New Analysis: Possible IOI RSPO Suspension

RSPO Complaint Financially Material

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The RSPO Complaints Panel’s pending decision on IOI Corporation’s (IOI:MK) operations in Sarawak and West Kalimantan concerns illegal land grabbing, peatland clearing and drainage, loss of High Conservation Value (HCV) forests, and planting palm oil trees illegally inside a forest reserve. RSPO’s certification procedures stipulate that such infractions may result in suspension of group membership. Should the Panel follow formal rules, IOI might experience a decrease in revenue from sales of its Certified Sustainable Palm Oil (CSPO) contracts, resulting in free cash flow contractions in a tight margin market.

Over the past five years, IOI has struggled to convert consistent increases in CPO production into greater revenue and follow-on share price increases. With the 63 companies with significant agricultural exposure that trade on the Bursa Malaysia, Indonesia Stock Exchange, and Singapore Exchange underperforming regional indices in 2015, IOI is facing both sectoral downdrafts and a possible unfavorable RSPO suspension, potentially putting further downward pressure on their share price. While IOI’s 5-year CPO production compound annual growth rate (CAGR) is up 2.6%, over the same 5-year period, IOI’s 5-year revenue CAGR is -6.35%.

This new analysis by Chain Reaction Research assesses the impact of a potential suspension of IOI from RSPO. We invite you to read and share the full report below.

Key Findings

  • RSPO Complaint Panel ruling on non-compliance expected soon
  • RSPO’s formal rules require that IOI be suspended from selling CSPO if grievance is upheld in the Panel’s final ruling
  • Several other buyers may suspend IOI independent from RSPO ruling
  • Any form of suspension would trigger further CSPO contract revaluation

Download as PDF: IOI Corporation: RSPO suspension? RSPO Complaint Financially Material

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