- Sime Darby Plantation (Liberia) Inc. ceases to be a subsidiary of the Group as divestment prevents further losses
- Responsible exit remains a priority with a 12-month transition period and the selection of a credible buyer
KUALA LUMPUR, 16 January 2020 – Sime Darby Plantation Berhad (SDP), today announces the completion of sale of its entire 100% equity interest in Sime Darby Plantation (Liberia) Inc. (SDPL) to Mano Palm Oil Industries Limited (MPOI). The Bursa Malaysia filing follows an earlier press statement in December 2019 that a Sale & Purchase Agreement (SPA) of the asset was being finalised.
Under the SPA, SDP’s entire equity in SDPL was sold to MPOI for a total cash consideration of USD1 plus an Earn-Out Payment, the sum of 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.
According to SDP’s Group Managing Director, Mohamad Helmy Othman Basha, 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. SDPL has been a continuously loss-making operation since its inception. In 2018 and 2019, it registered operational losses of USD19 million and USD16 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 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 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.
Pursuant to the SPA entered into by the parties on 12 December 2019, SDP will assign its employees with operational expertise and experience that are 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.
“For over 10 years, Liberia and its people have been close to our hearts. Although our decision to leave has come under the most unfortunate circumstances, we were determined to ensure that we exit our business responsibly so that the local communities can continue to benefit from the foundation that we have built over the years, under the new owner,” added 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 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.
All current businesses of SDPL will continue as-is. There will be no redundancy of existing employees as a result of this transaction and the new owner is expected to continue honouring all contractual obligations with the local communities. In addition, SDP will be according a sum of payment to all its former employees based on their years of service.
“We firmly believe we are leaving the business in the good hands of a responsible buyer. It will indeed be in the best interest of all stakeholders in Liberia to support MPOI in its endeavour for the socio-economic development of all Liberians.
“SDP would like to express its gratitude to the Government of Liberia for their support throughout all these years. With their blessing and consent of this divestment, we are comforted knowing that the same support and assistance will be extended to MPOI,” added Helmy.