WILMAR INTERNATIONAL LIMITED – Ref No.

: ABCC-2010/12-004
MANAGING MULTIPLE STAKEHOLDERS IN A Date: 20 March 2010
GLOBAL PALM OIL AGRIBUSINESS GROUP
Wee Beng Geok, Geraldine Chen and Ivy Buche

Established in 1991, Wilmar grew rapidly to become one of the largest palm oil companies in
Southeast Asia, with revenue and net profits of US$23.9 billion and US$1.88 billion,
respectively, for the year ended March 2009. It operated in the entire value chain of the
industry, from plantations to processing, merchandising, shipping and distribution.
As the third-largest listed plantation company in the world, it operated 300 processing plants
and had an extensive global distribution network. Its products sold in more than 50 countries,
including China and India.
As the global demand for palm oil grew, environmental groups were concerned about the
impact of palm oil industry on the social and natural environments, such as loss of forest
ecosystems, environmental damage, soil degradation, pollution, greenhouse gas emissions and
climate change. They were pressuring palm oil producers, including Wilmar, to take action to
address these issues.
By late 2010, Wilmar had two strategic initiatives to drive future growth. It was poised to
acquire Sucrogen, Australia’s largest sugar company with operations in sugar milling and
refining, bio-ethanol production and generation of renewable electricity. It was also expanding
into sub-Saharan Africa, where many governments were keen to support the development of
commercially managed large-scale oil palm projects. However, as in Asia, palm oil producers
and governments could expect to encounter pressure from environmental groups with regard
to possible adverse effects.
The challenge was to manage these initiatives and the environmentalists’ demands for more
sustainable operations.

Associate Professor Wee Beng Geok, Associate Professor Geraldine Chen and Ivy Buche prepared this case
based on public sources. The authors would like to acknowledge the research support provided by Rajeev Batra,
MBA participant, Nanyang Business School. As the case is not intended to illustrate either effective or ineffective
practices or policies, the information presented reflects the authors’ interpretation of events and serves merely to
provide opportunities for classroom discussions.
COPYRIGHT © 2010 Nanyang Technological University, Singapore. All rights reserved. No part of this publication
may be copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without
the written consent of Nanyang Technological University.
The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue,
Singapore 639798. Phone: +65-6790-4864/6552, E-mail: asiacasecentre@ntu.edu.sg

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INTRODUCTION

In July 2010, Wilmar International Limited (Wilmar), one of the top listed agribusiness companies in
Asia, announced its intention to acquire Sucrogen, a fully owned subsidiary of CSR Limited. 1 Sucrogen
was Australia’s leading producer of sugar and renewable energy, accounting for about 40 percent of
the country’s annual raw sugar production. The deal worth AUD$1.75 billion (comprising AUD $1,347
million in equity and AUD $403 million of net debt excluding minority interests) was expected to be
completed by the end of 2010, subject to approval by the Australian regulators. According to the
Company:

Wilmar intends to build a significant sugar business, utilising its proven integrated
agribusiness model to replicate its success in other agricommodities. The acquisition of
Sucrogen will jump-start this strategy to expand into sugar.2 This strategic acquisition will form
an integral part of Wilmar’s future Indonesian sugar business, providing downstream refining
and distribution to complement the Company’s announced plans to develop sugar plantations
and milling operations in Papua.3

With the Sucrogen acquisition, Wilmar, a leader in the global palm oil 4 agribusiness, signalled its
strategic thrust into the production, processing, distribution and merchandising of another major food
commodity, sugar, and possibly a step into the global bio-fuel industry.

WILMAR – BEGINNINGS AND GROWTH PATH

Wilmar Holdings Private Limited (WHPL) was founded by Kuok Khoon Hong and Martua Sitorus in 1991.
Kuok started his career in 1973 as a commodities trader in his uncle’s grain, edible oil and oilseed
business. His uncle Robert Kuok owned one of the largest and most diversified multi-national
conglomerates in Asia, with interests in trading agricultural commodities, food industries (packaging,
marketing and distribution), manufacturing (steel drums, packaging materials, rubber products,
fertilisers and building materials), real estate, 5 hotels, shipping and transportation, leisure and
recreation,6 and media.7

After earning a reputation as one of the best traders in the Kuok Group,8 Kuok Khoon Hong left in early
1991 to set up WHPL with Martua Sitorus. From an initial acquisition of 7,100 hectares (ha) in Western
Sumatra, Indonesia for oil palm cultivation, they expanded into oil palm crushing, refining and milling
operations. In 1996, the firm expanded the refinery business into Malaysia through the acquisition of a
palm oil refinery plant and a fractionation plant. In 1995, they bought their first bulk vessel to transport
refined palm oil products to customers. Three years later, the firm set up its first specialty fats plant,
marking its move into the production of higher value-added downstream products.9

1 CSR Limited was a leading diversified manufacturing company with 6,700 employees and operations in Australia,
New Zealand and Asia. It had two main business units: (1) Building Products, Aluminium and Property and (2)
Sugar and Renewable Energy.
2 Wilmar. (2010, July 5). Wilmar International Limited acquires CSR Limited’s Sugar and Renewable Energy
Business, Surgeon Limited [Press release].
3 Wilmar. (2010, August 23). Wilmar International Limited acquires P T Jawamanisi Rafinas [Press release].
4 In this case study, palm oil refers to the final product after processing while oil palm refers to the plantation and
the fruit.
5 Kerry Properties Limited in Hong Kong, Allgreen Properties Limited in Singapore and Pelangi Berhad and Taman
Molek Development in Malaysia were Kuok group’s principal property development enterprises.
6 Golden Communications (M) Sdn. Bhd. and Cathay Cinemas Sdn. Bhd. operated a chain of cinemas and
modern cineplexes with a total of 78 screens in major Malaysian cities.
7 The Kuok Group. Retrieved September 20, 2010 from
http://www.kuokgroupresidences.com/kuokgrp/thekuokgroup.htm
8 Sunita Sue Leng. (2006, December 18). As I Call It: The Comeback Kuok. The Edge Singapore.
9 Wilmar. (n.d.). Milestones. Retrieved September 8, 2010 from
http://www.wilmar-international.com/about_milestones2.htm

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In mid-2006, WHPL successfully engineered a reverse takeover of Ezyhealth Asia, a managed

healthcare services provider listed on the Singapore Exchange. WHPL injected the Company’s palm oil
agribusiness into the listed vehicle 10 , which on completion of the takeover was renamed Wilmar
International Limited.

One year later, the Kuok Group merged its massive palm plantation, edible oils, grains and related
businesses (PPB Oil Palms Bhd., Kuok Oils & Grains, PGEO Group Sdn. Bhd.) with Wilmar, in a deal
worth US$2.7 billion. This transformed Wilmar from an essentially Indonesia-based palm oil producer
into a leading Asian agribusiness player. The merger added approximately 360,000 ha of plantation
land, including over 120,000 ha of planted area. By combining Wilmar’s and the Kuok Group’s China
interests, Wilmar became the largest oilseed crusher, edible oils refiner, specialty fats and oleochemical
manufacturer and merchandiser of consumer pack edible oil in China. Wilmar also acquired the edible
oils, oilseeds, grains and related businesses of WHPL for US$1.6 billion, including interests in these
businesses held by Archer Daniels Midland (ADM) Asia Pacific, through the issue of new Wilmar shares.

