Sime Darby Plantation considers exiting West Africa palm oil operations: sources

FILE PHOTO: A man walks inside Sime Darby Plantation in Gbah, in Bomi County, Liberia December 30, 2017. Picture taken December 30, 2017. REUTERS/Thierry Gouegnon

KUALA LUMPUR (Reuters) – Sime Darby Plantation, the world’s biggest oil palm planter by land holdings, is considering exiting its palm and rubber operations in the West African nation of Liberia, industry sources said.

The potential move comes as the Malaysian company’s return on investment in Liberia has been lower than expected due to disappointing planting activity amid stricter new international environmental standards, the two sources said.

“At the end of the day, it’s all about returns … and they (the company’s leadership) are answerable to the board,” one of the sources said. They both declined to be identified due to the sensitivity of the issue.

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.

Liberian president George Weah said last week in a statement that the country could not afford to lose a major investor such as Sime Darby Plantation, and that the government was “committed to doing everything possible to ensure that this investment stays here”.

The statement, uploaded on Weah’s official website, also quoted Sime Darby Plantation’s management saying the company had spent over $200 million on its Liberian operations and had not broken even, coming under pressure from its board to reconsider the investment.

Sime Darby Plantation declined a request for comment from Reuters.

The company 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 so far only 10,000 hectares has been planted due to factors including an ebola outbreak and stricter environmental standards.

The head of Sime Darby Plantations in Liberia told Reuters last year that the company had not laid a seed in two years. [nL4N1Q441I]

The company filed a 111.8 million ringgit ($27 million) impairment on its Liberian operations for its financial year ending in June 2018, according to its 2018 annual report.

Greenfield expansion in Southeast Asia has become uncommon, as green groups push for more sustainable and “no deforestation” rules for palm oil production.

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