MARC RATINGS AFFIRMS RATINGS ON UMW'S IMTN AND PERPETUAL SUKUK PROGRAMMES 

MARC Ratings has affirmed its AA+IS rating on UMW Holdings Berhad's (UMW) RM2.0 billion Islamic Medium-Term Notes Programme (Sukuk Musharakah) and its AA-IS rating on the RM2.0 billion Perpetual Sukuk Programme. The outlook for all ratings is stable.  

UMW's longstanding leading position in the domestic automotive market, significant automotive sales in recent years that have translated into strong earnings, and healthy consolidated balance sheet are key rating drivers to the affirmation. These strengths are moderated by the keen price competition in the domestic automotive industry that could weigh on margins, and the potential impact on financial performance from business divestments and other structural changes to better align with parent Sime Darby Berhad following the completion of an acquisition exercise in March 2024. 

MARC Ratings notes that while both Sime Darby and UMW mainly operate in the automotive as well as heavy and industrial equipment segments, the latter's primary businesses have remained independent and intact as at date, save for the disposal of its 74% stake in UMW Komatsu Heavy Equipment Sdn Bhd. This disposal, expected to be completed by 3Q2024, was necessitated to prevent competition between two principals involved in the distribution of heavy equipment within the Sime Darby group. The rating agency views the financial impact on UMW Group's performance to be minimal as this segment accounted for about 6% or RM80 million of its profit before tax as at end-December 2023. MARC Ratings understands that no further significant divestment is envisaged over the near term, with focus to remain on group-wide cost optimisation following the acquisition. 

For 1Q2024, UMW sold 109,340 vehicles, accounting for 54.1% of the total industry volume, retaining its leading market position in the domestic automotive industry (1Q2023: 103,783 units or 53.9%). Its key marques ar