Kencana Agri subsidiaries to sell Karunia Alam Makmur to Central Cipta Murdaya

A palm oil tree at a plantation in IndonesiaA palm oil tree at a plantation in Indonesia

Kencana Agri’s indirect wholly owned subsidiaries PT Alamraya Kencana Mas (PT AKM) and PT Langgeng Nusa Makmur (PT LNM) have entered a deal to sell PT Karunia Alam Makmur to PT Central Cipta Murdaya for 78.5 billion rupiah, or around US$5.42 million, in cash, the palm oil producer said in a filing to SGX Tuesday.

PT Karunia Alam Makmur’s main asset is a palm oil plantation located in the Regency of North Morowali, in Central Sulawesi, with a planted area of around 888 hectares, the filing said.

PT AKM holds 99.97 percent of PT Karunia Alam Makmur, while PT LNM holds the remainder, the filing said.

PT Karunia Alam Makmur, the target company, posted a 2020 loss of US$400,000, and a loss of US$1.19 million for 2019, the filing said.

“The palm oil plantation owned by the target company has been underperforming and lossmaking for several years. Due to capital constraints, it would not be feasible for the target company to expand the scale of production as this would involve increasing the size of the planted area and investing working capital in a mill,” Kencana Agri said.

“Accordingly, the palm oil plantation is not able to benefit from economies of scale and it is expected that the palm oil plantation will
continue to suffer losses in the foreseeable future,” the company said.

Under the deal, Kencana Agri’s subsidiaries will inject capital of around 139.95 billion rupiah, or around US$9.65 million, into PT Karunia Alam Makmur to be used toward settling its indebtedness, the filing said.

The indebtedness includes a shareholder loan owed to PT AKM for 79.58 billion rupiah, or around US$5.49 million, the filing said.