FocusCPO firms unfazed by seizure threat

10 March 2008 09:32  [Source: ICIS news]

SINGAPORE (ICIS news)--Major Indonesian crude palm oil (CPO) plantation firms were unfazed by the government’s threat to seize First Resources’ assets, they said on Monday.

Indonesian agricultural companies Wilmar International and Golden Agri Resources said the proposed seizure of the assets of First Resources’ three subsidiaries by the Corruption Eradication Commission of Indonesia (KPK) would not impact them.

“It does not affect us. Actually, I do not fully understand why the actions of this individual [Martias] should lead to the seizure of their [First Resources] assets,” Kuok Khoon Hong, chief executive of Singapore-based Wilmar International said .

“In the history of the plantation business, this has not happened. Share prices are falling, crude palm oil is dropping. The market as a whole, even companies outside the palm oil business, are falling,” he added.

“Our company has been allocated the largest landbank in Indonesia and in the world and our acquisition has been 100% aboveboard. I don’t think this affects us,” a source close to Golden Agri Resources said.

However, the sudden decline in CPO companies' share prices could have been led by fears regarding the sovereignty of plantation assets, the source said. 

“One fear that investors have is that if people owe money, the government can just acquire the land,” the source added.

“Indonesian companies tend to trade at a discount now because of a higher perceived threat to sovereignty. Malaysian companies have not declined so much,” the source said.

A reduction in CPO rates from ringgits (M$) 4,400/tonne ($1,375/tonne) last week to the present M$3,600/tonne could have also contributed to the fall in share prices, he added.

“In the first few months, share prices tend to track CPO prices. But First Resources went down by 25%. Potentially, that is also a reason for the decline in CPO companies’ share prices,” the source said.

Following a statement by First Resources on Thursday that the KPK planned to seize its subsidiaries’ plantations, the company’s share prices fell 25% to close at Singapore dollars (S$) 1.05 ($0.75) on Friday.

Share prices of Wilmar International and Golden Agri-Resources fell by S$0.13 to S$4.20, and by S$0.10 to S$1 respectively, on Friday.

($1 = M$3.20)
($1 = S$1.39)

By: Arujnee J Ram
+65 6780 4359

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