Indonesia: Sampoerna Agro divests plantation unit to Gudang Garam for $33m

Publicly listed company Sampoerna Agro has divested its plantation unit Pertiwi Lenggara Agromas to Dhanistha Surya Nusantara (DSN Group) and Surya Nusantara Sawitindo (SNS) – both are subsidiaries of Indonesian cigarette maker Gudang Garam. The transaction was valued at Rp 447 billion ($33.2 million).

Proceeds from the sale will be used to strengthen the company’s capital flow and capital structure, according to director of Sampoerna Agro, Budi Setiawan Halim. It can be used for additional funding as working capital, expansion activities, or loan repayment to third parties.

“The company offloaded about 114,9 million shares while Arkananta Cahaya Indah transferred 49 shares to DSN Group. The share sale of Pertiwi Lenggara does not have a significant impact to the company’s operations,” said Setiawan in a statement.

The buyer, DSN Group, has operations in Central Kalimantan Province, West Kalimantan Province, South Sumatera Province, with about 100,000 hectares of managed plantations. It operates six mills and employs more than 8,000 workers.

Sampoerna Agro, which is also a member of another Indonesian cigarette manufacturer Sampoerna Group, decided to sell Pertiwi Lenggara because it was “less than ideal” to reach economic scale, considering its distant location with the other remaining areas of operations. The company then found a good opportunity to focus its management efforts on other quality assets, which in turn will optimize investment return in the long run.

In September 2016, Sampoerna Agro’s net income fell 86.9 per cent to Rp 194.9 billion. The slump is in line with sluggish revenue at Rp 1.49 trillion, down 39.37 per cent compared with the same period last year at Rp 2.14 trillion.

Earlier this year, Government of Indonesia fined Sampoerna Agro $81 million for 2014 forest fires on 3,000 hectares on its concessions in Riau Province, Indonesia. The $81 million fine is slightly less than Sampoerna Agro’s revenue in the first six months of 2016.

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