KUALA LUMPUR, Aug 30 (Reuters) – Malaysia’s Sime Darby Plantation Bhd said on Friday that it has initiated talks with three parties on its plans to exit Liberia, and expects to divest its operations in the West African nation in the “next few months”.
The world’s largest oil palm planter by land size said in February it was reviewing its operations in Liberia due to lower-than-expected returns on investment.
Sime Darby had signed a 63-year concession in 2009 to develop 220,000 hectares of land in northwest Liberia into oil palm and rubber plantations.
The concession makes up a fifth of Sime Darby Plantation’s total land bank, but only 10,000 hectares has been planted so far due to factors including an Ebola outbreak and stricter environmental standards.
Mohamad Helmy said the company aims to complete discussions on its planned divestment of its Liberian operations by the end of this year. Should talks with the three parties fail, they will return the concession to the Liberian government as a “last option”.
West Africa has been seen by many plantation companies as a new frontier for global palm oil expansion as land in Indonesia and Malaysia, which together produce over 80 percent of the world’s palm, has become scarce.
But large scale expansion in West Africa has met with resistance from green groups, who push for more sustainable and “no deforestation” rules for palm oil production.
Sime Darby will also look to boost profit contribution from its downstream operations, increasing refining capacities at its plants and producing higher margin products, Mohamad Helmy said.
He said the company hopes to increase the profit contribution of its downstream segment to 40% from its current range of 10%-15%.
Sime Darby reported quarterly net profit of 27 million ringgit ($6.44 million) for the period ending June.
Mohamad Helmy said the company expects crude palm oil to trade at around 2,200 ringgit a tonne from now until December this year, adding that prices have been helped by lower stockpiles in recent weeks.
“Last year it was difficult to get barges in Indonesia (to transport palm oil), but now we are not seeing that.”