SD Guthrie expects Indonesia output to decline due to El Niño

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SD Guthrie expects output to fall

Highlights

SD Guthrie expects output in Indonesia to fall by around 10% next year due to El Niño, as dry conditions have persisted for four months since July.
Lack of rainfall has disrupted upstream operations, with production effects potentially emerging as early as five months or as late as 18 months after the dry spell.
SD Guthrie shares rose 1.35% to RM6.01, giving it a market capitalisation of RM41.56 billion and reflecting a reassessment of operational risks from weather disruptions.

This article was translated from the original. Read the original version by our correspondent here.

Impact of dry weather on Indonesian operations

The Edge Malaysia reported that the forecast was shared by the group’s Indonesia upstream chief executive, Adrianudin Raj Azman, at the group’s earnings briefing on Thursday. He said a decline of around 10% is expected next year, and the impact could be greater in 2028 based on the company’s historical trends, although it could be smaller if rainfall increases.

He said a typical dry spell usually lasts two months, but the current El Niño has brought around four months without rain since July. This has made the company’s upstream operations in Indonesia more challenging, including watering its nurseries, which has required the group to source water externally. Mills have also had to shut down on certain days because of water shortages.

Adrianudin said the effects of unfavourable weather on output can emerge as early as five months later or as long as 15 to 18 months later. Conditions have now improved with the arrival of rain, but rainfall is still insufficient to replenish the group’s reservoirs. However, the company expects fairly good rainfall in November.

Implications for the group and market sentiment

At the end of 2025, more than half of SD Guthrie’s planted area was in Malaysia, while 31.3% was in Indonesia and a further 16.2% was in Papua New Guinea and the Solomon Islands. This means any production disruption in Indonesia has a significant impact on the group’s regional supply profile, even though its exposure to the Malaysian market remains greater.

At the time of writing, SD Guthrie shares were up eight sen, or 1.35%, at RM6.01, giving the group a market capitalisation of RM41.56 billion. The share price movement indicates that the market continues to assess the group’s operating outlook amid weather risks, including the possibility of further effects if the El Niño pattern persists.

MARC Ratings’ warning about Malaysia’s need to strengthen its fiscal buffers stresses that global shocks—including climate shocks—are becoming more frequent and need to be factored into planning for Budget 2027. The article also highlights how an extended period of high interest rates and bond yields, along with substantial spending commitments, is limiting fiscal headroom and strengthening the case for reforms such as broadening the tax base and improving targeted subsidies.

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