Mitr Phol Sugar Corporation, the world’s fourth largest sugar producer, will invest $100 million for a 50% stake in Olam’s wholly-owned Indonesian subsidiary Far East Agri.
Olam and Mitr Phol will jointly explore the development of a green field sugar mill in Indonesia as they aim to “capitalise on the attractive growth opportunities for sugar milling and refining” in the country.
Agri-business Olam will retain the remaining 50% stake in Far East, which operates a sugar refinery in Central Java.
Under the new agreement, Far East will explore the development of a green-field sugar milling facility in East Java. Upon completion in 2020, it is expected that the sugar mill will source 1.2 million metric tonnes of cane from farmers.
In addition to the joint venture, Mitr Phol will join Olam’s programme of extending Good Agricultural Practices to farmers across Indonesia, which have been in place since Olam entered the country in 1996.
Olam International sugar and dairy CEO Joe Kenny explained the rationale for the partnership: “Our potential expansion into sugar milling will transform our overall participation in Indonesia’s sugar industry, which offers attractive investment and return opportunities due to its growing demand and persistent supply deficit.
“Mitr Phol is a natural partner given our shared vision and complementary strengths. Their strong sugar milling expertise coupled with our farm gate, sourcing and manufacturing capabilities will enable us to cater to the growing demand for sugar in Indonesia.”
Mitr Phol CEO Krisda Monthienvichienchai said: “We are excited to begin our Indonesian journey by partnering with an established player like Olam. Our shared belief in the country’s potential and in creating long-term value will underpin our growth strategy there.
“We look forward to playing a meaningful role in helping Indonesia become self sufficient in sugar production by working closely with each other, the authorities, farmers and all stakeholders.”
Mitr Phol is Asia’s largest sugar producer with 16 sugar mills, eight power plants and four ethanol distilleries, contracting 143,000 farmers across Thailand, Laos, China and Australia.
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