IOI Corp downstream revenue seen rising on RSPO compliance — Moody's

IOI Corp downstream revenue seen rising on RSPO compliance — Moody's
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KUALA LUMPUR (May 8): IOI Corp Bhd's downstream oil palm operations' revenue is expected to grow between 5% and 10% over the next 12 to 18 months on rising sales volume of its specialty oils and fats after the company renewed its commitment to sustainable industry practices.

Moody's Investors Service wrote in a note today that IOI Corp's commitment would allow the company to re-establish relationships with customers that terminated contracts with IOI Corp after it was suspended from the Roundtable on Sustainable Palm Oil (RSPO) over lapses in sustainable industry practices.

"IOI's increased transparency and commitment to sustainable palm oil production is credit positive and will strengthen the company's existing off-take relationships within its specialty oils and fats downstream segment.

"Compliance with RSPO principles and criteria is an important differentiating factor for palm-oil producers, providing a competitive advantage and profitability enhancement in the industry. RSPO-compliant palm oil producers are well positioned for growth, particularly in Europe and North America, because certified crude palm oil and its derivatives are increasingly required by leading global food and household product companies," Moody's said.

According to Moody's, the RSPO lifted its certification suspension on IOI Corp's oil palm products in August 2016 because the RSPO was satisfied with IOI Corp's compliance to address deforestation. The suspension started in April 2016.

Last month (April 2017), IOI Corp chief executive officer Datuk Lee Yeow Chor said the company "stands firmly committed" to ensure sustainable palm oil supply. The group's commitment is crucial to convince stakeholders on its desire to improve the commodity's supply-chain management.

Lee said the company would continue to engage stakeholders in its sustainability journey. He said the group hoped to play a leading role in ensuring sustainable global palm oil supply chains.

Today, IOI Corp shares were traded unchanged at RM4.57 at 9:58am for a market value of RM28.67 billion. The stock saw 4,800 shares transacted.