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 2023, the Group continued to execute its principal activity, being the responsible ownership, management and development of sustainable oil-palm estates in Indonesia. In line with the Group’s stated strategy of sustainable expansion, the Group acquired 2,100 planted hectares in Simpang Kiri, and 8,350 planted hectares in East Kalimantan. This additional hectarage will assist in maintaining a young average age of plantings.

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 15,900 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 2023, 1,350 planted hectares were part of the co-operative arrangements in northern Sumatra. Furthermore, 1,700 scheme-smallholder hectares were included in the East Kalimantan acquisition.

The Group now has, in conjunction with its associated scheme smallholders, a total planted hectarage of 65,500 hectares.

After the acquisitions in East Kalimantan and Simpang Kiri, the Group remains committed to its growth strategy, and a number of further projects remain under review.

The Group had six 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 2024 as the Group’s sixth mill continues to process crop from the young, productive plantings at Musi Rawas, and as the Kota Bangun mills process crop from the newly acquired hectarage. 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.