31/03/2026

BIZ & FINANCE TUESDAY | MAR 31, 2026

15

Malaysian producer prices enter 12th month of decline

SD Guthrie outlook steady amid cost pressures, says PublicInvest

o Manufacturing and agriculture remain primary drags on index in February: Kenanga IB PETALING JAYA: Malaysia’s Producer Price Index (PPI) fell 3.4% in February, marking the twelfth consecutive month of deflation, following a 2.9% drop in January. According to Kenanga Investment Bank Bhd (Kenanga IB), the domestic manufacturing sector drove the decline, together with continued price weakness in the agriculture and utility sectors. On a monthly basis, the PPI returned to a 0.5% contraction after a brief 0.1% rise in January, as manufacturing prices slipped further. Manufacturing and agriculture remained the main drags on the index, with manufacturing prices declining 2.7% in February compared with a 1.7% drop in January, largely due to sharper declines in refined petroleum products at 10.6% and a 5.2% fall in food manufacturing, widening from a 4.2% decline in January. Agriculture, forestry and fishing remained in deflation, with prices declining 8.7% in February compared with an 8.3% drop in January, weighed down by lower perennial crop prices, although the sector recorded a modest 1.0% month-on-month increase from 0.3% previously. Mining remained in deflation, with prices declining 8.5% in February compared with an 11.7% drop in January, indicating a slight improvement. On a month-on-month basis, the sector contracted 0.4% after expanding 1.9% in January. KUALA LUMPUR: The Malaysian consumer products sector shall continue to provide earnings resilience and visibility, underpinned by stable domestic consumption and ongoing fiscal support, according to RHB Investment Bank Bhd (RHB IB). In a note yesterday, the investment bank said measures such as Sumbangan Asas Rahmah (Sara) and targeted fuel subsidies (RON95) should help support consumer spending amid soaring global energy prices. It said the temporary adjustment of the monthly purchase limit for the Budi Madani RON95 (Budi95) to 200 litres implied a limited immediate impact on the mass market. “Overall, we do not expect any near-term policy shifts that could materially disrupt consumption trends,” it said. However, RHB IB noted that a prolonged West Asia conflict could pose second-order risks via inflation. Meanwhile, the investment bank said the sector’s performance for the fourth quarter of 2025 (Q4 2025) was in line with its expectations, as nine of the 17 stocks under its coverage met expectations. It noted that margin expansion was widely observed during the period, driven by several factors, including the increasing scale of operations and higher sales volumes recorded by companies such as Nestle (Malaysia) Bhd, 99 Speed Mart Retail Holdings Bhd, MR DIY Group

PETALING JAYA: SD Guthrie Bhd remains optimistic that elevated crude palm oil (CPO) prices will serve as a natural hedge against rising input costs, particularly diesel and logistics, as the group navigates a complex global landscape marked by geopolitical tensions in the Middle East. Public Investment Bank Bhd (PublicInvest) said SD Guthrie is strategically pivoting toward industrial land development and renewable energy to diversify its earnings base. The research firm noted that the group has locked in about 42% of its Malaysian production for April-December 2026 at an average CPO price of RM4,400/mt (per metric ton), slightly below the current MPOB spot price of RM4,466/mt. According to PublicInvest, fertiliser costs, which account for 27-28% of direct costs, have been fully locked in for 2026. Diesel, comprising less than 5% of direct costs, remains a manageable risk in Malaysia but poses a higher threat to Indonesian operations due to reliance on diesel-powered mills. “While direct exposure to the Middle East is limited (approximately one vessel/month to Europe), a prolonged conflict would cause the escalation of global bunker fuel charges and a delay in palm oil shipments, particularly for its Papua New Guinea operations,“ PublicInvest said in a note. Apart from that, PublicInvest said that SD Guthrie has clarified that the recent government-linked company asset disposal rulings regarding 50% effective Bumiputera ownership are unlikely to curtail its existing projects, such as Eco Business Park 7, in which SD Guthrie has a 30% stake, and Eco Business Park 8, in which SD Guthrie holds 25% stake. Most partnerships have roped in state governments (10%-20%) to mitigate the risks to equity requirements, PublicInvest noted. Separately, the research firm noted that Shahrizal Suhainy will succeed Renaka Ramachandran as CFO, effective May 1. Touching on the Carey Island port project, PublicInvest said the Cabinet has recently approved a proposal from the Selangor state government to build the third international port on Carey Island after Northport and Westports. “This is positive for SD Guthrie, which owns 79% of the island or 28,646 acres, as it has three pending land joint-venture deals there (Yayasan Selangor, Sime Darby Property, and IJM Corp),“ it said. Moving on, PublicInvest said for the first two months of 2026, the group registered cumulative FFB production of 1.2 million mt, down 4.1% year-on-year. SD Guthrie stated that the group has targeted mid-single-digit FFB production growth this year, led by higher FFB production from Malaysia (mid-single digit) and Indonesia (low single-digit), and strong performance from Papua New Guinea and the Solomon Islands. PublicInvest maintains an “Outperform” rating on SD Guthrie, with an unchanged target price of RM6.79 based on 20x FY26 earnings per share.

Kenanga IB has raised its 2026 PPI forecast to -1.9% from -2.2% to reflect rising oil prices. – BERNAMAPIC

geopolitical tensions involving Iran have led to an upward revision of the 2026 Brent crude assumption to US$80 per barrel from US$67 previously. “Despite Malaysia securing assurances on safe passage through the Strait of Hormuz, it could still result in broader supply chain disruptions that lift producer prices, although a firmer ringgit is expected to keep overall PPI in deflationary territory for the year. “While the pass-through to consumer prices remains manageable and we maintain our consumer price index (CPI) forecast at 2.1%, rising upside risks could eventually weigh on private consumption if producers begin passing higher input costs to households,” Kenanga IB said.

Kenanga IB noted that deflation persisted across all stages of processing, signalling weak pipeline pressure, as prices of intermediate materials, supplies and components fell 3.1% in February, down from 2.3% in January, to a six month low, driven mainly by a sharper decline in processed fuel and lubricants. Finished goods declined 1.1% in February from 0.6% in January on lower capital equipment costs, and crude materials for further processing remained in deflation at 7.0% in February, slightly improved from 7.5% in January, supported by a modest increase in non-food materials prices. “We have raised our 2026 PPI forecast to - 1.9% from -2.2% (2025: -2.0%) to reflect rising oil prices,” Kenanga IB said, noting that heightened

RHB IB expects consumer sector to remain resilient on stable spending, fiscal support

Measures such as Sumbangan Asas Rahmah and targeted fuel subsidies should help support consumer spending amidst soaring global energy prices. – BERNAMAPIC (M) Bhd, Eco-Shop Marketing Bhd and Farm Fresh Bhd. between ‘neutral’ and‘positive’, with a number of discretionary players observing encouraging sales ramp-ups since the start of 2026.

“As usual, there was a pick-up in consumer spending towards the year-end, particularly with the consumer discretionary players. This was spurred by favourable seasonality (school holidays, festive season) and could also suggest a steady consumption trend in tandem with the improving consumer sentiment,” it said. Generally, management guidance range

The investment bank said this could be a result of firmer consumer sentiment – underpinned by solid macroeconomic conditions, healthy disposable income growth, a strengthening in the ringgit and positive spillover effects of Visit Malaysia Year 2026. – Bernama