The impact of the corporate re-structuring was reflected in Wilmar’s first post-merger earnings results
in November 2007, with revenue doubling to almost US$10 billion and net profit rising to US$346.4
million (for the first nine months of 2007). 11 Wilmar was valued at S$34.4 billion at end 2007, up from
S$6.16 billion a year ago.12 For the Financial Year (FY) ended March 2009, the Company recorded
revenue of US$23.9 billion and a net profit of US$1.88 billion, consolidating its position as the largest
global processor and merchandiser of palm and lauric oils.

By July 2010, Wilmar was ranked the second largest company by market capitalisation (US$28 billion)
on the Singapore Exchange.13 Headquartered in Singapore, Wilmar’s operations spanned more than
20 countries, with its primary focus on Indonesia, Malaysia, China, India and Europe. With 300
processing plants and an extensive distribution network, its products were sold in more than 50
countries globally.

WILMAR INTERNATIONAL LIMITED – AN INTEGRATED AGRIBUSINESS MODEL

Wilmar had a vertically integrated agribusiness model with extensive downstream operations (see
Figure 1). Its operations across the entire value chain gave the group significant bargaining power and
cost efficiencies. Wilmar consistently applied research and development technologies from improving
yields and enhancing palm oil extraction rates to developing new, higher value-added downstream
products such as specialty fats.

Origination – Oil Palm Plantations

About 85 percent of the global production of palm oil was accounted for by Indonesia and Malaysia. 14
As the peak production period of the crop was from years seven to 18 and the typical commercial
lifespan of an oil palm was 25 years, plantation companies maintained land banks to ensure continued
production.

Based on total land area under cultivation, Wilmar was the world’s third-largest listed oil palm plantation
company. At the end of 2009, it had a land bank of 573,000 ha with a total planted area of more than
235,000 ha – 73 percent in Indonesia and the remaining 27 percent in Malaysia (see Table 1).

10 Ezyhealth funded the takeover valued at S$1.29 billion by selling 21.5 billion new shares to Wilmar for 6 cents
each, 2 cents above the stock’s closing price of 4 cents.
11 Kuok, K. H. (2007, November 14). Wilmar International Limited – Third quarter 2007 Results Briefing
[Presentation].
12 Yang, H. (2008, January 10). Palm Oil Firm Taps into Strong Demand. The Straits Times, Singapore.
13 Nguyen, L. A. (2010, August 9). Wilmar’s Harvest. Forbes Asia.
14 Global area under oil palm cultivation was over 12 million ha – Indonesia accounted for 5.35 million ha while
Malaysia had 4.7 million ha of oil palm cultivation areas.

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Figure 1
Wilmar’s Integrated Agribusiness Model

Origination

Processing

Bulk Consumer Pack Oilseeds Specialty Oleo- Other products: Rice,

Edible Oils Edible Oils Meal Fats chemicals Flour, Bio-diesel

Merchandising, Shipping & Distribution

Customers

Source: Wilmar International Limited. Retrieved September 20, 2010 from

http://www.wilmar-international.com/business_index.htm

Table 1
Wilmar’s Land Bank (2006–2009)
Figures in hectares
December 2006 December 2007 December 2008 December 2009
Total Land Bank 210,000 500,000 570,000 573,000
Planted Area 203,683 223,258 235,799
66,367
Malaysia – 61,979 Malaysia – 62,453 Malaysia – 63,666
Indonesia – 141,704 Indonesia – 160,805 Indonesia –172,133
• Mature 55,318
129,729 141,407 159,464
• Immature 11,049
Small landholders 32,132 33,238 33,867 33,867

Source: Compiled from Wilmar Annual Reports.

These plantations supplied 42 percent 15 of Wilmar’s crude palm oil requirements (compared to 22
percent in 2006) with the balance sourced from third-party growers, including small landholders in
Indonesia under a government programme.16 In 2006, Wilmar announced its intention to grow the total
plantation area through greenfield projects and acquisitions.

Milling and Refining

Wilmar owned and operated vertically integrated processing plants, located in both origin and
destination markets in Indonesia, Malaysia, China, India and Europe.

Besides processing oil palm fruit, Wilmar’s refineries (see Table 2) also processed soya bean, rapeseed,
groundnut, sunflower seed, sesame seed, cotton seed and grains (wheat and rice). China contributed
to the bulk of Wilmar’s earnings from this activity. By end 2009, Wilmar had 39 oilseed crushing plants
in India, Malaysia and Russia.

15 OCBC Investment Research. (2009, June 23). Wilmar International Company Report.
16 The Plasma Scheme in Indonesia was a government initiative under which plantation companies helped in the
development of plantations for small landholders.

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Table 2
Wilmar Refineries (as at Dec 2009)

Country Number
Indonesia 22
Malaysia 15
China 42
Europe 5
Vietnam 2
India (associate) 14
Africa (associate) 2
Ukraine (associate) 1
Russia (associate) 3

Source: Wilmar Annual Report 2009.

Processing and Merchandising

Wilmar was the world’s largest processor and merchandiser of palm and lauric oils. 17 These oils were
processed into refined palm oil, specialty fats, oleochemicals and bio-diesel. In 2009, the Group
processed 19.1 million metric tonnes (MT) of palm and laurics.

The Group also undertook the merchandising of these processed oils, with the products sold in bulk, in
drums or in branded consumer packs (for edible oils, flour and rice) to distributors, wholesalers, feed
millers, industrial users and retailers in China. Besides finished products, the Company exported the
by-products of processing – oilseed meal – to Japan, Korea and Vietnam where these were used as
animal feed and fertiliser.

Logistics, Distribution and Sales

In China, Wilmar established a comprehensive sales and distribution network spanning traditional retail
outlets, hypermarkets, supermarkets and convenience stores. In 2009, this network included over 130
plants located within large-scale integrated facilities, 200 sales offices, 1,500 sales staff and 4,000
independent third-party distributors.18 Land logistics were facilitated by its large fleet of trucks spanning
its distribution network in China. Through its merchandising operations as well as its extensive
distribution and sales network, Wilmar was able to secure a substantial share of the consumer markets
in Indonesia, Vietnam, China and India for its edible oil brands. Through its shipping subsidiary, Raffles
Shipping Corporation, the Group’s 25 vessels managed the in-house shipping and logistics needs. (See
Exhibit 1 – Wilmar’s Business Segments.)

Palm Oil Commodity Trading

Palm oil prices were subjected to short-term fluctuations. The prices of substitute crops, such as
rapeseed, sunflower and soya bean, also had a knock-on effect on palm oil. Wilmar was noted for its
ability to ride the highs and lows in trading of the commodity. This dominant position in the midstream
business allowed Wilmar to better manage commodity price risks and profit from crude palm oil (CPO)

17 Lauric oils are found in palm kernel mainly from coconuts and oil palms. Oils rich in lauric acid and their
derivatives have many characteristics such as stability to oxidation, quick melting and ability to form stable
emulsions and foams which has led to their use in both food and chemical industries.
18 Wilmar. (2009). Wilmar Annual Report 2009. p 7.

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price movements. 19 By capturing the entire value chain of the agricultural commodity processing
business, different segments could offset each other’s gains or losses. For example, if lower CPO prices
created an impact at the plantation stage, the loss might be recovered at the refining and manufacturing
stages.

