Indonesia’s land crackdown dents Genting Plantations’ profits

[KUALA LUMPUR] Indonesia’s drive to fine resource companies over alleged misuse of lands cut into Genting Plantations Bhd’s earnings in the latest quarter, with the Malaysian-listed planter forking over about US$25 million to a task force that is reshaping the palm sector in the world’s biggest producer of the edible oil.

Genting disclosed in a stock filing late on Tuesday (Feb 24) that the payment of what it described as an administrative fine by a 95 per cent-owned Indonesian subsidiary dramatically reduced fourth-quarter net profit. It did not elaborate on the nature of the fine – which it had disclosed last month – but said it was paid to Indonesia’s Forest Area Enforcement Task Force.

The earnings adds to a list of public disclosures on the effects of a crackdown on resource companies in Indonesia, where President Prabowo Subianto is reclaiming land from plantations and mining firms while meting out fines for alleged misuse of forest land. The task force, which Prabowo formed last year, has seized millions of hectares of agricultural and other lands and issued fines totalling billions of US dollars.

Indonesian planter Astra Agro Lestari Tbk said it paid an administrative fine of 571 billion rupiah (S$43 million) to the forest task force in December, following changes to regulations related to spatial planning in the forestry sector.

The same month, Singapore-listed agribusiness Indofood Agri Resources said Indonesian subsidiary Salim Ivomas Pratama Tbk and associated units were hit with administrative charges of 2.34 trillion rupiah. It added in a statement this week that the fine was paid “in good faith” to a government escrow account, “pending a final resolution.”

Genting’s fourth-quarter net income slumped 87 per cent from a year earlier to RM14.1 million (S$4.6 million). It said the fine’s impact was partially mitigated by increased revenue on the back of improved palm fruit production. The company did not immediately respond to emailed requests for further comment.

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Malaysia’s Genting Plantations pays 396 billion rupiah fine to Indonesia amid Jakarta’s land enforcement crackdown

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In a recent briefing to analysts, Genting indicated that the task force had also seized about 12,000 hectares of the company’s land, of which 3,000 hectares was planted, CGS International analyst Jacquelyn Yow wrote in a note. The company’s management indicated that there are currently no further discussions with the Indonesian government regarding any additional potential land confiscation, she added. BLOOMBERG