Sinar Mas firm to invest $1.6 billion in Liberian palm oil

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The Jakarta Post | 26 March 2013
SInar Mas plantations in Indonesia (Photo: Reuters)

Mariel Grazella

Sinar Mas Group says it will invest US$1.6 billion in the Liberian palm oil business to expand operations overseas.

Franky Oesman Widjaja, the CEO of Golden-Agri Resources Ltd. (GAR), a key Sinar Mas Group business unit, said that the company would disburse the funds over eight to 10 years.

“So far, we have put in about $100 million,” he said during a meeting with Liberian President Ellen Johnson Sirleaf on Monday in Jakarta.

Franky said that the investment was appealing and would boost the company’s image.

Golden-Agri Resources has been seeking to become a virtual king in the market as it attempts to acquire to 40,000 hectares of new concessions, mostly in Kalimantan.

GAR, the world’s second-largest palm oil plantation operator, aims to operate 503,400 hectares of plantations in 2013, which would be up 8.6 percent from 2012 and would include areas developed in partnership with local farmers.

In 2010, the company invested in the Verdant Fund LP, a private equity fund that has a stake in Golden Veroleum (Liberia) Inc., which the Liberian government granted a concession of 220,000 hectares of palm oil plantations and 40,000 hectares in partnership with local farmers.

As of 2012, GAR has invested $70 million in Verdant Fund to develop palm oil plantations, while Veroleum has planted in 2,000 hectares of the concessions.

Franky added that, depending on conditions such as soil, the company would plant up to 10 hectares this year, an investment which could reach $100 million.

“We are getting 5 to 6 tons of yield per hectare. Thus, of all the planted land produces results, we could have a yield of 1.5 tons on our hands,” he added.

GAR is targeting a 5 percent to 10 percent increase in palm-product output this year. The company’s unaudited 2012 financial report said that GAR’s crude palm oil (CPO) production volume rose by 9 percent to 2.36 million tons, while palm kernels were up 14 percent to 554,000 tons last year.

The company earned $6.05 billion in revenue from operations, registering a 1.7 percent year-on-year accretion. Indonesia contributed 78.7 percent, or $4.76 billion, to revenue while China brought in 21.3 percent

In terms of products, CPO comprised 44 percent of revenue, while unbranded refined palm products brought in another 29 percent. Branded products, soybean meal and soybean oil contributed 8 percent, 8 percent and 4 percent
respectively.

GAR is listed on the Singapore stock exchange and has a market capitalization of $6.8 billion as of 2012. Investment group Flambo International Ltd. holds 49.95 percent of GAR.

Sirleaf said that Liberia might grant the company additional
concessions.

However, Sirleaf said that it was essential that the company work closely with communities. “We look forward to that and we look forward to them moving even further than that to start processing once the operations have come into full
maturity.”

Liberia has been rebuilding after a long civil war. The country held democratic elections in 2005, which Sirleaf, a Harvard-trained economist, won.
Original source: Jakarta Post
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