Sime Darby Plantation completes Liberian unit disposal

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KUALA LUMPUR (Jan 16): Sime Darby Plantation Bhd (SDP) said its unit Sime Darby Plantation Investment (Liberia) Pte Ltd has completed the disposal of its entire interest in Sime Darby Plantation (Liberia) Inc (SDP Liberia) to Mano Palm Oil Industries Ltd (MPOI).

The group said this in a statement today following its announcement last month that a Sale & Purchase Agreement (SPA) of the asset was being finalised.

Under the SPA, SDP’s entire equity in SDP Liberia was sold to MPOI for US$1 plus an earn-out payment, which will be determined by the average future crude palm oil (CPO) price and future CPO production of SDP Liberia in 2022.

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

SDP group managing director, Mohamad Helmy Othman Basha said the terms and conditions of the asset sale were agreed with the buyer considering, amongst others, SDP’s cash outflow and SDP Liberia’s continuous loss-making state.

SDP Liberia has been a continuously loss-making operations since its inception. In 2018 and 2019, it registered operational losses of US$19 million and US$16 million respectively, even before asset impairment.

“As part of the consideration of the sale, the earn-out payment constitutes a continuing potential income for SDP even after SDP Liberia 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,” Helmy stressed.

Although the group has endeavoured to reduce its cost of operations and taken various steps to enhance the efficiency of the operations, it still could not sustain its operations and provide a long-term sustainability for the business.

“Since we began our foray into Liberia in 2009, SDPL has only managed to plant on just over 10,300 hectares of land due to various operating challenges. This is in spite of a 63-year concession that we were given to develop 220,000 hectares of land. The existing size of the plantation is relatively small to make a significant impact to our bottom line,” said Helmy.

MPOI, a wholly-owned subsidiary of Mano Manufacturing Company (MANCO) is involved in the purchase of CPO and exporting it to various destinations across West Africa. MANCO, a local Liberian company established since 1967, is principally involved in the manufacturing of soap, bleach and detergents.

According to Helmy, the selection of MPOI as the new owner was made based on its standing and track record, as well as its readiness to commit to SDP Liberia’s existing obligations to its employees, local communities and suppliers.