CPO prices averaged US$683/tonne in 2009, 28 percent lower than the US$1,170/tonne average of
2008. In the first half of 2008, record high prices of crude oil and other oils pushed the price of CPO to
a record high in March 2008.20 Strong import demand, especially from China and India, plus increased
use of competing oils for bio-fuels, played key roles in the price rally. Prices declined sharply during the
second half of 2008, only to rise again in the first half of 2009 due to the global economic recovery,
higher crude oil prices and lower palm oil production in Malaysia. Prices fell again from June 2009 as
total production increased and with the prospect of a larger than expected soya bean harvest in South
America (see Figure 2).21 At the end of 2010, CPO prices were projected to rise as heavy rainfall in
Indonesia was expected to hamper production as well as new plantings.

Figure 2
Crude Palm Oil Price Movement

Source: Retrieved September 20, 2010 from http://siteresources.worldbank.org

FINANCIAL PERFORMANCE

Rising market demand for palm and lauric oils, particularly from major consuming countries such as
China and India, and tight supply of other edible oils, drove up both prices and demand from 2006 to
2009.

In FY2009, contribution to group profit before tax was led by the Merchandising and Processing division
at 64 percent, followed by Plantations and Consumer products, respectively (see Table 3). That year,
Wilmar’s net profits rose by 23 percent to US$1.88 billion due to its hedging strategy, despite an 18
percent decline in revenue to US$23.9 billion as a result of a sharp plunge in CPO prices. (See Exhibit
2 for Wilmar Five-year Financial Summary [2005–2009], Exhibit 3A – Wilmar International Income
Statement and 3B – Wilmar International Balance Sheets [as at 31 December 2009].) China, Southeast
Asia and India contributed more than 80 percent of the revenue in 2009. (See Exhibit 4 – Revenue
Breakdown by Geographical Segment.)

19 Ng, J. (2009, October 12). No Stopping Wilmar’s Expansion Path. The Edge Malaysia.
20 Wilmar. (2008). Wilmar Annual Report 2008. p 15.
21 Wilmar. (2009). Wilmar Annual Report 2009. p 23.

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Table 3
Contribution to Profit before Tax by Business Segment

Business segment 2007 (%) 2008 (%) 2009 (%)

Merchandising and Processing 56.6 67.8 64.0
• Palm and Laurics 33.0 35.4 34.0
• Oilseed and Grains 23.6 32.4 30.0
Plantation and Oil Mills 20.6 17.9 19.0
Consumer Products 13.4 4.2 11.0
Others and Associates 9.4 10.1 6.0

Source: Compiled from Wilmar Annual Reports.

MANAGEMENT

After the re-structuring exercises in 2006, Kuok Khoon Hong took on the roles of both Chairman and
Chief Executive Officer of Wilmar. All decision-making on merchandising activities throughout the
various regions was centralised at the headquarters in Singapore.

Risk management formed an integral part of Wilmar’s business strategy development, as the firm’s
activities exposed it to different types of markets, operational and credit risks at each stage of the value
chain, including changes in commodity prices, foreign currency exchange rates and interest rates.
Wilmar’s global market intelligence enabled the Company to enhance profitability through timely
purchase of raw materials and the sale of manufactured products.

People

Wilmar’s employee strength grew more than five times from 14,822 in 2003 to 80,000 in 2009 (see
Table 4). In 2006, about a third of the Company’s employees were in the labour-intensive plantation
segment. Employee numbers jumped three-fold in 2007 with the injection of the Kuok Group’s palm
plantations and processing business into Wilmar. Training centres were set up in the plantations to
upgrade skills of agricultural employees with employee training covering technical and supervisory skills,
as well as quality control and ISO certification training. In 2009, to build the global talent pool to meet
its growth needs, Wilmar launched a Management Trainee Programme to recruit top graduates from
reputable universities world-wide. A pioneer batch of 30 management trainees was selected from an
application pool of over 3,000 candidates.

THE GLOBAL DEMAND FOR PALM OIL

(a) As a food product

By 2009, palm oil was the most produced vegetable oil in the world at 45 million MT. (See Exhibit 5 –
World Production of Palm Oil [1980–2009].) Between 1980 and 2009, palm oil production increased 10
times, while its major competitor, soya bean oil, increased by 2.7 times.22 Oil palm was also regarded
as the most productive oilseed in the world: it needed a smaller land area to produce a target quantity
of oil. One hectare of oil palm could yield 3.6 tonnes of crude oil whereas soya beans generated only
0.36 tonnes per ha.23

22 Teoh, C. H. (2010). Key Sustainability Issues in the Palm Oil Sector. A Discussion Paper for Multi-Stakeholders
Consultations. p 7. Washington, DC: World Bank Group.
23 Basiron, Y. (2007). European Journal of Lipid Science Technology, 109, 289–295.

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Table 4
Wilmar Employee Strength

2003 2004 2005 2006 2007 2008 2009

Employees 14,822 14,880 20,123 23,313 67,000 70,000 80,000

Source: Compiled from Wilmar Annual Reports.

Total number of employees: 23,313 as at 31 Dec 2006

(a) By type of work (b) By country

Source: Wilmar Annual Report 2006. p 33.

About 80 percent of the global palm oil output was consumed for food, ranging from cooking oil,
margarine, peanut butter to ice cream, cookies and chocolates. Income growth was the main demand
driver. In 2008/2009, per capita consumption in developed countries such as the EU and the US was
59.3 kg and 51.7 kg, respectively. 24 Per capita consumption in developing countries such as India,
Pakistan and Nigeria was 13.4 kg, 19.9 kg and 12.5 kg, respectively. Demand in countries such as
China, India and Indonesia was expected to rise as living standards improved.

Consumption of palm oil in developed countries was expected to rise due to concerns over health
hazards associated with trans-fatty acids and genetically modified organisms (GMO). Non-GMO palm
oil needed little or no hydrogenation for the production of margarine, bakery shortenings and
confectionery fats. However, a 2009 study supported by the US Agricultural Research Service
questioned whether palm oil was a good substitute for partially hydrogenated fat. 25

(b) As a non-food consumer product

In terms of non-food uses, it was estimated that palm oil was used in 50 percent of all non-food
packaged supermarket products including items such as laundry detergent, toothpaste, soap bars,
shower cream and shampoo. Global brands such as Flora, Kit Kat, Dove and Persil contained
ingredients derived from palm oil.

(c) As a bio-fuel

With bio-fuels increasingly viewed as an alternative to fossil fuel, and as an oilseed, the palm fruit could
also have potential as a source of renewal fuel. Bio-diesel products derived from palm oil had already
24 Teoh, C. H. (2010). Key Sustainability Issues in the Palm Oil Sector. A Discussion Paper for Multi-Stakeholders
Consultations. p 7. Washington, DC: World Bank Group.
25 USDA/Agricultural Research Service. (2009, May 11). Palm Oil Not a Healthy Substitute for Trans Fats, Study
Finds. ScienceDaily.

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been produced as a source of renewal transport fuel. In 2006, Willmar set up three bio-diesel plants
with a combined production capacity of 1.05 million MT annually inside its integrated manufacturing
complex in Sumatra, Indonesia. In 2009, a new large-scale integrated manufacturing complex was
under construction in Gresik, Indonesia, to further expand Wilmar’s production of refined palm oil,
fertiliser, oleochemicals and palm bio-diesel. Wilmar’s bio-diesel production process was based on the
proven technology of its shareholder ADM, a world leader in renewable transport fuel.

