POSCO International achieved the entire process of its palm oil operations by purchasing an Indonesian plantation company and finalizing the construction of a palm oil refinery in Southeast Asia.
POSCO Group's trading and energy branch announced that its subsidiary based in Singapore has bought a 65.72 percent share in Sampoerna Agro for $566 million.
POSCO International is expected to invest up to $862 million in accordance with Indonesia's financial regulations, which mandate a tender offer to minority investors for the remaining shares.
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POSCO International initiated the establishment of palm oil plantations in Papua, Indonesia in 2011 and launched full-scale production in 2016. Currently, the company manages three crude palm oil mills with a total annual output of 210,000 tons.
With this acquisition, POSCO International has added 128,000 hectares to its existing Papua plantations, bringing its total global agricultural base to 150,000 hectares.
The company anticipates immediate stable profits as the recently acquired plantations are already fully operational.
The existing plantations have posted an average operating margin of 36 percent, making a strong contribution to POSCO Group’s profitability.
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POSCO International and GS Caltex recently conducted a celebration to commemorate the finishing of their collaborative palm oil refinery in Indonesia. Testing of the plant is set to commence shortly, followed by the commencement of full-scale production by the end of the year.
In 2023, the trading firm and the oil refiner formed a joint venture and invested $210 million in building the refinery. Construction started in May of the previous year.
The refinery has a yearly capacity to refine 500,000 tons, which makes up about 80 percent of Korea's annual palm oil imports.
POSCO International intends to provide crude palm oil from its plantations to the refinery, where it will be processed into refined oil for distribution in Korea, Indonesia, and China. GS Caltex will leverage its expertise in refining to improve operational efficiency and deliver refined palm oil for use in biodiesel in the Korean market.
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The company stated that the expansion of its palm oil operations is in line with the strategic vision of POSCO Group Chairman Chang In-hwa to seek sustainable and forward-looking business opportunities for consistent long-term growth.