POSCO International acquires Indonesian palm company

(POSCO International)

POSCO International Corp., a trading company under South Korea’s POSCO Group, is expanding its investment in the biofuel business with the 1.3 trillion won ($886 million) acquisition of PT Sampoerna Agro Tbk, a major palm company in Indonesia.

POSCO International announced on Thursday that it secured management control and the status of the largest shareholder of Sampoerna Agro, an Indonesian listed company, by acquiring its shares on Wednesday.

The acquisition is part of the company’s strategy to expand its global palm business value chain.

With this deal, POSCO International has secured an additional 128,000 hectares of farmland, which is more than twice the size of Seoul, bringing its total global farming base to 150,000 hectares, including its existing plantation in Papua, Indonesia.

Sampoerna Agro operates palm plantations across the islands of Sumatra and Kalimantan in Indonesia, and owns a seed-specialty subsidiary and a research institute that holds the second-largest market share in Indonesia’s palm seed industry.

Palm plantation operations are structured as long-term, high-profit businesses, in which harvesting begins 3 to 4 years after planting the trees and production continues for more than 20 years.

POSCO International noted that the newly acquired plantation has already reached the mature fruit-bearing stage, enabling stable profit generation from the early stages of the acquisition.

POSCO International began developing palm plantations in Papua in 2011 and started commercial production in 2016.

It currently operates three palm oil mills with an annual production capacity of 210,000 tons.

The Papua plantations have delivered strong profitability as they enter their mature phase, with an annual average operating margin of 36 percent through last year, contributing significantly to group earnings.

On the same day, POSCO International also held a completion ceremony for PT AGPA Refinery Complex (ARC), a palm oil refining joint venture with GS Caltex Corp. in Balikpapan, East Kalimantan.

PT. ARC is owned 60 percent by POSCO International and 40 percent by GS Caltex, with a total investment of $210 million.

The newly completed refinery has an annual processing capacity of 500,000 tons, which is equivalent to 80 percent of the palm-refined oil imported into Korea each year.

Construction for the refinery began in May last year, and after test operations, it is expected to commence production before year-end.

POSCO International will supply crude palm oil from its plantations to PT. ARC, while the refined oil produced there will be sold both in the Indonesian domestic market and overseas, including Korea and China.

GS Caltex plans to enhance operational efficiency at the refinery and supply refined oil for biodiesel production to the Korean market.

“POSCO Group will solidify its leading competitiveness in the global palm market to reduce Korea’s dependence on imported edible oils and help strengthen national food security by securing a stable production and supply base for palm oil,” said a POSCO International official.