In June 2010, Wilmar announced a joint venture with US-based Elevance Renewable Sciences to build
a bio-refinery in Indonesia to produce bio-fuels and oleochemicals. Elevance’s bio-refinery technology
was capable of using multiple renewable oil feedstocks, such as palm, mustard, soya bean, jatropha
and waste oils.26

Customers

The major buyers of processed palm oil products were global multi-national companies (MNC) such as
P&G, Cargill Inc., Nestle S.A., PT Arnott’s Indonesia, Unilever Ltd., Nirma Ltd. (India), VVF Ltd. (India),
China Grains & Oils Group Corporation, Beijing Heyirong Cereals & Oils Co. Ltd., Beijing Orient-Huaken
Cereal & Oil Co. Ltd., China National Vegetable Oil Corporation and the Savola Group (Saudi Arabia).

Wilmar produced consumer packs of palm and other edible oils, rice, flour and grains, marketed under
its own brands. By 2009, Wilmar had over 100 brands across the world with leading market positions
in China, Indonesia, India, Bangladesh and Vietnam.

With rising affluence in countries such as China and India, the market for edible oils was expected to
continue to shift from the consumption of loose oils to quality branded consumer pack oils. Wilmar
aimed to focus on brand building, increased retail penetration and product innovation to strengthen its
market presence. (See Exhibit 6 – Wilmar’s Edible Oil Brands.)

The bulk of Wilmar’s biodiesel capacity was pre-sold to buyers in Europe and the US.

Competitors

Wilmar competed upstream with other palm oil producers for land resources needed for cultivation and
production of palm oil, as well as for third-party suppliers, mainly farmers with small holdings of oil palm
fruit. The palm oil producer-competitors were mainly plantation companies in Malaysia and Indonesia,
such as Sime Darby, IOI Corp, KL Kepong and Indo Food Agri (see Table 5).

Table 5
Leading Plantation Companies – Land under Oil Palm Cultivation

Company Total Planted Area (hectares)

Sime Darby 530,987
Golden Agri-Resources 427,000
Wilmar 235,799
Indofood 227,000
KL Kepong 170,000
IOI Corp 150,931
United Plantations 45,494

Source: Compiled from 2009 Annual reports of respective companies.

26 Wilmar. (2010, June 28). Elevance Renewable Sciences Announces Joint Venture with Wilmar International to
Build World Scale Biochemical Refinery [News release].

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In the downstream business, Wilmar’s rivals included some of the world’s largest agricultural produce
processors such as Cargill, Bunge, Louis Dreyfus and ADM (a Wilmar shareholder).

Cargill: Founded in 1865, the largest privately held US-based MNC was an international producer and
marketer of food, agricultural, financial and industrial products and services. The Company employed
131,000 people in 66 countries. In FY2010, Cargill earned US$107.9 billion in revenues with net
earnings of US$2.6 billion.27

Bunge Ltd.: Founded in 1818, NYSE-listed Bunge (2001) was a leading agribusiness and food company
with integrated operations stretching from field to retail shelf, with over 25,000 employees in 30
countries.28 Key businesses included oilseed origination and crushing for livestock meal and oil for the
food and biofuel industries; sugar cane crushing for sugar and ethanol, wheat and corn milling, and the
production of bottled oils, margarines and other food products.

Louis Dreyfus: Founded in 1851, France-based Louis Dreyfus SAS was a privately owned company
with a strong presence in North and South America, Europe, Asia, the Middle East and Africa. Its
commodities business, LDCommodities, was a world leader in the processing and merchandising of
agricultural products, with offices in more than 55 countries and approximately 34,000 employees. In
addition, LDCommodities was the second-largest sugar cane crushing and renewable energy group in
the world.29

Archer Daniels Midland (ADM): Formed in 1923, ADM was a Fortune 100 company listed on the NYSE.
Its primary businesses included oilseed processing, corn processing and agricultural services, as well
as renewable fuels, ethanol and bio-diesel. Headquartered in Illinois, USA, ADM had 29,000 employees
and operated more than 240 processing plants and 330 sourcing facilities in 60 countries. Net sales
were US$62 billion for FY2010.30

GLOBAL EXPANSION

From its operational base in Asia, in 2007, Wilmar began expansion into Africa, Russia/Commonwealth
of Independent States (CIS)/Eastern Europe and Western Europe. In Western Europe, demand for
trans-fat free palm oil was increasing rapidly due to its competitive price and versatility for food and non-
food uses. In Russia, CIS and Eastern Europe, growing demand due to rising prosperity made the
region an increasingly important market for tropical oils. Wilmar established its regional headquarters
and its first refinery in Rotterdam, the Netherlands followed by a second refinery in Brake, Germany in
2009.31

Palm oil was the most consumed oil in West Africa and annual consumption was expected to grow,
given the low levels of per capita consumption. In November 2007, Wilmar and Olam International, a
major commodities company in Singapore, announced the formation of a 50:50 joint venture, Nauvu
Investments (Nauvu), to invest in integrated palm oil natural rubber and sugar assets in Africa. As its
first major initiative, Nauvu announced three investments:

 25 percent stake in SIFCA group,32 the largest palm oil and rubber company in West Africa and
second largest in the sugar sector in Cote d’Ivoire

27 Retrieved September 15, 2010 from http://www.cargill.com/company/glance/index.jsp

28 Retrieved September 15, 2010 from http://www.bunge.com/about.html
29 Retrieved September 15, 2010 from http://www.ldcommodities.com/-About-us-.html
30 Retrieved September 20, 2010 from http://www.adm.com/en-US/company/Facts/Pages/default.aspx
31 Wilmar. (2009). Wilmar Annual Report 2009. p.11.
32 Established in Cote d’Ivoire in 1964, the SIFCA Group was one of Africa’s largest agro-industrial business
groups. It was the largest player in the palm oil and natural rubber industry in West Africa and the second largest
in the sugar sector in Cote d’Ivoire. In the palm oil business, SIFCA was a fully integrated player with activities
spanning from plantations and CPO production to palm oil refining and distribution of retail brands with leading
market share. SIFCA was privately owned by Ivorian investors.

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 Majority stake of 50.5 percent in SIFCA’s palm oil refining business (Newco)

 16.65 percent stake in SIFCA’s oil palm plantation and crude palm oil producer (Palm-CI)

Wilmar’s goal was for Nauvu to achieve a leadership position in geographical niches where there were
natural advantages to produce palm oil. Kuok Khoon Hong explained:

We see this partnership as a very promising opportunity to tap into the economic growth of
West Africa and its growing importance as an agriculture producing and processing region. 33

In 2009, the Company invested US$10 million to set up oil palm plantations in Uganda over a three-
year period. In June 2010, through its wholly owned subsidiary, Wilmar Africa Limited, the Company
acquired 58.45 percent of Benso Oil Palm Plantation Ltd. (BOPP) from Unilever Ghana Limited. Listed
on the Ghana Stock Exchange, BOPP was involved in the growing and processing of oil palm fruits. In
a move towards acquiring downstream facilities in Ghana, Wilmar also entered into an agreement with
Unilever Ghana to acquire the ‘Frytol’ cooking oil brand and its oil processing activities in Ghana. 34

While African states had huge tracts of land suitable for palm oil cultivation, the productivity of existing
methods of palm oil cultivation and production remained low. 35 These countries also faced pressure
from environmental groups due to the clearing of rainforests to grow oil palm trees.

ENVIRONMENTAL CONCERNS ABOUT PALM OIL PRODUCTION

Environmentalists were increasingly voicing demands that agribusiness companies take action to
reduce the impact of palm oil cultivation, production and processing on the social and natural
environment in Indonesia and Malaysia. Their key concerns were the negative impacts on both the
climate and the natural ecosystems as a result of the clearing of rainforests and peatland for oil palm
cultivation.

