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Jakarta Post

Golden Agri loses suppliers after IPOP implementation

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Tue, October 6, 2015   /  05:55 pm

Singapore-listed Golden Agri Resources (GAR) has said that it lost hundreds of thousands of tons of fresh fruit bunch (FFB) supplies as it suspended partnerships with several supplier companies due to the implementation of GAR'€™s non-deforestation policy.

GAR sustainability and strategic stakeholder engagement managing director Agus Purnomo said in Jakarta on Monday that since May, the company had stopped buying FFB and crude palm oil (CPO) for its refineries from five to six companies allegedly conducting deforestation.

However, he declined to reveal the value, saying it would be found in the company'€™s year-end financial report.

'€œThe impact of the decision to suspend the purchases was serious because it affected the company'€™s production,'€ he said.

According to the company'€™s financial report published in August, GAR'€™s CPO output dipped by around 9 percent to 1.09 million tons in the first half of this year while its FFB production slipped by 3 percent to 4.58 million tons year-on-year.

GAR, whose subsidiary Sinar Mas Agri-Resources and Technology (SMART) is listed on the Indonesia Stock Exchange (IDX), booked total revenues of US$3.38 billion during the first half, about 14 percent lower than figures recorded in the same period last year, while its core net profits attributable to owners slid by nearly 27 percent to $109.52 million.

Agus said that the policy was made as a consequence of it signing the Indonesia Palm Oil Pledge (IPOP) in September last year.

The IPOP is an agreement among leading palm oil producers Asian Agri, Cargill, Wilmar and Musim Mas, as part of their commitment to sustainability practices, such as applying a principle of not planting on high carbon stock or peatland. The pledge is considered significant as the leading producers account for 80 percent of the country'€™s palm oil production.

GAR, which is operating around 500,000 hectares of land this year, has a total annual production capacity of 3.8 million tons since it started using a new kernel crushing plant with a capacity of 270,000 tons per annum and expanding its downstream capacity by 300,000 tons annually.

Agus stated that Indonesia'€™s palm oil producers should start conducting sustainable businesses to enable them to compete with emerging producers in Africa and South America amid intensive campaigns advising customers to buy environmentally friendly products.

'€œWe want to rebrand Indonesia'€™s palm oil ['€¦] so that it'€™s not a product that destroys forests,'€ he said.

IPOP executive director Nurdiana Darus said Ghana'€™s government, for example, had stated that it did not want to repeat mistakes made by Indonesia'€™s CPO industry.

'€œIf we are not cautious [of competitors], we will lose our markets,'€ she said.

Data from the Indonesian Palm Oil Producers Association (GAPKI) showed that Indonesia, the world'€™s largest producer and exporter of palm oil, exported around 21.76 tons of CPO and its derivatives last year worth around $20.8 billion to its biggest export destinations of India, EU countries and China. The exports were up slightly 2.5 percent from 2013.

Meanwhile, CPO production, including biodiesel and oleochemical, reached around 31.5 million tons last year, 5 percent higher than 2013'€™s total production, data showed. (prm)

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