Monday, September 27, 2010

Golden Agri

Breaching RSPO policies

The Roundtable On Sustainable Palm Oil (RSPO), an industry organization that promotes the growth of sustainable palm oil products, said that Smart has breached its policies and that the palm oil producer's membership with RSPO is at risk. Smart is a subsidiary of GAR. RSPO said on its website that its Grievance Panel has reviewed Smart's independent verification report and found that there has been non-compliance with RSPO Code of Conduct. RSPO also urged GAR not to publicly suggest that it is in the process of obtaining certifications for its operations and not to claim that it is planning to become a member of RSPO. GAR is currently not a member of RSPO and the latter has yet to receive any membership application from GAR. Responding to this, Smart said it is committed to sustainable palm oil production and will work towards RSPO's requirements. Boycotting palm oil purchases

Since the release of the report in August, where its findings have been widely challenged by Greenpeace, Burger King has announced its decision to cancel palm oil purchases from Smart while IOI Crop has decided not to resume its purchases from the company. Global food companies Nestle and Unilever have earlier suspended their sourcing of palm oil from Smart.

More complications The comments by RSPO will further complicate GAR and Smart's efforts to regain customer confidence after Greenpeace accused the group of unsustainable oil palm development. Collectively, these food companies only accounted for less than 3% of GAR's total revenue. Although financial impact is marginal, GAR's reputation has been significantly affected. This longdrawn issue on sustainability may cap GAR's share price performance.

Maintain Hold on the stock.

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