Loss of Forest Ecosystems

According to global environment group, Greenpeace, Indonesia had the fastest de-forestation rate of
any single country in the world. 36 Cultivated land under palm oil grew from less than 2,000 square
kilometres to more than 30,000 square kilometres between 1967 and 2000. 37 In 2007, it was estimated
that Indonesia had lost 72 percent of its large intact ancient forest areas and a United Nations
Environment Programme (UNEP) report stated that most of the forests in Indonesia could be destroyed
by 2022.38

Non-governmental organisations (NGOs) saw the expansion of palm oil cultivation through the clearing
of rainforests as threatening the region’s bio-diversity with major loss of wildlife such as elephants,
tigers, rhinoceroses and orangutans that lived in these forests.

Environmental Damage, Soil Degradation and Pollution

Production of crude palm oil generated tonnes of solid oil waste, palm fibre and shells as well as palm
oil mill effluents. For every metric tonne of palm oil produced, 2.5 metric tonnes of effluents were

33 Wilmar. (2007, November 15). Wilmar and Olam to Form a 50:50 Joint Venture, Nauvu Investments, to Invest
in Integrated Palm Oil, Natural Rubber and Sugar Assets in Africa [News release].
34 Wong, C. (2010, June 1). Wilmar Expands Operations in Africa. OCBC Investment Research.
35 Although Nigeria was the third-largest palm oil producing country in the world, it was a net importer of palm oil,
as it did not produce enough to meet domestic demand.
36 Reuters. (2007, May 3). Indonesia De-forestation Fastest in the World: Greenpeace.
37 The Economist. (2010, June 24). The Other Oil Spill.
38 UNEP Report. (2007, February). Last Stand of the Orangutan: State of Emergency.

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generated from processing the palm oil in mills.39 Much of the waste was often dumped directly into
water bodies, with a negative impact on aquatic ecosystems.40 Furthermore, after a 25-year harvest, oil
palm lands were left essentially devoid of vegetation other than weedy grasses that served as tinder for
wildfires.41

Greenhouse Gas Emissions and Climate Change

Greenpeace published a report How the Palm Oil Industry Is Cooking the Climate which highlighted
how Indonesia’s peatland carbon stocks were being depleted through development of palm oil. 42
According to a 2007 World Bank report, Indonesia was the third-largest greenhouse gas polluter due to
the destruction of its rainforest and peatlands. 43 There were concerns that the drainage of Indonesia’s
stock of peatland, estimated to be 12 percent of its total land area, could contribute to enormous
greenhouse gas (GHG) emissions and air quality problems. 44

Greenpeace also contended that the liberal use of petroleum-based pesticides, herbicides and
fertilisers in most palm oil cultivation not only polluted the environment – as the chemicals were likely
to enter waterways and groundwater – but also contributed to greenhouse gas emissions.

Social Issues

De-forestation also had adverse social effects on local communities, particularly poor rural people,
dependent on services and products provided by the forest ecosystem. The expansion of oil palm
plantations acreage increased the incidence of land conflict among smallholders, local communities
and indigenous peoples, plantation companies and the government. In Indonesia, the NGO Sawit
Watch documented over 500 land-related conflicts, while WALHI45 recorded 200 cases of conflict in
West Kalimantan. In Malaysia, there were reports of more than 150 land disputes in litigation, out of
which about 40 cases were related to oil palm plantations.46

TARGETING THE PALM OIL SUPPLY CHAIN

Environmental NGOs targeted consumer goods MNCs such as Unilever and Nestle as a way to
influence palm oil producers. The prospect of consumer boycotts and negative publicity forced the
MNCs to examine their supply chains.

The Friends of the Earth’s 2004 report Rainforest Destruction in your Shopping Basket claimed that one
in three products on UK supermarket shelves was directly contributing to the destruction of the world’s
rainforests.47 Demand for top brand foods such as Walkers’ crisps, Kellogg’s cereals, Heinz’s soups
and some Cadbury Schweppes’ chocolate fuelled the use of palm oil (see Figure 3). The report also

39 Palm Oil and Soil and Water Pollution. Retrieved September 20, 2010 from
http://wwf.panda.org/what_we_do/footprint/agriculture/palm_oil/environmental_impacts/soil_water_pollution
40 In 2003, the Jakarta Post reported that palm oil waste dumped by Indonesian company, PT London Sumatera,
killed thousands of fish and contaminated the Itam River. In another reported incident in that year, thousands of
fish died in the Kuning River in Sumatra due to palm oil effluent.
41 Shahid, Y. & Kaoru, N. (2009). Tiger Economies under Threat. World Bank.
42 Greenpeace. (2007). How the Palm Oil Industry Is Cooking the Climate. Retrieved September 15, 2010 from
http://www.greenpeace.org/international/en/publications/reports/cooking-the-climate-full/
43 DFID & World Bank. (2007, March). Indonesia and Climate Change. Working Paper on Current Status and
Policies.
44 Delft Hydraulics (Hooijer et al. 2006), cited in Teoh (2010), p 18.
45 WALHI (Wahana Lingkungan Hidup Indonesia, or The Indonesian Forum for Environment) is an Indonesian
environmental non-governmental organisation which is part of the Friends of the Earth network
46 Teoh, C. H. (2010). Key Sustainability Issues in the Palm Oil Sector. A Discussion Paper for Multi-Stakeholders
Consultations. p 22. Washington, DC: World Bank Group.
47 Wakker, E (2004). Greasy Palms: The Social and Ecological Impacts of Large Scale Oil Palm Development in
Southeast Asia. Friends of the Earth.

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alleged that UK companies were involved in the palm oil businesses as investors, processors and
retailers. WWF published an annual scorecard of palm oil policies of 59 European companies. 48

Setting up the RoundTable on Sustainable Palm Oil

In April 2004, the RoundTable on Sustainable Palm Oil (RSPO) was set up to promote the growth and
use of sustainable oil palm products through the establishment and implementation of credible global
standards. The WWF and Unilever were two founding members. In 2010, RSPO had more than 360
members consisting of growers, processors, manufacturers, retailers, banks and NGOs, representing
more than 40 percent of global palm oil production.

Figure 3
Palm Oil Production process

Source: Wakker, E. (2004). Greasy Palms: The Social and Ecological Impacts of Large Scale Oil Palm
Development in Southeast Asia. p 8. Friends of the Earth.

In November 2007, the Group agreed on a set of principles and criteria for Sustainable Palm Oil
Production.49 Certified Sustainable Palm Oil (CSPO) was available for sale in Europe from December
2007. Producer members were required to commit to certifying a portion of their crops to meet these

48 The Economist. (2010, June 24). The Other Oil Spill.

49 Retrieved September 15, 2010 from
http://www.rspo.org/sites/default/files/RSPO%20Principles%20&%20Criteria.pdf

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standards. However, of a total consumption of 45 million MT of palm oil, in 2009, only 1.6 million MT of
CSPO was available, out of which only 380,000 tonnes had been sold between 2008 and 2010. 50 As
CSPO palm oil was physically identical to non-CSPO palm oil, it was not possible to charge a premium
for CSPO although the cost of production was higher. 51

Many of the largest producers in Indonesia that supplied directly to consumer goods multi-national
companies, were also traders – the palm oil they sold could come from third parties. Even if their own
plantations met RSPO criteria, this could not be said of all palm oil purchased from them. As a result,
Unilever acknowledged that it was unable to identify 20 percent of its palm oil supplies.

