IOI Corp Confident Of Facing Major Challenges In EUDR Compliance, Targets Sales Premium To Europe

PUTRAJAYA, Nov 4 (Bernama) -- Compliance with the European Union Deforestation Regulation (EUDR) is not expected to pose a major challenge to IOI Corporation Bhd as the company has extensive experience in supplying certified palm oil products.

Group Managing Director and Chief Executive Officer Datuk Lee Yeow Chor said the additional requirement for land verification information could be met based on the existing system.

In addition, he said the group's experience in supplying palm oil as well as palm oil fractions that received the Sustainable Palm Oil Roundtable (RSPO) certification was also taken into account.

"We have been supplying palm oil and palm oil fractions identified as RSPO certified products for several years.

"Therefore, taking the next step to comply with the EUDR is not difficult," he told reporters at a press conference after the company's Annual General Meeting (AGM) here today.

Lee said the group did not expect a significant increase in sales volumes to Europe following the implementation of the regulation.

However, it expects EUDR-compliant products to be able to earn a premium price in recognition of the extra effort required to meet the requirements of the regulation.

According to him, smallholders account for less than 0.5 per cent of the group's supply and their level of readiness is not expected to have a significant impact on IOI Corp's exports to Europe.

On the haze situation in Indonesia, he said prolonged dry weather had affected plantation operations, particularly in Kalimantan where some areas did not receive rain for about three months.

He added that the situation was exacerbated by haze and reduced sunlight which also contributed to the decline in production at the group's operations in Indonesia.

In a separate development, Lee said IOI Corp was confident that its associate company Bumitama Agri Ltd would be able to prove the effectiveness of fire prevention and firefighting measures to an evaluator appointed by the Singapore authorities.

He said the assessment would examine whether plantation companies had allocated sufficient resources to prevent fires from occurring or spreading within their respective concession areas.

He explained that Bumitama has used various technologies including artificial intelligence (AI)-based closed-circuit cameras (CCTV) and drones to monitor areas at risk of fires.

Lee is confident that the company's efforts will be taken into account in the assessment and does not anticipate any financial or environmental, social and governance (ESG) implications for Bumitama or IOI Corp.

IOI Corp owns an indirect stake of 32.1 per cent in Bumitama Agri Ltd, an upstream palm oil producer listed on the Singapore Exchange.

Meanwhile, Lee said Malaysian oleochemical producers had gained a competitive advantage in the US market due to the difference in anti-dumping duties and reciprocal duties imposed on fatty acid imports.

He said Malaysia exports are subject to a duty of about 10 per cent compared to 30 to 31 per cent for Indonesian products, depending on the respective companies.

The difference in duty rates of about 20 percentage points gives Malaysian manufacturers a competitive advantage relative to the US market.

However, he said IOI Corp did not see other general import tariffs as a factor that had a significant impact on the group's oleochemical business.