Credit Update: Cocoa grinders continue to benefit from the volatile bean prices – JB Cocoa

• Bean Price is expected to ease slightly, supported by improving weather conditions in Ivory Coast, which may gradually alleviate supply pressures.

• JB Cocoa delivered an exceptionally strong performance, with revenue increasing by 178.2%, primarily due to higher average selling prices across all products

• The credit profile has improved despite prolonged cocoa bean price volatility, while the liquidity position remains strong to support debt obligations.

• Supply chain disruptions and cocoa bean price fluctuations remain key risks

• Given JB Cocoa’s favorable outlook, investors may consider its bond issuances (except the bond maturing in 2025) for their decent returns.

JB Cocoa is a premium cocoa ingredient brand under JB Foods Limited (SGX: BEW). The group’s principal activities comprise of the production and sales of cocoa ingredients, i.e.: cocoa mass, cocoa butter and cocoa powder. As of today, it is one of the world’s leading producers of cocoa ingredients.

Early this year, JB Cocoa announced a change in its financial year-end from 31 December to 31 March, in order to better align its financial reporting with the Group’s internal management and operational cycle.

As a result, the financial figures presented in the current period (FY2025 – 15 months ended 31 March 2025) are not entirely comparable with those of the previous financial year.

Previous update: Idea of the week: One of the highest yields in MYR bond space 2024 – JB Cocoa

Demand for cocoa bean remains intact despite elevated bean price

As shown in Chart 1, cocoa bean prices plunged to approximately USD9,000/MT in June 2025, down from a peak of around USD11,000/MT at end-December 2024. We believe that the easing in cocoa bean price may be a result of improving conditions in key production regions — Ivory Coast and Ghana — which together account for roughly 60% of global cocoa bean output.

Although cocoa bean price remains elevated, demand for cocoa beans remains strong. Cocoa beans demand seems to be relatively price inelastic as they are essential ingredients in many food and drink products.

Looking ahead, cocoa bean price is expected to ease slightly and will likely to trade within the range of USD6,000/MT to USD10,000/MT, supported by improving weather conditions in Ivory Coast, which may gradually alleviate supply pressures.

Chart 1: World Cocoa Grindings and Cocoa Bean Price (000’ MT and USD / MT)

Outstanding performance in FY2025; but margin remains thin

In FY2025 (15 months ended March 2025), JB Cocoa delivered an exceptionally strong performance, with revenue increasing by 178.2% to USD1,657.5 million. This was primarily driven by higher average selling prices across all products, supported by the persistently high cocoa bean price.

However, in line with the rise in revenue, the Group’s cost of sales also increased by approximately 180%, driven by elevated cocoa bean prices. Finance costs rose by around 127%, due to higher utilisation of trade bills.

During the financial year, the Group recorded unrealised mark-to-market fair value losses of USD2.8 million (FY2023: USD12.3 million) on hedging activities. In addition, the strengthening of the GBP and EUR against the USD led to foreign exchange losses on forward contracts amounting to USD4.7 million.

As a result, the Group’s profit before tax (PBT) surged by 2,080% to USD31.7 million. Despite the robust top line performance, JB Cocoa’s net margin remained thin at 1.4% in FY2025, as persistently high bean prices continued to weigh on profitability (Chart 2).

Moving forward, we expect JB Cocoa’s net margin to remain thin in the near term (FY2026), as cocoa bean prices are unlikely to return to the previous low level of USD3,000/MT quickly, despite improving weather conditions.

Table 1: Profitability indicators (USD million)

Source: Company’s Reports, iFAST compilations. Data as of 31 March 2025

Chart 2: Net profit margin (%)

Improving balance sheet despite prolonged bean price volatility

Despite the persistent higher cocoa bean price, JB Cocoa managed to pare down its total borrowings by approximately USD74 million. The group’s debt composition was mainly made up by Sukuk issuance (37%), trade bills (31%), shareholder loans (15%) and term loan (15%).

Total Debt/EBITDA saw significant improvement, improving from 11x in FY2023 to 2.6x in FY2025, underpinned by the tremendous surge in earnings. The group also recorded higher interest coverage ratio of 2.2x during the financial year.

As of end-March 2025, the group’s cash and bank balances were insufficient to meet its short-term obligations of approximately USD44 million. In the latest financial statement, the group did not indicate whether it has any credit facilities that could be utilised. Nonetheless, we believe the group’s credit profile remains healthy considering its marketable assets (receivables + inventories) are more than sufficient to fulfill its short-term obligations.

Overall, JB Cocoa’s credit risk remains well under control. We are aware that the group’s borrowings may remain volatile.

Table 2: Credit metrics (USD million)

Source: Company’s Reports, iFAST compilations. Data as of 31 March 2025

Key risks

Supply chain issue: Supply chain disruptions due to the adverse weather conditions may have a negative impact on the group’s financials and credit metrics.

Fluctuation in cocoa bean prices and foreign exchange risks: Highly volatile bean prices environment and foreign exchange movements may impact the group’s financials negatively.

Our View

JB Cocoa recorded exceptionally strong revenue in FY2025 (15 months ended Mar 2025), mainly driven by higher average selling prices across all product segments and supported by its strong customer base. In addition, the Group's credit profile has seen improvement, with lower gearing ratio and stronger liquidity profile within the financial year.

However, investors should be mindful that volatile cocoa bean price may continue to weigh on JB Cocoa’s bottom line and balance sheet, as elevated procurement costs could lead to increased financing.

Overall, we view JB Cocoa’s profile as decent and credit risk remains under control at this juncture. Investors may consider the group’s existing issuances (excluding the 2025 tranche due to its relatively low yield to maturity, as it is maturing this year).

Table 3: Recommended bonds

Source: BSM, iFAST compilations. Data as of 08 July 2025

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.