We found that, in one way or another, all of our suppliers have technically infringed either
RSPO standards or Indonesian law. It isn’t as easy as saying just pick the best, we can’t. We
are not in a position to do that. The industry almost certainly has to go through fundamental
change.52

Gavin Neath
Senior Vice President Communications and Sustainability, Unilever

Despite this, in 2008, Unilever pledged that 100 percent of its palm oil would be certified sustainable by
2015. For the palm oil used in Europe, Unilever pledged to have fully traceable supply chains in place
by 2012. Unilever’s stand was followed by more than 20 big companies, including Nestle, P&G and
Mars.

WILMAR AND SUSTAINABLE PALM OIL

In light of such environmental activism, Wilmar took action to demonstrate its commitment to sustainable
operations:

RSPO Initiatives: Wilmar became a member of the RSPO in 2005 and was a participant in a two-year
trial implementation project to field-test and review a set of principles and criteria for sustainable palm
oil production.53 It took the following steps:

 Adopted the RSPO principles and criteria in 200

 Received RSPO certification for three mills and their supply base of four plantations by December
2008
 Completed audits for two mills and five estates in East Malaysia, which were expected to be certified
in 2010
 Completed the final RSPO assessments for six plantations and three mills in Sabah and Central
Kalimantan
 Aimed to achieve certification for all of Wilmar’s operations over the next 4-5 years.54

Supply Chain Certification: Wilmar took steps towards increased traceability in its supply chain.

 In 2009, interim approval was received for the RSPO Supply Chain Certification for four mills and
refineries in Sabah, East Malaysia and a bio-diesel facility in Riau, Indonesia.
 Use of the ‘Mass Balance Supply Chain Approach’ (approved by RSPO) to track, record and report
the amount of palm oil coming from certified sustainably managed plantations. 55

50 Goon, J. (2010, January 21). The Development of the Global Market for Sustainably Produced Oils and Fats led
by The Netherlands and the EU – Reality and Rhetoric [Presentation].
51 ibid.
52 The Economist. (2010, June 24). The Other Oil Spill.
53 Wilmar. (2007). Wilmar Annual Report 2007. p 39.
54 Wilmar. (2009). Wilmar Annual Report 2009. p 34.
55 ibid.

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Greenhouse Gas Emission Mitigation and Energy Efficiency: Wilmar commissioned an independent
carbon footprint study in 2008, to assess its operations in origination, processing and distribution of
palm oil, soya bean and other related products across 50 oil palm plantations and 80 processing
facilities. The aim was to provide baseline carbon emissions data and help develop projects to deal with
the issue of emission mitigation.56

Between 2007 and 2009, Wilmar registered six ‘Clean Development Mechanism’ projects with the UN
Framework Convention on Climate Change, aimed at reducing its carbon footprint. The majority of
projects focused on generating ‘carbon-neutral’ energy for palm milling operations by recycling and
reusing bio-mass waste products and methane gas capture. In 2009, Wilmar also embarked on nine
‘Voluntary Carbon Standards’ projects in China and Vietnam for rice mill operations.

Environment: In 2007, Wilmar became a signatory to the UN Global Compact57, the world’s largest
voluntary corporate citizenship initiative, whose principles spanned human rights, labour, environment
and anti-corruption. In 2009, Wilmar joined the UN CEO Water Mandate, which aimed to improve the
use and management of water resources. Wilmar also implemented the practice of conducting high
conservation value forest (HCVF) 58 assessments before commencing any new plantation development
activities.

Reporting Initiatives: Wilmar participated in several third-party reporting initiatives to enhance its
corporate governance standards. In 2008, Wilmar started participating in the Carbon Disclosure Project
(CDP), along with over 2,000 of the world’s largest companies, to promote awareness of business
implications of climate change. That same year, Wilmar participated in an international project by Global
Reporting Initiative (GRI) to develop indicators for a reporting framework on sustainability, specifically
for the food processing sector. Wilmar also began working on its inaugural sustainability report which
was expected to be available by the third quarter of 2010.

PALM OIL AND ECONOMIC DEVELOPMENT

Oil palm-based agricultural development was viewed as a major driver of development by policy makers
in developing countries. This was a result of the impact of the palm oil industry in Indonesia and
Malaysia on improving employment and economic growth.

In 2007, the export value of palm oil and its derivatives was US$13.8 billion in Malaysia and US$7.9
billion in Indonesia.59 The labour-intensive nature of certain processes was a key source of employment.
In Malaysia, employment in the oil palm sector was 570,000 in 2009, with another estimated 290,000
in downstream operations. In Indonesia, it was estimated that 3 million people were employed by the
palm oil industry.60

Smallholders played a significant role. In 2008, about 30 percent of the total oil palm planted area in
Malaysia was by organised smallholders linked directly to the large plantations under special schemes.
Another 11 percent was managed by independent smallholders. In Indonesia, it was estimated that the
special scheme smallholders, together with the independent smallholders, collectively accounted for
43.8 percent of the total oil palm planted area in 2009.

From 1965 to 2010, the World Bank committed nearly US$1 billion to over 35 projects in the palm oil
sector in 12 countries in Africa, Latin America and Southeast Asia. About 50 percent of this commitment

56 Wilmar. (2008). Wilmar Annual Report 2008. p 39.

57 Established in July 2000, the Compact was endorsed by more than 6,700 participants including over 5,200
businesses around the world.
58 HCVF is defined as forests of outstanding and critical importance due to their high environmental, socio-
economic, cultural, bio-diversity or landscape value (as defined by the Forest Stewardship Council).
59 Figures were published by World Bank in 2009, cited in Teoh (2010), p 8.
60 Roberts, J. M. (2010, June 21). World Bank’s Palm Oil Strategy Should Focus on Economic Freedom.
Backgrounder, 2426.

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went to financing a series of projects in Indonesia. 61 The International Finance Corporation (IFC), a
member of the World Bank, invested in plantations, palm oil refining (Indonesia and Ukraine) and palm
oil trading (Indonesia and Singapore). These investments resulted in criticism of IFC for insufficient
attention to supply chain issues with regard to sustainability, which prompted a re-examination of its
investment strategy for the palm oil sector and a suspension of lending to palm oil companies. 62

To some, the palm oil industry offered poor countries in Africa a similar chance to raise their standard
of living.63 In Sub-Saharan Africa, with 65 percent of the workforce dedicated to the agriculture sector,
bringing in high-yield agriculture was essential to raising the sector’s productivity. With a growing
population and ample land, oil palm production was regarded by some as an effective means for
ensuring food security and poverty reduction. The campaign by European NGOs to restrict palm oil
production world-wide and limit access to European markets was thus seen as blocking future job
creation, development of higher living standards and poverty reduction in the very countries that the
NGOs claimed to be protecting.64 Given this perspective, the defining issues of development in Africa’s
agricultural sector was perceived not as environmental sustainability but as poor infrastructure, access
to finance, property rights and low crop-yield.65

Both poverty alleviation and environmental sustainability were at the heart of the Millennium
Development Goals (MDG) set by the UN in 2002.66 In the 2010 review of progress towards MDG, Ban
Ki-moon, the Secretary-General of UN, stated:

Eradicating extreme poverty continues to be one of the main challenges of our time, and is a
major concern of the international community. Ending this scourge will require the combined
efforts of all, governments, civil society organisations and the private sector, in the context of
a stronger and more effective global partnership for development. 67

However, in eradicating poverty, the UN MDG also reiterated that:

Prudence must be shown in the management of all living species and natural resources, in
accordance with the precepts of sustainable development. The current unsustainable patterns
of production and consumption must be changed in the interest of our future welfare and that
of our descendants.68

Others argued that alignment between poverty eradication and environmental sustainability was
necessary, simply because the effects of unsustainable practices were more likely to have a
disproportionate impact on the well-being of people in less developed countries, which had lower
capacity to cope with its effects.69 The challenge then was to craft policies that would facilitate large-
scale poverty reduction while managing the environmental impact of economic development, especially
as the effects of climate and ecosystem changes would only be felt over the longer term.

