MP Evans Group PLC, a prominent player in the sustainable Indonesian palm oil sector, has unveiled plans to expand its plantation footprint through the acquisition of two Indonesian firms, P.T. Agro Bumi Kaltim (ABK) and P.T. Nusantara Agro Sentosa (NAS).
The transaction, valued at US$60 million, is expected to be finalised by the end of 2023, following the completion of necessary legal and regulatory procedures in Indonesia.
MP Evans’ ongoing strategy is to augment its planted area in proximity to its existing operations.
ABK and NAS collectively manage a sprawling 8,350 hectares of oil palm plantations in East Kalimantan, a significant addition to MP Evans’ current holdings.
The majority of these plantations are populated with young palms, predominantly planted between 2017 and 2019, promising an escalation in yields as these trees mature.
The cash and debt-free transaction will be financed through existing resources, supplemented by a final adjustment to accommodate for working capital upon completion, translating to a cost of US$9,000 per group-owned planted hectare.
ABK and NAS posted after-tax losses of US$3 million and US$2.6 million in the past year respectively.
However, MP Evans maintains a positive outlook, anticipating improvements in financial performance as the plantations mature and agronomic standards are enhanced across both estates.
Moreover, the acquisition is set to bolster the operations at the Kota Bangun milling facilities by reducing dependence on external crop suppliers.
In the wake of the acquisition, MP Evans intends to prioritise the integration of the newly acquired areas into its registration with the Roundtable on Sustainable Palm Oil. The anticipated costs pertaining to this initiative were factored into the purchase price, ensuring alignment with the group's sustainability objectives.
"The addition of the estates at ABK and NAS to the group portfolio is a great achievement and will bring our total area under management to over 65,000 hectares,” said MP Evans’ chairman Peter Hadsley-Chaplin. “We have been very keen to acquire more hectares close to Kota Bangun for some time, and having the ABK estate supplying its crop to our existing mills will further enhance our operational efficiencies.”
Hadsley-Chaplin emphasised the strategic importance of the proximity to Kota Bangun, anticipating enhanced operational efficiencies and increased output, thereby fostering the group's goal to yield progressive returns.