Moody’s: Sime Darby unlikely to attain full ownership of NBPOL

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KUALA LUMPUR: Sime Darby Bhd is unlikely to attain the full ownership of New Britain Palm Oil Ltd (NBPOL), said Moody’s Investors Service, as government-related entities currently hold around 22% of NBPOL and may wish to increase their ownership interest.

While Sime Darby aims to fully own NBPOL and has stated that it wants a minimum 51% stake in the company, the global rating agency said it is unlikely that full ownership will be achieved.

It said NBPOL is likely to remain listed, but not in London. This allows the company to raise funds for expansion or make selective share placements to dilute Sime Darby’s stake if required.

In a statement yesterday, Moody’s vice-president and senior credit officer Alan Greene pointed out that the proposed acquisition would increase Sime Darby’s planted area by 15%.

Sime Darby’s 525,290ha of oil palm as at June 2014, combined with NBPOL’s 79,884ha in the same period, will amount to 1.62 times that of Felda Global Ventures Holdings Bhd and 1.29 times that of Golden Agri-Resources Ltd.

“The acquisition will also improve the geographical diversity of Sime Darby’s palm oil sources, thereby mitigating the risk of unfavourable localised weather,” said Greene.

The addition of NBPOL’s plantations in Papua New Guinea (PNG) to Sime Darby will result in a planted area that is well-balanced between Malaysia and overseas. This is about 51% in Malaysia, 34% Indonesia, 13% PNG and 2% Liberia on a pro-forma basis, the statement read.

Moody’s noted that the acquisition would enhance Sime Darby’s European sales channel, given that NBPOL’s 300,000 tonnes per annum (tpa) refinery in Liverpool, England, is fully certified by the Roundtable of Sustainable Palm Oil, and complements Sime Darby’s existing 450,000 tpa refinery in the Netherlands.

“While operations in PNG are exposed to regulatory and security risks, NBPOL’s operating track record in PNG is long and its plantations exhibit yields that are above average relative to industry peers,” it said, adding that NBPOL’s operations are immediately earnings before interest, taxes, depreciation and amortisation (ebitda)- accretive, with NBPOL generating US$97 million (RM316 million) of reported ebitda at a 17.3% ebitda margin in 2013.

 

This article first appeared in The Edge Financial Daily, on October 14, 2014.