61 Teoh, C. H. (2010). Key Sustainability Issues in the Palm Oil Sector. A Discussion Paper for Multi-Stakeholders
Consultations. pp 11–14.
62 ibid.
63 Initiative for Public Policy Analysis. (2010, August). Africa Case Study: Palm Oil and Economic Development in
Nigeria and Ghana; Recommendations for the World Bank’s 2010 Palm Oil Strategy.
64 Roberts, J. M. (2010, June 21). World Bank’s Palm Oil Strategy Should Focus on Economic Freedom.
Backgrounder, 2426.
65 Initiative for Public Policy Analysis. (2010, August). Africa Case Study: Palm Oil and Economic Development in
Nigeria and Ghana; Recommendations for the World Bank’s 2010 Palm Oil Strategy.
66 United Nations. Millennium Development Goals. Retrieved September 10, 2010 from
http://www.un.org/millenniumgoals/bkgd.shtml
67 ibid.
68 United Nations. (2000, September 18). Millennium Declaration. Retrieved September 10, 2010 from
http://www.un.org/millennium/declaration/ares552e.pdf
69 Chua, G. (2010, September 5). You Can’t Separate Climate from Economy. The Sunday Times.

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WILMAR’S STRATEGIC INITIATIVES

Africa – New Land for Cultivation

In 2010, available land for oil palm cultivation in Malaysia continued to shrink. 70 In Indonesia, the
government’s plans to impose a two-year moratorium on new permits to clear natural forest for oil palm
cultivation meant that Southeast Asia’s major oil palm producers were being pushed to look further
afield for land.

In a bid to increase supply sources, Wilmar turned its attention to Sub-Saharan Africa, in particular,
Cote d’Ivoire, Uganda and Ghana. In 2009, it owned 43,000 ha under joint ventures and managed
125,000 ha of oil palm plantations on behalf of smallholders. Many African governments were keen to
develop oil palm-based large-scale agricultural projects, as these were regarded as supporting their
poverty reduction programmes.

However, as in Asia, palm oil producers and governments could expect to encounter pressure from
environmental groups with regard to possible adverse effects of land clearing for oil palm cultivation.

Diversifying into Sugar – Wilmar’s Long-term Challenge

In mid-2010, oil palm producers were facing pressure on their margins. Wilmar’s profits in April-June
2010 fell by 15 percent, despite an increase in revenue of 18 percent, 71 as higher CPO prices and
uncompetitive pricing of palm oil in comparison to other edible oils caused margins in palm oil
merchandising and processing businesses to fall.

Diversification into the sugar value chain could enable Wilmar to sustain the pace of growth it had
achieved in the past decade. Wilmar expected demand to increase substantially in the future due to
rising affluence and a corresponding increase in per capita consumption in countries where Wilmar had
leading market positions.

Australia’s Sucrogen

In 2010, Queensland-based Sucrogen was the largest raw sugar producer in Australia with 142,000 ha
of cultivated land and seven mills, producing 1.2 million MT of raw sugar per year. It was also the second
largest exporter of raw sugar in the world. It was the largest sugar refiner in Australia and New Zealand
while it ranked fifth world-wide. Food-grade refined sugar such as white sugar, brown sugar, caster
sugar and syrups were distributed under flagship consumer brands CSR™ (Australia) and Chelsea®
(New Zealand).

In addition, Sucrogen was Australia’s second largest producer of sugar-based ethanol from bio-mass
using waste by-product of cane sugar production. It was Australia’s largest renewable energy generator
from bio-mass, generating electricity from co-generation operations at the sugar mills (with annual
capacity of 171 megawatts). The Company also produced fertilisers as by-products of sugar milling and
ethanol distillation processes.

In FY2010, Sucrogen reported revenue of AUD$1.7 billion with a net profit of AUD$79.3 million. Analysts
expected Sucrogen’s on-going operations to boost Wilmar’s earnings by 3–5 percent in the first year of
consolidation and sugar earnings contribution to the group to double in 10 years’ time.72 (See Exhibit

70 During the 1990s decade, availability of suitable land for palm oil plantations in Peninsular Malaysia gradually
diminished. New areas for expansion were likely to be in less ideal environments such as hilly to steep terrain
or deep peat soils. This resulted in rapid expansion of oil palm plantation in Sabah and Sarawak. Sarawak had
a land area of about 12.4 million ha of which 3.9 million ha was suitable for oil palm cultivation. By end 2008, a
total of 744,372 ha of land had been planted with oil palms in Sarawak.
71 Wilmar. (2010, August 13). Wilmar Posts 15 Percent Decline in Earnings to US$344 Million for 2Q 2010 [Press
release].
72 Aw, J. S. (2010, July 27). Wilmar’s Sweet Tooth. Retrieved September 10, 2010 from
http://www.stockmarketsreview.com

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7A – Overview of Sucrogen Financials and 7B – CSR Limited – Breakdown of Earnings Before Interest
and Tax [Financial Year Ending 31 March 2010]).

Kuok Khoon Hong believed that Sucrogen was a good strategic fit with Wilmar’s existing portfolio.
Wilmar saw high potential for growth in Indonesia and other Asian markets, based on Sucrogen’s
proven expertise across the entire sugar value chain. 73

Wilmar followed up with two other acquisitions in August 2010: the sugar refining company PT
Jawamanis Rafinasi, which owned and operated one of the leading sugar refineries in Indonesia, as
well as the sugar trading business of Singapore-based Windsor & Brook Trading Pte. Ltd. At the same
time, Wilmar secured a 200,000 ha concession to develop sugar plantations in Indonesia’s Papua island.

Sucrogen’s sustainable agribusiness practices

Sucrogen was involved in several major initiatives to reduce the effects of raw sugar production and
refining activities on the environment. Specific measures were in place on water conservation, which
was especially important given the high water requirements of the sugar crop as well as in refining and
ethanol production.74 It had targets to reduce absolute emissions and established the Carbon Working
Group across its business units to monitor the setup of systems and processes to move the group to a
low carbon environment. In 2009, Sucrogen generated enough renewable electricity which together
with a small amount of external fuel, was sufficient to operate its seven sugar mills. It reduced packaging
waste by moving to recyclable plastics and minimising packaging materials, and in so doing, reduced
material going to landfill by 80 percent.75

THE NEXT DECADE

On 22 December 2010, the acquisition of Sucrogen by Wilmar Australia Private Limited was completed.
With that, Wilmar wrapped up a decade in which the company grew to become one of the major
agribusiness groups in the world.

At the start of the second decade of 21st century, Wilmar was poised to move quickly in two new
continents: Africa, a new raw material supply base as well as huge market potential for palm oil products;
and Australia, its seeding base for a new product line, the global sugar business.

