Liberia operations have been ‘a drag’ to its bottom line, says deputy MD
Pic By BLOOMBERG
SIME Darby Plantation Bhd (SD Plantation) is in talks for a potential sale of its operations in Liberia, as the world’s largest oil palm plantation company seeks ways to optimise its nonperforming palm and rubber operations in the West African country.
Deputy MD Mohamad Helmy Othman Basha said the group’s Liberia operations have been “a drag” to its bottom line, as it loses between RM40 million and RM50 million per year from the country.
“It’s getting lesser because the age of the palm is more matured now, so we’re getting more yield…but we don’t see this as a strategic investment we need to keep,” he told reporters at Invest Malaysia 2019 in Kuala Lumpur yesterday.
Mohamad Helmy said the group’s review of its Liberia operations — as announced by MD Tan Sri Mohd Bakke Salleh last month — is almost completed, and will be presented to the board and at its upcoming AGM.
“We’re exploring (the idea of) selling (the operations) to a third party. We’re talking to a few buyers — those who are familiar with the region.
“If they’re not familiar with Africa, they won’t go there. In fact, we’ve signed non-disclosure agreements with a few of them,” said Mohamad Helmy, who refused to divulge details or a timeline for the potential asset sale.
Another option for the palm oil company is to include the Liberia operations in SD Plantation’s work with international non-government organisations to develop smallholders.
As such, Mohamad Helmy said the company could seek financing from its funders, or even hand over the asset to the government of Liberia based on its concession agreement (CA).
The company’s African plantation deal was first sealed in 2009, when it signed an amended and restated CA with the government of Liberia amid growing interest in Africa as the new frontier to develop oil palm plantations.
Under the agreement, some 220,000ha of land would be carved out in Bomi, Grand Cape Mount, Gbarpolu and Bong for both oil palm and rubber plantations.
In addition, SD Plantation would commence work on 10,000ha of land with an initial investment of RM70 million.
However, Mohamad Helmy said the group issued its own Responsible Agriculture Charter in 2016, in light of growing deforestation worldwide.
“From then on, we do not clear forests anymore unless it is grassland that we can develop. So, we have over 200,000ha of land. However, by expanding, we’ll be touching forests,” he said.
Mohamad Helmy added that the group will balance its interests with Liberia’s needs as it is mindful of its position as one of the largest employers in Liberia, despite the impact of the upcoming decision would not be “too major” in the West African nation.
Last month, Liberia President George Weah said the country cannot afford to lose SD Plantation as it is a major investor, adding that the government is “committed to doing everything possible to ensure that this investment stays here”.
Meanwhile, Mohamad Helmy said the European Union’s (EU) move to ban the use of palm oil won’t affect the group as it does not export biofuels to the EU.
Earlier this month, the EU had approved a measure to phase out palm oil-based biofuels by 2030, while still allowing EU member states to import and use palm oil-based biodiesel — although this will no longer be considered a renewable fuel, nor be eligible for the relevant subsidies.
“As far as we are concerned, our biodiesel doesn’t go to Europe. So, it doesn’t impact us. However, it does create a negative perception, which is why our government, as well as Indonesia’s are fighting for our case.”