Could you introduce GAR and its oleochemical business to our international audience?

Listed in Singapore, Golden Agri-Resources (GAR) is one of the world’s largest palm oil companies, managing over half a million hectares of palm oil plantations across Indonesia. We are a fully integrated seed-to-shelf agribusiness operating across the palm oil value chain, including R&D into seeds and agronomy; managing plantations, mills, and refineries; and producing biofuels, oleochemicals, and consumer products such as cooking oils. 

The oleochemicals business consists of two entities: a fully-owned GAR subsidiary called Sinar Mas Oleochemical (PT Soci Mas) and Sinarmas Cepsa, a 50:50 joint venture between GAR and Spanish company Cepsa. Together, these two entities have a production capacity of around half a million t/y of oleochemical products derived from responsibly sourced palm and palm kernel oils and fats. Our product portfolio covers fatty acids, fatty alcohols, glycerine, and soap noodles, as well as tailor-made products for specific customer needs. These products reach a diverse customer base, with applications for home and personal care, as well as food, nutrition, industrial and pharmaceutical applications.

Could you comment on the latest financial performance at GAR and the current market climate for oleochemicals?

2023 was a correction year for crude palm oil (CPO) prices, which normalized after a record year in 2022. While we saw revenues drop in line with this market trend, sales volume increased during this period and have continued to increase year-on-year into Q1 2024. GAR’s integrated business model has helped to maintain our solid performance by focusing on value-added products such as oleochemicals and other downstream products to mitigate the impact of price fluctuations in CPO. 

GAR’s downstream business, which entails refining and processing palm-based products including oleochemicals, biofuels, and consumer products, contributes about 51% of the Company’s EBITDA. We’re continuously exploring ways to grow both the upstream and downstream businesses. In the upstream business, we are looking to meet growing demand for oils by using more advanced seeds to help intensify production on our existing plantation areas. In the downstream business, we are working to remove bottlenecks, add capacity, and expand into further downstream derivatives to enhance our portfolio, while continuing to expand our global reach to customers in Europe, the USA, Latin America and the Middle East. 

Do you see a greater uptake of palm oil oleochemicals?

As younger generations pay more attention to greener and lower-emissions alternatives in everyday products like soaps, detergents, and cosmetics, plant-derived oleochemicals are gaining momentum as a substitute for petrochemicals in many home and personal care applications. Meanwhile, industrial players in the pharmaceutical, plastic, rubber, and animal feed industries are looking to reduce emissions by replacing petrochemicals with plant-based substitutes. Regulators provide another driver that influences the uptake of oleochemicals. All of these factors are helping to push oleochemicals to the fore. 

Compared to other vegetable oils, palm oil is a much more efficient and productive feedstock, producing 3.5 tonnes of oil per hectare compared to 0.5 tonnes of soybean or 0.7 tonnes of sunflower using the same amount of land.

Traceability is another growing requirement in global markets. The new EU Deforestation Regulation (EUDR) has the potential to destabilize the market, but GAR sees it as an opportunity. We have been investing in traceability and sustainable sourcing for almost a decade. Today, 99% of our supply chain can be traced back to plantation. 

Finally, could you also share some examples of your ESG initiatives in Indonesia?

GAR is committed to achieving net zero greenhouse gas emissions by 2050 and, as a signatory to the Agriculture Sector Roadmap to 1.5oC, has pledged to pursue a pathway limiting global warming to 1.5 degrees Celsius. We also have longstanding commitments to No Deforestation, No Peat and No Exploitation (NDPE) principles.

ESG and community engagement are part of GAR’s DNA. This is best seen in our upstream businesses where we work closely with smallholder farmers and local communities in and around our operations. Our Sawit Terampil program trains smallholder farmers to implement sustainable practices and prepares them to pursue certification. Our long-term vision is to train over 100,000 smallholders to implement sustainable agricultural practices by 2035. Indonesia is home to more than 16 million hectares of palm oil plantations, and around 4.5 million of these are managed by over 2.7 million independent smallholders. Helping smallholders to adopt positive practices is key to driving change in the industry.