Malaysia's Felda pulls environment certificates from 58 palm mills

Reuters News
Posted: May 03, 2016 9:02 AM

KUALA LUMPUR (Reuters) - Malaysia's Felda Group, the world's third-largest palm plantation operator, has withdrawn certificates of environmental sustainability from all of its 58 processing mills that had them, it said on Tuesday.

The group said it and subsidiary Felda Global Ventures Holdings Bhd had withdrew the certificates granted by the Roundtable on Sustainable Palm Oil (RSPO).

"This exercise allows a more inclusive certification between commercially managed plantations by Felda Global Ventures and FELDA smallholders," it said in a statement filed to the local stock exchange, without elaborating.

The RSPO suspended certificates for Malaysian plantations company IOI Group on April 1 over allegations it violated sustainable policies in three of its subsidiaries' concessions in Indonesia.

The RSPO is a body of consumers, green groups and plantation firms that aims to promote the use of sustainable palm oil products, and is used by many European buyers as the international sustainability benchmark.

Felda remains a member of the RSPO and said it was currently addressing all sustainability issues along the supply chain.

"We voluntarily withdraw from RSPO principles and criteria certificates to address the sustainability issues in our supply chain," said Felda group president and CEO Zakaria Arshad in a separate statement on Tuesday.

"Based on the recent developments in the sustainability arena, we foresee some potential risks in our supply chain. Therefore we intend to make some structural changes in our RSPO certification approach and also review certain policies."

The exercise, which will only affect upstream mills and not downstream refineries or kernel crushing plants, will affect less than 1 percent of FGV's revenues, Arshad said.

The group's recertification plan is expected to take up to three years.

Felda, which has 71 mills in Malaysia, will still be able to sell its uncertified crude palm oil (CPO), said Ivy Ng, regional head of plantations at CIMB Investment Bank.

"They can sell, but the impact on their earnings is the loss in (sustainability) premiums of CPO sales," said Ng.

"We see minimal impact on Felda's share price and earnings, because we expect them to use this opportunity to improve on the sustainability process and get themselves certified again."

(Reporting by Emily Chow; editing by Christian Schmollinger and Mark Potter)