KUALA LUMPUR, Jan 16 — Sime Darby Plantation Berhad (SDP) today announced the sale and cessation of its loss-making Liberia business, Sime Darby Plantation (Liberia) Inc (SDPL), to Mano Palm Oil Industries Limited (MPOI), for US$1 (RM4.06).
In a statement today, SDP said that under the sales and purchase agreement (SPA), SDP’s entire equity in SDPL was sold to MPOI for a total cash consideration of US$1 plus an Earn-Out p+Payment sum, which will be determined by the average future crude palm oil (CPO) price and future CPO production of SDPL in year 2022.
“The earn-out consideration is payable in equal quarterly instalments over a period of eight (8) years, commencing April 2023,” SDP said.
SDP’s Group Managing Director Mohamad Helmy Othman Basha said that the terms and conditions of the asset sale were agreed with the buyer considering, amongst others, SDP’s cash outflows and SDPL’s continuous loss-making state.
He said that SDPL has been a continuously loss-making operation since its inception. In 2018 and 2019, it registered operational losses of US$19 million and US$16 million respectively, well before asset impairment.
“As part of the consideration of the sale, the Earn-Out Payment constitutes a continuing potential income for SDP even after SDPL ceases to be a 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,” he said.
SDP said that despite the corporation having taken efforts to reduce its cost of operations and 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,” Helmy said.
SDP said that will assign its employees with operational expertise and experience currently serving in Liberia to provide guidance to MPOI, and ensure smooth transfer of knowledge to the new owner for a period of 12 months, under a secondment arrangement.
MPOI is 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.
Helmy said that the selection of MPOI was made based on the company’s standing and track record, as well as its readiness to commit to SDPL’s existing obligations to its employees, local communities and suppliers. This also includes the development of an Outgrowers’ Programme for the benefit of the local communities in Liberia.
SDP said that all of its current businesses of SDPL will continue as it currently is, and there would be no redundancy of existing employees, as a result of the buy over.
It said that MPOI is also expected to continue honouring all contractual obligations with the local communities.
In addition, SDP said it would also be according a sum of payment to all its former employees based on their years of service.