Fitch: Indonesian Policies to Push Downstream Palm Oil Activity

Golden Agri-Resources

19/09/2016 03:10

(The following statement was released by the rating agency)

JAKARTA, September 18 (Fitch) Downstream activity of Indonesia's palm oil 
companies is likely to accelerate due to more stringent sustainability-related 
government regulations, with the weak-price environment encouraging 
consolidation, says Fitch Ratings.

Indonesia's government plans to issue a five-year moratorium on new concessions 
to convert primary natural forests and peat land to palm oil plantations in a 
bid to preserve the country's sustainable environment, particularly after global 
criticism of out-of-control forest fires. 

Fitch believes regulation limiting new planting may prompt companies to shift 
their strategies to focus on productivity and efficiency, increased downstream 
activity and the acquisition of smaller plantation companies.

Major plantation companies have already increased their downstream capacity. 
Golden Agri Resources Ltd boosted its refinery capacity to 4.7 million metric 
tonnes per annum (mtpa) in 2015 (2014: 3.5 million mtpa) and is constructing two 
biodiesel facilities with capacity of 300,000 mtpa. PT Astra Agro Lestari Tbk 
expanded its refinery capacity in 2014-2015 to 3,000 tonnes of crude palm oil 
per day.

Fitch also expects more consolidation, as weak commodity prices have financially 
squeezed palm oil companies, leaving larger operators with vertically integrated 
operations and stronger balance sheets better off. PT Dharma Satya Nusantara Tbk 
plans to acquire stake in PT REA Kaltim Plantations. Genting Plantation Berhad, 
a Malaysian-based plantation company, plans to purchase 21,995 hectares of 
landbank in Borneo's West Kalimantan province by acquiring a 100% share in 
Cahaya Agro Abadi Pte Ltd and Palm Capital Investment Pte Ltd. PT Sawit 
Sumbermas Sarana Tbk is looking for inorganic acquisition to expand its 
plantation area, according to news reports. 

Contact: 

Rufina Tam

Associate Director

+62 21 2988 6800

PT Fitch Ratings Indonesia

DBS Bank Tower, 24th Floor, Suite 2403

Jl. Prof. Dr. Satrio Kav 3-5

Jakarta 12940

Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: 
leslie.tan@fitchratings.com.

Additional information is available on www.fitchratings.com

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