KUALA LUMPUR: Sime Darby Plantation Bhd has completed the sale of its entire 100 per cent stake in Sime Darby Plantation (Liberia) Inc. (SDPL) to Mano Palm Oil Industries Ltd (MPOI).
Sime Darby said the stake was sold for a total cash consideration of US$1 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 2022.
“The earn-out consideration is payable in equal quarterly instalments over a period of eight years, commencing April 2023,” it said in a statement today.
SDP group managing director Mohamad Helmy Othman Basha said the deal was agreed upon considering, among others,
its cash outflows and SDPL’s continuous loss-making state.
SDPL 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 SDPL ceases to be 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.
Helmy said although the group had worked on reducing its cost of operations and taken various steps to enhance operation 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,” he added.
Pursuant to the sales and purchase agreement by the parties on December 12 last year, 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,” said Helmy.
MPOI, a wholly-owned subsidiary of Mano Manufacturing Company, is involved in the purchase of CPO, exporting it to various destinations across West Africa.