Asia Pulse | 29 October 2010
By Marty Silk
SINGAPORE, Oct 29 Asia Pulse - Singapore-based commodities giant Wilmar International will use the sugar business of Australia's CSR, Sucrogen, to expand its Indonesian sugar operations if authorities approve a US$1.47 billion takeover next month.
Wilmar is eyeing Indonesia's Papua Province for a massive cane growing project and due to logistics the acquisition of Sucrogen will be highly beneficial to its plans.
"Wilmar has been offered a 200,000 Ha land concession in Irian Jaya (Papua) for sugar cultivation," a Wilmar presentation outlines.
"Sucrogen's operations base in Townsville, Queensland, provides ideal base for staff to develop our Irian project."
Wilmar's project in Papua will form part of the US$5 billion Merauke Integrated Food and Energy Estate, which has been planned by the government to help gain self-sufficiency in food production, with a longer-term goal of turning Indonesia into a food-exporting nation.
However Greenpeace warns against the serious environmental and social impacts the huge project may have.
"The Maruake project is actually two million hectares, Wilmar's lot makes up only part of it. What makes us worried about it is that Papua is the largest intact forest in both the region and in Indonesia itself. The forest is in good condition and biodiversity is quite high. If the project goes ahead it will be extremely destructive," Greenpeace Indonesia spokesperson Bustar Maitar said.
He says that the project will not only be damaging to the forest.
"This project will also bring workers from other parts of Indonesia to Papua. We've seen time and time again that this sort of situation creates social problems between migrants and locals," Bustar explained.
"Specifically, the cane-growing part of this project will also lead to silt being deposited in the coastal environments. This will be bad for the marine environment on the coastal ridge and the mangroves."
"What Wilmar is always trying to communicate to shareholders and the media is their commitment to biodiversity. If they join this project then they join in with the deforestation of Papua," he said.
On August 11 this year Australia's Foreign Investment Review Board extended by up to 90 days its assessment of the proposed sale of Sucrogen by CSR to Wilmar. It is expected to publish the findings next month.
If successful, the takeover would position Wilmar as the world's second largest raw sugar exporter through Sucrogen's joint venture with Queensland Sugar Ltd (QSL), and Australia's largest sugar refiner through Sucrogen's other JV with Mackay Sugar Ltd.
The majority of its clients are from Asia and over time, Wilmar believes, the investment will see positive returns as regional palates change with economic development.
"Sugar consumption per capita remains low in Asia. For instance, sugar consumption in China, India and Indonesia ranges from 10-20kg per capita, as compared to up to 60kg (Australia is 42kg) per capita in some developed countries. As Asia grows more affluent, this gap should narrow," said a Wilmar International spokesperson who asked to remain unnamed.
With control of over half of Australia's raw sugar output within its grasp though, Wilmar is keen to underline its commitment to Sucrogen's existing customers and ventures.
"We are mindful of Sucrogen's heritage and will work closely with Sucrogen management to build on Sucrogen's strengths, create synergies and expand the business," said the spokesperson.
"Wilmar recognises the strength of both the CSR and the Chelsea brands in their respective markets. They are icon brands and represent established quality, trust and reliability, which are values which Wilmar will work hard to continue to maintain."
"Wilmar's decision to invest in Sucrogen was based on the current arrangements which include the JV with Mackay for the refining or sweetener operations. Wilmar has held discussions with both QSL and cane grower organisations and in those discussions Wilmar advised that it had no plans to change to the QSL arrangements," he said.
In the 2009/10 fiscal year Sucrogen's earnings before interest and taxes (EBIT) rose 62 per cent to A$135.7 (US$133.49) million. For the year ended December 31, 2009 Wilmar International posted a profit US$1.97 billion and held assets worth US$23.448 billion.
