THE partnership between PT Eagle High Plantations Tbk (EHP) and Malaysia’s Felda is a strategic one that saw increased sales revenue last year, the Indonesian palm oil giant said in response to criticism by an industry watchdog.

EHP said its sales increased by 40.2% over the first nine months of 2017 resulting in income operations that rose to IDR 229.7 billion (RM6.3 million) from IDR 4.9 billion.

“There has been significant improvement to our financial position due to recent business decisions. 

“Cash flow improved in 2017 as we refocused on increasing production and yields from existing planted areas with young age profiles, rather than opening new areas with new plantings.

“The improved performance is directly attributed to the synergies stemming from the strategic partnership between EHP and Felda. 

“Given these encouraging developments, we are confident this strategic partnership will continue to bring about positive results for both companies and the palm oil industry,” EHP said in a statement today.

Oil palm industry watchdog, International Palm Oil Monitor (IPOM), two days ago raised concerns and improprieties which it said appeared in a due diligence report prepared in relation to EHP’s acquisition by KPMG.

IPOM cited cash flow problems inflated acquisition price, non-compliance with laws and regulations, excessive borrowings and excessive amounts due for repayment to the banks and tax evasion.

IPOM also cited a huge amount of “inter-company interest free advances amounting to US$26 million (RM101.4 million)” where repayment was unclear.

EHP today said it would “not comment on allegations which are unsubstantiated and not verifiable”, stressing it adhered strictly to the standards prescribed by the Indonesian Stock Exchange

It also said it was committed to sustainable oil palm practices and already had Indonesian Sustainable Palm Oil (ISPO) certification for two of its mills and estate complexes, while its other facilities were in various stages of audit and certification processes.

“As a member of the Roundtable on Sustainable Palm Oil (RSPO), we are fully committed to a time-bound plan for certification,” EHP said.

A year ago, Felda, via FIC Properties Sdn Bhd, acquired 37% of the shares of Eagle High for approximately US$500 million, paying approximately IDR580 per share, at an extremely high premium of 95% to its closing share price at the point of acquisition.

IPOM said the deal was slammed by critics and experts due to it being overpriced and also due to the state of affairs within EHP.

However, the deal went through. Government funds were used to finance the deal which many saw as a bailout for Peter Sondakh, an Indonesian businessman with strong political ties in Malaysia. – February 22, 2018.