Strategy

The Group’s strategy is to maintain steady expansion of its majority-owned Indonesian palm-oil areas in a sustainable and cost-effective manner.

During 2022, the Group continued to execute its principal activity, being the responsible ownership, management and development of sustainable oil-palm estates in Indonesia.

Alongside its own projects, the Group also manages and develops scheme-smallholder areas attached to those estates. The Group’s objective is to continue increasing both its own crop and that from its scheme smallholders, whilst also increasing its own milling capacity, thereby increasing its output of certified sustainable palm oil. As Group areas mature, its strategy is to increase the planted hectarage controlled by it. Milling its own crop and that of its scheme smallholders in its own mills enables the Group to deploy its operational expertise to greatest effect with the aim of generating stronger returns, allowing shareholders to receive sustained increases in dividends.

Scheme-smallholder areas associated with Group estates expanded in the year to 13,900 hectares. This followed a significant project promoted by the Group in northern Sumatra to attract independent smallholders to join new co-operative schemes. Under these schemes, the Group is providing initial funding for replanting, and crop from the newly planted areas close to Pangkatan will become a valuable new source of input to the Group’s mill there. By the end of 2022, 1,100 planted hectares had been added as part of the new co-operative arrangements.

Following the year end, the Group has been successful in acquiring an additional 2,100 planted hectares close to its estate at Simpang Kiri in Aceh Province in northern Sumatra. This is in line with the Group’s stated strategy of continuing to increase its planted area through the acquisition of further hectarage, initially within the vicinity of its existing projects. After taking these additional hectares into consideration, the Group now has, in conjunction with its associated scheme smallholders, a total planted hectarage of 56,200 hectares.

After the acquisition at Simpang Kiri, the Group remains committed to its growth strategy, and a number of further projects remain under review.

The Group had five palm-oil mills operating throughout the year and was able to raise the proportion of crop processed in its own efficiently and sustainably run facilities. This will increase further in 2023 as the Group’s sixth mill opened just after the year end at Musi Rawas. In addition, following the acquisition of further hectarage close to Simpang Kiri referred to above, the Group will review plans to build a mill there. If constructed, the Group would then achieve 100% ‘in-house’ processing of its own crop, and the output from that crop would all qualify as certified sustainable CPO.