8 plantation firms allegedly linked to smog crisis revealed

14 others yet to be named.

According to CIMB, the Indonesian Environment Ministry has started investigating plantation companies that it suspects have contributed to the haze by burning their land. This is negative for the planters involved as it will hurt their corporate image.

CIMB noted that the Indonesian Environment Ministry has named eight companies that it is investigating for contributing to the haze by scorching their land in Riau and Jambi (Table 1). Another 14 companies are being investigated for burning but have yet to be named.

Here's more:

Also, planters who are involved in starting forest fires may face legal action. If the haze situation worsens and lasts for a period of time, palm oil supplies may be crippled as harvesting and pollination activities at the estates may be affected.

This may result in lower palm oil supplies and higher prices in the medium term.

We maintain our Neutral rating. Our top picks are First Resources, IOI Corp and Wilmar.

What Happened

According to Indonesian presidential delivery unit chief, Kuntoro Mangkusubroto, the majority of hotspots in the Riau province are inside concessions affiliated to the April group, which has an office in Singapore, and Asia Pulp and Paper (sister company of Golden Agri).

This is negative for the planters which have been linked in the media or government to the haze as this will affect their corporate image and reputation as a sustainable palm oil producer and they face potential penalties if charged by the government.

The April group, Golden Agri and Sime Darby revealed that
they have a zero-burning policy and denied any involvement in open burning to clear their concessions.

Most have also said that the fires in their concessions, if any, may have spread to its estates from fires that began outside its concessions.

We are also concerned that the severe haze may cripple palm oil supplies from estates engulfed by the haze as it could affect harvesting at the estates and pollination by the weevils. This may lead to lower palm oil supplies and higher CPO prices in the medium term.

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