Increasingly, governments, especially in developing countries, were instituting policies to regulate the
distribution and prices of basic food products such as cooking oil and sugar. For example, in November
2010, the Chinese central government announced remedial measures including price controls and relief
to poor households to cope with mounting food prices. Under the proposed policies, China would
provide subsidies to farmers and release state reserves of grains, edible oils and sugar on the market,
as necessary, to guarantee adequate supplies. With more pressure on food supplies likely in the future
given a fast-growing world population, it was possible that governments would play a more active role
in regulating prices of essential foods, including cooking oil in the coming decade.

The coming decade would see more demands and actions by environmental groups concerned about
global warming and climate change. As Wilmar’s profile in the global agribusiness grew, the
environmentalists would likely focus more attention on the Group’s operations and activities throughout
the world. How should Wilmar manage its growth strategies in the light of possible demands and actions
taken by environmental groups for more sustainable operations in agribusinesses throughout the world?

73 Wilmar. (2010, July 5). Wilmar International Limited Acquires CSR Limited’s Sugar and Renewable Energy
Business, Sucrogen Limited [Press release].
74 As a water-intensive crop, sugar cane has to remain in the soil for 12 months of the year using approximately
one million litres of water to produce 12.5 tonnes of commercial cane. Even where the cane was fed by rainfall,
the crop affected river flow by intercepting run-off from catchments and drawing heavily on underground water
supplies.
75 Retrieved January 5, 2011, from http://www.csr.com.au/she/environment/Pages/socialresponsiblity3b24.aspx

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EXHIBIT 1

WILMAR – BUSINESS SEGMENTS

Wilmar International Ltd.

Plantation Merchandising and Processing Consumer Other Business

Products
Indonesia
Sumatra, West Indonesia Fertilisers
Kalimantan and 20 percent market One of the largest
Central share, second fertiliser suppliers in
Kalimantan Palm and Oilseed and largest producer of Indonesia.
Malaysia Laurics Grains consumer pack oils.
Sabah and India
Sarawak Largest global China 20 percent market Shipping
Uganda (JV) processor and Largest oilseed share through JV Through its
6,000 ha merchandiser crusher and Adani Wilmar Ltd. subsidiary, Raffles
West Africa (JV) of palm and leading wheat Bangladesh Shipping
37,000 ha lauric oils. and rice miller. 30 percent market Corporation, a fleet
share of 25 vessels (with
Vietnam a combined
50 percent market tonnage of 857,000
share, largest MT) catered
producer of primarily to in-
consumer pack oils. house needs.

Source: Created by authors.

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EXHIBIT 2

WILMAR FIVE-YEAR FINANCIAL SUMMARY (2005–2009)

Source: Wilmar International Annual Report 2009. p 14.

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EXHIBIT 3A

WILMAR INTERNATIONAL INCOME STATEMENT

For Financial Year Ended 31 December 2009

Source: Wilmar Annual Report 2009. p 76.

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EXHIBIT 3B

WILMAR INTERNATIONAL BALANCE SHEETS (AS AT 31 DECEMBER 2009)

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Source: Wilmar Annual Report 2009. pp 78–79.

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EXHIBIT 4

REVENUE BREAKDOWN BY GEOGRAPHICAL SEGMENT

US$
2005 % 2006 % 2007 % 2008 % 2009 %
China 2,300,083 49.4 4,177,200 59.5 8,481,523 51.5 14,325,761 49.2 13,197,166 55.3
India 296,938 6.4 297,980 4.2 793,601 4.8 1,662,287 5.7 1,212,987 5.1
Southeast
1,056,309 22.7 1,358,801 19.4 3,825,593 23.2 7,001,314 24.0 5,492,824 23.0
Asia
Europe - - 379,420 5.4 1,379,065 8.4 2,537,367 8.7 1,638,724 6.9
Others 998,230 21.5 802,600 11.5 1,986,369 12.1 3,618,456 12.4 2,343,443 9.7
Total 4,651,560 100.0 7,016,001 100.0 16,466,151 100.0 29,145,185 100.0 23,885,144 100.0

Source: Compiled from Wilmar Annual Reports.

EXHIBIT 5

WORLD PRODUCTION OF PALM OIL (1980–2009)

’000 tonnes
Country 1980 1990 2000 2009
Indonesia 691 2,413 6,900 20,900
Malaysia 2,576 6,095 10,800 17,566
Nigeria 433 580 740 870
Colombia 74 226 516 794
Cote d’Ivoire 182 270 290 N.A
Thailand 13 232 510 1,310
Ecuador 37 120 215 436
Papua New Guinea 35 145 281 470
Others 768 786 1,699 3,236
Total 4,809 10,867 21,951 45,582

Source: Oil World (various years).

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EXHIBIT 6

WILMAR’S EDIBLE OIL BRANDS

China Indonesia Vietnam

Arowana Complete range of Sania Palm oil Neptune Palm olein blended
‘金龙鱼’ edible oils including with soya bean oil
blended oils, soya
Koufu Fortune Palm oil Simply Soya bean oil,
bean, rapeseed,
‘口福’ rapeseed oil,
corn, sunflower seed,
sunflower oil, rice
sesame, groundnut
bran oil
and camellia
Orchid Groundnut oil India Meizan Palm olein blended
‘胡姬花’ with soya bean oil,
soya bean oil

Gold Ingots Soya bean oil Fortune Assortment of Cai Lan Palm olein blended
‘元宝’ edible oils (soya, with soya bean oil
sunflower seed,
cotton seed,
mustard seed,
groundnut, palm,
coconut)
Golden Carp Rapeseed oil Jubilee Shortening
‘鲤鱼’
Huaqi Assortment of edible Raag Soya bean oil and
‘花旗’ oils vanaspati
Baihehua Assortment of edible Alpha Palm oil and
‘百和花’ oils vanaspati

Xiangmanyuan Assortment of edible Aadhar Soya bean and

‘香满园’ oils sunflower oil

Source: Retrieved September 10, 2010 from http://www.wilmar-international.com/business_consumerpack.htm

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at Nanyang Technological University from August to December 2018.
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EXHIBIT 7A

OVERVIEW OF SUCROGEN FINANCIALS

Figures are in A$
Year Ending 31
2009 2010 Business Unit EBIT Contribution
March
Revenue 1,410.7 1,737.30 Year Ending 31 March 2009 2010
EBIT 83.7 135.7 Cane Products 35.2 85.6
EBITDA 140.1 196.9 Sweeteners 44.7 53.2
EBITDA Margin 9.9% 11.3% Bio-ethanol 11.0 4.0
Profit before Tax 81.9 120.7 Corporate (7.3) (7.1)
Net Profit1 53.9 79.3 Total EBIT 83.7 135.7
Total Assets 1,425.4 1,549.4 Source: Sucrogen Management Accounts
Total Liabilities 788.2 773.9
Net Asset Value 562.7 696.5
Net Tangible Assets 454.0 580.8
Note: 1 Net of minority interests

Source: Presentation by Wilmar. (2010, July 6). Sucrogen Overview. Retrieved October 1, 2010 from
http://www.wilmarinternational.com/investor/20100706%20-%20Wilmar_Sucrogen_Analyst_Presentation_Part2.p
df

EXHIBIT 7B

CSR LIMITED – BREAKDOWN OF EARNINGS BEFORE INTEREST AND TAX

(FINANCIAL YEAR ENDING 31 MARCH 2010)

CSR Earnings Before Interest and Tax AUD$364.1 million

Source: CSR Annual Report. p 2.

This document is authorized for use only in AB3601 Strategic Management by Assoc Prof Lai Si Tsui-Auch
at Nanyang Technological University from August to December 2018.