockAnalysis.com, IOI Corporation Berhad financial statements sourced to S&P Global Market Intelligence, accessed 2026-05-16. Used as supplementary data for FY2023-FY2025 operating cash flow, FCF, EBITDA, total debt, cash and short-term debt. Full item-by-item reconciliation against the official annual report PDF has not been completed.
• KLSE Screener financial results page, accessed 2026-05-16. Used to confirm that the December 2025 quarterly report was the latest official recurring financial result, and to check historical results announcement timing.
• Internal structured data: issuer_summary/issuers/ioi_corporation/data/ioi_corporation_financial_snapshot_20260516.json. Working data organisation for financial, segment and bond data used in the text.

Unverified / Pending Items