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Malaysian palm oil grower ready for tougher ESG rules With IPO

Malaysian palm oil grower ready for tougher ESG rules With IPO

Johor Plantations Group Bhd. will use funds raised in its 735 million ringgit ($156 million) initial public offering to build a palm oil operation powered by clean energy, as it navigates increasingly tough regulations in key markets like Europe.

The mid-sized palm oil producer is confident about appealing to European consumers thanks to its short, sustainability-certified supply chain and plans to halve its carbon output by next year, Managing Director Mohd Faris Adli Shukery said in an interview ahead of the listing on Tuesday.

Growers of the world’s most-consumed edible oil are facing heightened global scrutiny over their devastating impact on tropical rainforests, with the most immediate pressure coming from the European Union Deforestation Regulation. Due to come into effect by the end of the year, the law forces companies selling commodities like palm oil and cocoa to make sure their products don’t come from recently deforested land. 

Malaysia is the world’s second-largest palm oil producer and Europe is among its biggest export markets. 

For JPG, it’s a chance to accelerate its net zero plans, Faris said in the interview in Kuala Lumpur, adding that the company is committed to meeting “whatever developments that have been put by different jurisdictions.” 

“Given that we have a restricted production volume and we are certified, we are optimizing that opportunity in being able to accommodate” stricter environmental requirements including the EUDR, he said. 

Bigger palm oil producers have struggled to completely stamp out deforestation and prove their supply chains are fully-traceable right down to the estate. By comparison, JPG, with a valuation of 2.1 billion ringgit, has around 56,000 hectares of planted area in the southern region of Peninsular Malaysia. 

“End-buyers are looking at companies which have got more distinctive characteristics,” Faris said. “In our case, you’re talking about a shorter supply chain, and a very confined geographical area of production,” containing risks, he said. 

The IPO will be the largest in Kuala Lumpur since the first quarter of 2022, when dairy maker Farm Fresh Bhd. raised $240 million. Since then, the market for new share sales across Southeast Asia has been slow amid low valuations.

Companies that listed in Malaysia over the past 10 years with offerings larger than $100 million, rose by 4% on average in their opening session, according to data compiled by Bloomberg.

JPG plans to spend its IPO proceeds on building a palm oil complex powered by renewable energy, replanting old trees, and repaying debt. It also plans to develop new income streams with three bio-methane plants that will be running by the end of the year.

The firm will launch a specialty oils and fats refinery that is a joint venture with global food ingredient manufacturer Fuji Oil Holdings Inc., which when completed in 2026, will boost JPG’s revenue by at least 20%, Faris said.

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