Sime Darby Plantation sells Liberia unit for US$1 plus an earn-out payment

More importantly, this divestment will enable us to prevent further losses in our books, says group MD


SIME Darby Plantation Bhd has disposed of Sime Darby Plantation (Liberia) Inc (SDPL) to Mano Palm Oil Industries Ltd (MPOI) for a total cash consideration of US$1 (RM4.07) plus an earn-out payment.

In a statement yesterday, the group said the sum of the earn-out payment will be determined by the average future crude palm oil (CPO) price and future CPO production of the Liberian unit in the year 2022.

The earn-out consideration is payable in equal quarterly instalments over a period of eight years, commencing April 2023.

Sime Darby Plantation group MD Mohamad Helmy Othman Basha (picture) said the terms and conditions of the asset sale were agreed with the buyer considering the group’s cash outflows and SDPL’s continuous loss-making state.

“As part of the consideration of the sale, the earn-out payment constitutes a continuing potential income for Sime Darby Plantation even after SDPL ceases to be an indirect subsidiary of the group.

“But more importantly, this divestment will enable us to prevent further losses in our books and reallocate our financial resources into areas where they will create the highest value for the group and its shareholders,” he noted.

SDPL has been making losses since its inception, having registered operational losses of US$19 million in 2018, and US$16 million in 2019, even before asset impairment.

Mohamad Helmy said since Sime Darby Plantation began its foray into Liberia in 2009, SDPL has only managed to plant on just over 10,300ha of land due to various operating challenges, despite the 63-year concession that was given to develop 220,000ha of land.

The disposal is positive for the company as it will “stop the bleeding” and allow the group to re-strategise its focus on existing plantation companies, Public Investment Bank Bhd analyst Chong Hoe Leong said.

“The Liberian unit has been dragging Sime Darby Plantation for almost a year. By selling it, the group can stop recognising the provisions from the Liberian unit, as well as injecting more capital expenditure into it.

“In addition, Sime Darby Plantation is now entitled to SDPL’s future earnings from the 10,300ha of land which could be favourable for the group. For the time being, the company is still loss-making,” he told The Malaysian Reserve.

Pursuant to the sale and purchase agreement entered into by the parties on Dec 12, 2019, Sime Darby Plantation will assign its employees with operational expertise and experience who are currently serving in Liberia to provide guidance to MPOI and ensure smooth transfer of knowledge to the new owner for a period of 12 months under a secondment arrangement.

The plantation company said all current businesses of SDPL will continue as-is, with no redundancy of existing employees as a result of the transaction.

The new owner is expected to continue honouring all contractual obligations with the local communities.

In addition, Sime Darby Plantation will be giving a sum of payment to all its former employees based on their years of service.

MPOI, a fully-held subsidiary of Mano Manufacturing Co (Manco), is involved in the purchase of CPO and exporting it to various destinations across West Africa.

Manco, a local Liberian company established in 1967, mainly manufactures soap, bleach and detergents.

Shares of Sime Darby Plantation closed unchanged at RM5.30 yesterday, giving the company a market capitalisation of RM36.49 billion.