(Fitch Ratings - Jakarta - 16 Jun 2025)--Fitch Ratings Indonesia has assigned Indonesian lubricant producer and distributor PT Pertamina Lubricants (PTPL) a National Long-Term Rating of 'AA-(idn)'. The Outlook is Stable.
PTPL's rating benefits from a two-notch uplift from its Standalone Credit Profile (SCP) of 'a(idn)'. This is because we believe its parent company, PT Pertamina Patra Niaga (PPN, AAA(idn)/Stable), has 'Medium' operational and strategic incentives, despite 'Low' legal incentive, to support PTPL under our Parent and Subsidiary Linkage Rating Criteria. PTPL's SCP reflects a strong market position and distribution network, and a conservative financial profile.
'AA' National Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.
Key Rating Drivers
Stable EBITDA Margin: Fitch forecast PTPL's EBITDA margin to rise to about 12%-13% in 2025-2026, up from 11% in 2024. We expect PTPL to benefit from lower raw material costs, aligned with our expectation of lower oil prices over the same period. These cost savings will cushion potential margin pressures arising from increased market competition, changes in product mix or higher marketing expenses.
Fitch believes the EBITDA margin declined to 11% in 2024, from 20% in 2021, due mainly to increased marketing expenses aimed at strengthening PTPL's retail market position and a greater share of lower-margin products particularly in 2024. PTPL has improved its market share in the retail segment in recent years. Retail sales, which typically carry higher margins, account for 25%-30% of PTPL's revenue, while industrial sales contribute 40%-50%.
Moderate Market Share: PTPL is one of the leading players in the Indonesian lubricant market. Its domestic market share was 35% in 2023, according to the company. PTPL is the second-biggest brand in the Indonesian retail lubricant market with a 22% share, and holds a 45% share in the industrial segment. PTPL has production capacity for lube at 475,000 kilolitres (KL) a year, grease at 8,000 tonnes/year and viscosity modifier at 10,000 KL/year.
Strong Distribution Network, Supply Chain: PTPL maintains a strong market presence through an extensive distribution network, comprising 123 distribution points and 676 warehouses across Indonesia. Its products are also available at over 15,000 fuel stations operated by PPN. PTPL benefits from a robust lubricant supply chain as part of the PT Pertamina (Persero) (BBB/Stable) group, the state-owned oil and gas company. About 70% of its raw materials are sourced from PT Kilang Pertamina Indonesia (KPI, BBB/Stable), the refining subsidiary of Pertamina. PTPL's factories are located near KPI's refineries to lower transport costs and lead times.
Net Cash: Fitch expects PTPL to remain in a net cash position in 2025-2026 (2024: net cash). This will be supported by a strong operating cash flow and an ample cash balance. We have assumed IDR150 billion-175 billion capex a year (2024: IDR125 billion), in the absence of significant expansion. PTPL has maintained a dividend payout ratio exceeding 90% in the past four years, which we expect to continue over the medium term.
'Medium' Strategic Support Incentives: Fitch believes that PPN has 'Medium' strategic incentive to support PTPL. The subsidiary provides competitive advantage to PPN in terms of access to domestic and overseas lubricant markets with a moderate market position. PTPL improves PPN's product diversification and allows it to capture a wider market in the oil and gas supply chain. In addition, PTPL contributed about 6% of PPN's EBITDA in 2024, and owns three factories and a nationwide distribution network.
'Medium' Operational Support Incentives: PTPL and PPN have some operational synergies, as PTPL sells products at PPN's fuel stations in addition to its own distribution network. We believe there is a reasonable avoidance cost of PTPL's operational benefits to PPN, based on its role in end-to-end lubricant processing and ownership of factories and distribution channels. The two entities also benefit from common branding through the use of the Pertamina name. However, we assess the legal incentive to support PTPL as 'Low', given the absence of a corporate guarantee or cross-default provisions between PTPL and PPN.
Peer Analysis
PT Samator Indo Gas Tbk (SIG, A(idn)/Stable) is rated on a par with PTPL's SCP. SIG is the leading industrial and medical gas supplier in Indonesia. It also has thicker and more stable EBITDA margin at around 30%, with cash flow visibility from its medium-term contracted revenue. These counterbalance SIG's higher EBITDA net leverage of 3.0x-3.5x and its smaller EBITDA scale compared to PTPL.
The rating of Perusahaan Umum Kehutanan Negara (Perum Perhutani, A-(idn)/Stable) is one notch below PTPL's SCP due to its smaller scale, exposure to commodity price fluctuations and weaker financial profile. The company generates EBITDA of IDR500 billion, compared to PTPL's more than IDR1.5 trillion. Perum Perhutani has EBITDA net leverage of 1.0x-2.0x, and expansionary capex is likely to put some pressure on its FCF in 2025-2026. On the other hand, PTPL has no debt.
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer:
- Sales volume of around 600,000 tonnes a year in 2025 and 2026;
- EBITDA margin of 12%-13% in 2025 and 2026;
- Annual capex of IDR150 billion-175 billion in 2025 and 2026;
- Dividend payment of around IDR1 trillion a year in 2025 and 2026.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
- Lower incentives from PPN to support PTPL;
- A significant weakening in market share;
- A deterioration in EBITDA margin to below 7% on a sustained basis.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
- Higher incentives from PPN to support PTPL;
- A sustainable improvement in the EBITDA margin and incremental increases in market share.
Liquidity and Debt Structure
PTPL's liquidity is underpinned by its ample cash balance, positive operating cash flow and no debt. The company had IDR2.7 trillion in cash at end-2024. We expect its internally generated cash flow to be sufficient to cover its direct and operating costs, working capital and tax obligations. PTPL does not have any credit facility or record of raising debt. However, we believe its funding access, if needed, will benefit from its status as part of the Pertamina group.
Issuer Profile
PTPL is a subsidiary of PPN and manufactures, distributes and markets lubricant, grease and specialty chemical products. About 83% of PTPL's 2024 sales volume was in the domestic market, with the remaining 17% exported to ASEAN, China, South Korea, South Africa and others. PPN is wholly owned by Pertamina.
Date of Relevant Committee
26 May 2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the applicable criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. (ends)
